A restructuring plan does not create a present obligation at the balance sheet date if it is announced after that date, even if it is announced before the financial statements are approved. Under IFRS 9, financial liabilities continue to be measured at amortised cost, unless they are required to be measured at fair value through profit or loss or an entity has opted to measure a liability at fair value through profit or loss. A financial asset host that is within the scope of IFRS 9 is not assessed for embedded derivatives, because the solely payments of principal and interest (SPPI) criterion is applied to the entire hybrid contract to determine the appropriate measurement category. The optional exemptions cover standards for which the IASB considers that retrospective application could prove too difficult or could result in a cost likely to exceed any benefits to users. Impairments of any assets dedicated to the contract are recognised before making a provision. A different cost formula could be justified where inventories have a different nature or use. The Board also amended the transitional provisions to provide relief from restating comparative information and introduced new disclosures to help users of financial statements understand the effect of moving to the IFRS 9 classification and measurement model. IFRS 13 addresses how to measure fair value, but it does not stipulate when fair value can or should be used. Accounting for defined benefit plans is complex, because actuarial assumptions and valuation methods are required to measure the balance sheet obligation and the expense. Recognition and measurement for short-term benefits is relatively straightforward, because actuarial assumptions are not required and the obligations are not discounted. Sometimes standards offer a policy choice; there are other situations where no guidance is given by IFRSs. A portion of the consideration might be contingent on the outcome of future events or the acquired entity’s performance (‘contingent consideration’). Intangible assets with indefinite useful lives, and intangible assets not yet in use, are tested annually for impairment and whenever there is an indication of impairment. The grantor controls any significant residual interest in the infrastructure. Disclosure is particularly important for information relating to insurance contracts, because entities can continue to use local GAAP accounting policies for measurement. Illustrative IFRS financial statements 2018 – Investments funds and the IFRS Interpretation Committee’s agenda decision on interest income issued in March 2018 (see Note 2.12). Net interest costs (that is, the unwinding of the discount on the defined benefit obligation and a theoretical return on plan assets). There must be an expectation that the value of the hedging instrument and the value of the hedged item will move in the opposite direction as a result of the common underlying or hedged risk. Deferred tax is provided in full for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, except where the temporary difference arises from: Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. In these circumstances, the difference between the carrying amount of the financial liability extinguished and the fair value of the equity issued is recognised in the income statement. The equity method of accounting also applies to interests in joint ventures. Classification under IFRS 9 is driven by the entity’s business model for managing the financial assets and whether the contractual characteristics of the financial assets represent solely payments of principal and interest. An entity whose ordinary shares are listed on a recognised stock exchange, or is otherwise publicly traded, is required to disclose both basic and diluted EPS with equal prominence in its separate or individual financial statements, or in its consolidated financial statements if it is a parent. Entities have a choice of presenting the statement of comprehensive income in a single statement or as two statements. An example of such costs might be certain mobilisation, design or testing costs. Instruments or components of instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation (for example, some shares issued by limitedlife entities). The criteria do not apply to non-assets that are being scrapped, wound down or abandoned. Prices change over time, as the result of political, economic and social factors. Click on each heading to visit its topic home page on Inform. If there is no IFRS standard or interpretation that is specifically applicable, management considers the applicability of the requirements in IFRS on similar and related issues, and then the definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the Framework. Some possible estimation methods include (1) cost plus a reasonable margin, and (2) evaluation of stand-alone sales prices of the same or similar products, if available. The publication of IFRS 9 in July 2014 was the culmination of the IASB’s efforts to replace IAS 39. IFRS 15 includes specific implementation guidance on accounting for licences of IP. It is also acknowledged that the preparation of interim reports generally requires a greater use of estimates than for annual financial reports. Past-service costs are defined as a change in the present value of the defined benefit obligation for employee services in prior periods, resulting from a plan amendment (the introduction or withdrawal of, or changes to, a defined benefit plan) or a curtailment (a significant reduction by the entity in the number of employees covered by a plan). It also provides the known or reasonably estimable information relevant to assessing the impact that the application of the standard might have on the