Pocket Guide 2010 FINAL

8/3/2019 Pocket Guide 2010 FINAL

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International Financial Reporting Standards

Pocket guide 2010


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This pocket guide provides a summary o the recognition and measurement

requirements o International Financial Reporting Standards (IFRS) issued

up to August 2010. It does not address in detail the disclosure requirements;

these can be ound in the PwC publication IFRS disclosure checklist.

The inormation in this guide is arranged in six sections:

Accountingrulesandprinciples

Incomestatementandrelatednotes

Balancesheetandrelatednotes

Consolidatedandseparatenancialstatements

Othersubjects

Industry-specictopics

More detailed guidance and inormation on these topics can be ound in the

IFRS Manual o Accounting 2010 and other PwC publications. A list o PwCs

IFRS publications is provided on the inside ront and back covers.

International Financial Reporting Standards

Pocket guide 2010


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IFRS pocket guide 2010 PricewaterhouseCoopersi

Contents

Accounting rules and principles 1

1. Introduction 1

2. Accounting principles and applicability o IFRS 2

3. First-timeadoption 3

4. Presentationofnancialstatements 5

5. Accountingpolicies,accountingestimatesanderrors 9

6. Financial instruments 11

7. Foreign currencies 21

8. Insurance contracts 23

Income statement and related notes 24

9. Revenue 24

10. Segment reporting 27

11. Employeebenets 28

12. Share-basedpayment 31

13. Taxation 33

14. Earningspershare 35

Balance sheet and related notes 36

15. Intangibleassets 36

16. Property,plantandequipment 38

17. Investment property 40

18. Impairment o assets 41

19. Leases 43

20. Inventories 44

21. Provisionsandcontingences 45

22. Eventsafterthereportingperiodandnancialcommitments 4823. Equity(sharecapitalandreserves) 49


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PricewaterhouseCoopers IFRS pocket guide 2010 ii

Contents

Consolidated and separate nancial statements 51

24. Consolidatedandseparatenancialstatements 51

25. Businesscombinations 53

26. Disposalsofsubsidiaries,businessandnon-currentassets 56

27. Associates 58

28. Jointventures 59

Other subjects 60

29. Related-partydisclosures 60

30. Cash fow statements 62

31. Interim reports 63

32. Serviceconcessionarrangements 65

Industry-specic topics 66

33. Agriculture 66

34. Retirementbenetplans 67

35. Extractiveindustries 68

Index by standards and interpretation 70


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IFRSpocketguide2009


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Accounting rules and principles

1PricewaterhouseCoopers IFRS pocket guide 2010


1 Introduction

Therehavebeenmajorchangesinnancialreportinginrecentyears.Most

obvious is the continuing adoption o IFRS worldwide. Many territories have

beenusingIFRSforsomeyears,andmoreareplanningtocomeonstream

from2011.ThenextwaveoftransitioningcountriesincludesKorea,India,

Japan,muchofSouthandCentralAmericaandCanada.Thekeycountryin

this regard is the US. The decision about adoption o IFRS in the US is still

tobetaken.Despitethis,alikelyadoptiondateisnowmoreoftenquotedas

2016 rather than 2014. Convergence between IFRS and US GAAP continues

in the meantime.

An important recent development is the extent to which IFRS is aected

bypolitics.Thecreditcrunch,theproblemsinthebankingsectorandthe

attempts o politicians to resolve these questions have resulted in pressure

onstandardsetterstoamendtheirstandards,primarilythoseonnancial

instruments.Thispressureisunlikelytodisappear,atleastintheshort

term.TheIASBisworkinghardtorespondtothis;wecanthereforeexpect

a continuous stream o changes to the standards in the next ew monthsand years.


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2 IFRS pocket guide 2010 PricewaterhouseCoopers


2 Accounting principles and applicability o IFRS

TheIASBhastheauthoritytosetIFRSandtoapproveinterpretationsof

those standards.

IFRSsareintendedtobeappliedbyprot-orientatedentities.Theseentities

nancialstatementsgiveinformationaboutperformance,positionandcash

owthatisusefultoarangeofusersinmakingnancialdecisions.These

usersincludeshareholders,creditors,employeesandthegeneralpublic.A

completesetofnancialstatementsincludesa:

Balancesheet.

Statementofcomprehensiveincome.

Cashowstatement.

Statementofchangesinequity.

Adescriptionofaccountingpolicies.

Notestothenancialstatements.

The concepts underlying accounting practices under IFRS are set out

intheIASBsFrameworkforthepreparationandpresentationof

nancialstatements.


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3 First-time adoption o IFRS IFRS 1

An entity moving rom national GAAP to IFRS should apply the requirements

ofIFRS1.ItappliestoanentitysrstIFRSnancialstatementsandinterim

reportspresentedunderIAS34,Interimnancialreporting,thatarepart

o that period. The basic requirement is or ull retrospective application

ofallIFRSseffectiveatthereportingdate.However,thereareanumber

o optional exemptions and mandatory exceptions to the requirement or

retrospective application.

TheexemptionscoverstandardsforwhichtheIASBconsidersthat

retrospectiveapplicationcouldprovetobetoodifcultorcouldresultinacostlikelytoexceedanybenetstousers.Theexemptionsareoptional.Any,

all or none o the exemptions may be applied.