entity's financial statements in the period of initial recognition. A number of factors might influence which entity has control, including: equity shareholding, control of the board and control agreements. IFRS 10 Consolidated Financial Statements; Overview The main objective of consolidated financial statements is to help the users of financial statements make informed economic decisions. It is based on the perspective of market participants rather than the entity itself, so fair value is not affected by an entity’s intentions towards the asset, liability or equity item that is being fair valued. This is a significant change compared to IAS 17, under which lessees were required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). PPE might comprise parts with different useful lives. Material prior-period errors are adjusted retrospectively (that is, by restating comparative figures) unless this is impracticable (that is, it cannot be done, after ‘making every reasonable effort to do so’). The fair value is measured in terms of IFRS 13. For these assets, 12-month ECL (that is, expected losses arising from the risk of default in the next 12 months) are recognised, and interest revenue is calculated on the gross carrying amount of the asset (that is, without deduction for credit allowance). If the non-controlling interest is measured at its fair value, goodwill includes amounts attributable to the non-controlling interest. Variable consideration is measured using either a ‘probability weighted’ or ‘most likely amount’ approach, whichever is most predictive of the final outcome. Hedges of a net investment in a foreign operation are accounted for similarly to cash flow hedges. It shall also take into account any changes in the net defined benefit liability (asset) resulting from contributions to the plan or benefit payments. Standards are normally published in advance of the required implementation date. Any new standard presents challenges and questions when preparers of financial statements start implementation. If not, the entity should capitalise those costs only if the costs relate directly to a contract, relate to future performance, and are expected to be recovered under a contract. The overall result of a series of transactions is considered if there are a number of transactions among the parties involved. There is no specific IFRS that applies to public-to-private service concession arrangements for delivery of public services. A financial liability is a contractual obligation to deliver cash or another financial asset; or to exchange financial instruments with another entity under conditions that are potentially unfavourable. Recognise and measure the consideration transferred for the acquiree. Under a finance lease, the lessee recognises an asset held under a finance lease and a corresponding obligation to pay rentals. Accounting principles and income statement and related notes; Consolidated and separate financial statements; The objective of general purpose financial reporting; Qualitative characteristics of useful financial information; Financial statements and the reporting entity; Concepts of capital and capital maintenance; and. Home; Members; CPD online; Overview. Guidance on fair value is given in. The statement of financial position presents an entity's financial position at a specific point in time. Pensions are provided to employees either through defined contribution plans or defined benefit plans. For such liabilities, changes in fair value related to changes in own credit risk are presented separately in OCI. Subsequent expenditure relating to an item of PPE is capitalised if it meets the recognition criteria. Financial statements, unadjusted for inflation in most countries, are prepared on the basis of historical cost, without regard either to changes in the general level of prices or to changes in specific prices of assets held. This produces a meaningful result, provided that there are no dramatic changes in the purchasing power of money. An entity applies IFRS 9 to financial instruments in an associate or joint venture to which the equity method is not applied. These include: [please add bullet list]. The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (that is, the promise to transfer the good or service is distinct within the context of the contract). This means, for example, that a redeemable preference share, which is economically the same as a bond, is accounted for in the same way as a bond. IFRS 6, ‘Exploration for and evaluation of mineral resources’, addresses the financial reporting for the exploration for and evaluation of mineral resources. Financial statements unadjusted for inflation do not properly reflect the company’s position at the end of the reporting period, the results of its operations or its cash flows. Although many entities manage their business using some level of ‘segmented’ data, the disclosure requirements are limited to (a) entities with listed or quoted equity or debt instruments, and (b) entities that are in the process of obtaining a listing or quotation of equity or debt instruments in a public market. The total that summarises the effect of the operating, investing and financing cash flows is the movement in the balance of cash and cash equivalents for the period. Agenda Introduction What is control? Operating activities are the entity’s revenue-producing activities. The accounting treatment under IFRS 2 is based on the fair value of the instruments. Under the two-statement approach, all components of profit or loss are presented in an income statement. If the acquisition is for less than 100% of the acquiree, there is a non-controlling interest. IAS 1, ‘Presentation of financial statements’, requires various disclosures. IFRS 10’s objective is to establish principles for presenting and preparing consolidated financial statements when an entity controls one or more entities. Statement of financial position (balance sheet): as of the end of the current interim period, with comparatives for the immediately preceding year end. 5. PPE is measured initially at cost. For insurers, the transition to IFRS 17 will have an impact on financial statements and on key performance indicators. Assets and liabilities are translated from the functional currency to the presentation currency at the closing rate at the end of the reporting period. An asset seldom generates cash flows independently of other assets. Equity accounting – IAS 28’ above). There are special measurement requirements for certain costs that can only be determined on an annual basis (for example, items such as tax that shall be calculated based on an estimated full-year effective tax rate). IFRS 10 sets out the requirements for when an entity should prepare consolidated financial statements, defines the principles of control, explains how to apply the principles of control, and explains the accounting requirements for preparing consolidated financial statements. For example, a debenture under which the issuer is required to make interest payments and redeem the debenture for cash is a financial liability. Derecognition of financial assets and liabilities; Classification and measurement of financial assets (. The cost formula used is applied on a consistent basis from period to period. The financial statements comply with International Financial Reporting Standards (IFRS) as issued at 30 April 2015 and that apply to financial years … Any other properties are accounted for as property, plant and equipment (PPE) or inventory in accordance with: Investment property is initially measured at cost. The unearned profit (contractual service margin) is recognised over the coverage period. Separate disclosure is made of significant non-cash transactions (such as the issue of equity for the acquisition of a subsidiary or the acquisition of an asset through a finance lease). The consideration for the combination includes cash and cash equivalents, the fair value of any non-cash consideration given and liabilities assumed. IFRS 9 removes the cost exemption for unquoted equities and derivatives on unquoted equities, but it provides guidance on when cost might be an appropriate estimate of fair value. Nonadjusting events indicate conditions that arose after the balance sheet date – for example, announcing a plan to discontinue an operation after the year end or changes in tax rates or tax laws enacted or announced after the balance sheet date. Separately acquired intangible assets are recognised initially at cost. In that case, IFRS 10 permits the use of a subsidiary’s financial year ending up … Goodwill acquired in a business combination is allocated to the acquirer’s CGUs or groups of CGUs that are expected to benefit from the synergies of the business combination. It presents the generation and use of ‘cash and cash equivalents’ by category (operating, investing and financing) over a specific period of time. Non-current assets (or disposal groups) classified as held for sale or as held for distribution are: A discontinued operation is a component of an entity that can be distinguished operationally and financially for financial reporting purposes from the rest of the entity, and it: An operation is classified as discontinued only at the date on which it meets the criteria to be classified as held for sale or when the entity has disposed of it. Unanimous consent towards decisions about relevant activities between the parties sharing control is a requirement in order to meet the definition of joint control. The entity shall use the net defined benefit liability (asset) and the discount rate determined at the start of the annual reporting period (unless there is a plan amendment, curtailment or settlement during the reporting period). However, a number of countries either require or recommend their publication, in particular for public companies. Contingent assets are not recognised. For contracts with multiple performance obligations (deliverables), the performance obligations should be separately accounted for, to the extent that the pattern of transfer of goods and services is different. ���ݕ�Y3���{ۥ_Y��n��쥎��P^����*"6)���M3aZ�Y�p}�':kM�Ĵ�T�/�E���m�M�lE��x/�p��E9�7+v{V�4],�f���J9�.���Gg��V}u%���S�H�G����I�? Investments in associates or joint ventures are classified as non-current assets and presented as one line item in the balance sheet (inclusive of notional goodwill arising on acquisition). Equity-settled share-based payment transactions are not remeasured once the grant date fair value has been determined. Warning, this action will add the whole document to my documents. Stage 1 includes financial instruments that have not had a significant increase in credit risk since initial recognition or that have low credit risk at the reporting date. 1 Unit. All other biological assets, including produce growing on a bearer plant, are usually measured at fair value less costs to sell, with the change in the carrying amount reported as part of profit or loss from operating activities. In addition, the following types of financial instrument are accounted for as equity, provided that they have particular features and meet specific conditions: The classification of the financial instrument as either debt or equity is based on the substance of the contractual arrangement of the instrument, rather than its legal form. The critical feature of a liability is that, under the terms of the instrument, the issuer is or can be required to deliver either cash or another financial asset to the holder; it cannot avoid this obligation. The acquisition method views a business combination from the perspective of the acquirer, and it can be summarised in the following steps: The acquiree’s identifiable assets (including intangible assets not previously recognised), liabilities and contingent liabilities are generally recognised at their fair value. Supporting commentary is also provided. Costs relating to satisfied performance obligations and costs related to inefficiencies should be expensed as incurred. IFRS 10’s objective is to establish principles for presenting and preparing consolidated financial statements when an entity controls one or more entities. IFRIC 20, ‘Stripping costs in the production phase of a surface mine’, applies to waste removal costs incurred in surface mining activity during the production phase. It also explains how the pension asset or liability might be affected by a statutory or contractual minimum funding requirement. Adjusting events provide additional evidence of conditions that already existed at the balance sheet date – for example, the determination, after the year end, of the consideration for assets sold before the year end; or the settlement of a court case after the balance sheet date that confirms that the entity had a present obligation at the balance sheet date. Although balance sheet information is neither restated nor remeasured for discontinued operations, the statement of comprehensive income information does have to be restated for the comparative period. Cash payments for the principal portion of the lease liability are classified within financing activities. Two phenomena should be distinguished: (1) changes in supply and demand and technological changes might cause prices of individual items to increase or decrease independently of each other (‘specific price changes’); and (2) other factors in the economy might result in changes in the general level of prices, and therefore in the general purchasing power of money (‘general price changes’). Contingent assets are possible assets that arise from past events and whose existence will be confirmed only on the occurrence or non-occurrence of uncertain future events outside the entity’s control. For insurance contracts with direct participation features, the ‘variable fee approach’ applies. Joint operators have rights to assets and obligations for liabilities. Statement of comprehensive income (or, if presented separately, income statement and statement of other comprehensive income): for the current interim period and the current year-to-date information, with comparatives for the equivalent periods in the previous year. The date of disposal of a subsidiary or disposal group is the date on which control passes. endstream endobj 1063 0 obj <>>>/Filter/Standard/Length 128/O(�����;��z�r0�J\)��J�� ۂ��1do)/P -1324/R 4/StmF/StdCF/StrF/StdCF/U(d��5K�� ��J�o��� )/V 4>> endobj 1064 0 obj <>>> endobj 1065 0 obj <> endobj 1066 0 obj <>/ExtGState<>>>/Font<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI]/XObject<>>>/Rotate 0/StructParents 0/Tabs/S/TrimBox[0 0 612 792]/Type/Page>> endobj 1067 0 obj <>stream Analysing contracts for potential embedded derivatives is one of the more challenging aspects of IFRS 9. If an entity has an onerous contract (that is, the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it), the present obligation under the contract is recognised as a provision. IFRS 10 does not contain any disclosure requirements; these are included within IFRS 12. The tax consequences that accompany, for example, a change in tax rates or tax laws, a reassessment of the recoverability of deferred tax assets or a change in the expected manner of recovery of an asset are recognised in profit or loss, except to the extent that they relate to items previously charged or credited outside profit or loss. It recognises an asset if current tax has been overpaid. Service costs (that is, the present value of the benefits earned by active employees); and. Both the valuation of and the accounting for awards can be difficult, due to the complex models that need to be used to calculate the fair value of options and also due to the variety and complexity of schemes. The statement of cash flows is one of the primary statements in financial reporting (along with the statement of comprehensive income, the balance sheet and the statement of changes in equity). For example, where a product is sold with a subsequent service, revenue is allocated initially to the product component and the service component, and it is recognised separately thereafter when the criteria for revenue recognition are met for each component. The financial statements of a fictional entity have been updated to illustrate the disclosure and presentation requirements of the IFRS standards and interpretations for financial years beginning on or after 1 January 2012. Activities outside the scope of IFRS 6 are accounted for according to the applicable standards (such as IAS 16, ‘Property, plant and equipment’, IAS 37, ‘Provisions, contingent liabilities and contingent assets’, and IAS 38, ‘Intangible assets’). Revenue is recognised for each component separately by applying the recognition criteria below. IFRS 7 sets out disclosure requirements that are intended to enable users to evaluate the significance of financial instruments for an entity’s financial position and performance, and to understand the nature and extent of risks arising from those financial instruments to which the entity is exposed. It discloses the date of acquisition on transition to IFRS 9 is required IAS... Embedded derivatives is one of the three elements used to portray an entity will apply to such company! 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