The optional exemptions relate to:

Businesscombinations.

Deemedcost.

Employeebenets.

Cumulativetranslationdifferences. Compoundnancialinstruments.

Assetsandliabilitiesofsubsidiaries,associatesandjointventures.

Designationofpreviouslyrecognisednancialinstruments.

Share-basedpaymenttransactions.

Insurancecontracts.

Decommissioningliabilitiesincludedinthecostofproperty,

plant and equipment.

Leases.

Serviceconcessionarrangements. Borrowingcosts.

Investmentsinsubsidiaries,jointlycontrolledentitiesandassociates.

Transfersofassetsfromcustomers.


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The exceptions cover areas in which retrospective application o the IFRS

requirements is considered inappropriate. The ollowing exceptions are

mandatory,notoptional:

Hedgeaccounting.

Estimates.

Non-controllinginterests.

Comparative inormation is prepared and presented on the basis o IFRS.

Almostalladjustmentsarisingfromtherst-timeapplicationofIFRSare

againstopeningretainedearningsoftherstperiodthatispresentedonan

IFRS basis.

Certain reconciliations rom previous GAAP to IFRS are also required.


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4 Presentation o nancial statements IAS 1

Theobjectiveofnancialstatementsistoprovideinformationthatisuseful

inmakingeconomicdecisions.TheobjectiveofIAS1,Presentationof

nancialstatements,istoensurecomparabilityofpresentationofthat

informationwiththeentitysnancialstatementsofpreviousperiodsand

withthenancialstatementsofotherentities.

Financial statements are prepared on a going concern basis unless

managementintendseithertoliquidatetheentityortoceasetrading,

or has no realistic alternative but to do so. An entity prepares its

nancialstatements,exceptforcashowinformation,undertheaccrualbasis o accounting.

Thereisnoprescribedformatfortheprimarystatements.However,thereare

minimumdisclosurestobemadeinthenancialstatementsandthenotes.

The implementation guidance to IAS 1 contains illustrative examples o

acceptable ormats.

Financial statements disclose corresponding inormation or the preceding

period (comparatives) unless a standard or interpretation permits orrequires otherwise.

Statement o nancial position (balance sheet)

Thestatementofnancialpositionpresentsanentitysnancialpositionata

specicpointintime.Subjecttomeetingcertainminimumpresentationand

disclosurerequirements,managementmayuseitsjudgementregardingthe

formofpresentation,suchaswhethertouseaverticalorahorizontalformat,

whichsub-classicationstopresentandwhichinformationtodiscloseintheprimary statement or in the notes.


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Thefollowingitems,asaminimum,arepresentedonthefaceofthe

balance sheet:

Assetsproperty,plantandequipment;investmentproperty;intangible assets;nancialassets;investmentsaccountedforusingtheequity

method; biological assets; deerred tax assets; current tax assets;

inventories; trade and other receivables; and cash and cash equivalents.

Equityissuedcapitalandreservesattributabletotheparentsowners;

andnon-controllinginterest.

Liabilitiesdeferredtaxliabilities;currenttaxliabilities;nancial

liabilities; provisions; and trade and other payables.

Assetsandliabilitiesheldforsalethetotalofassetsclassiedas

heldforsaleandassetsincludedindisposalgroupsclassiedas

heldforsale;andliabilitiesincludedindisposalgroupsclassiedasheld

forsaleinaccordancewithIFRS5,Non-currentassetsheldforsaleand

discontinued operations.

Currentandnon-currentassetsandcurrentandnon-currentliabilitiesare

presentedasseparateclassicationsinthestatementunlesspresentation

based on liquidity provides inormation that is reliable and more relevant.

Statement o comprehensive income

The statement o comprehensive income presents an entitys perormance

overaspecicperiod.Entitieshaveachoiceofpresentingthisinasingle

statement or as two statements. The statement o comprehensive income

underthesingle-statementapproachincludesallitemsofincomeand

expense and includes each component o other comprehensive income

classiedbynature.Underthetwo-statementapproach,allcomponents

ofprotorlossarepresentedinanincomestatement,followedimmediately by a statement o comprehensive income. This begins with

thetotalprotorlossfortheperiodanddisplaysallcomponentsofother

comprehensive income and ends with total comprehensive income or

the period.


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Items to be presented in statement o comprehensive income

Thefollowingitems,asaminimum,arepresentedinthestatementof

comprehensive income:

Revenue.

Financecosts.

Shareoftheprotorlossofassociatesandjointventuresaccountedfor

using the equity method.

Taxexpense.

Post-taxprotorlossofdiscontinuedoperationsaggregatedwithany

post-taxgainorlossrecognisedonthemeasurementtofair

value less costs to sell (or on the disposal) o the assets or disposal

group(s) constituting the discontinued operation.

Protorlossfortheperiod.

Eachcomponentofothercomprehensiveincomeclassiedbynature.

Shareoftheothercomprehensiveincomeofassociatesandjoint

ventures accounted or using the equity method.

Totalcomprehensiveincome.

Protorlossfortheperiodandtotalcomprehensiveincomeareallocatedinthestatementofcomprehensiveincometotheamountsattributabletonon-

controlling interest and to the parents owners.

Additionallineitemsandsub-headingsarepresentedinthisstatement

when such presentation is relevant to an understanding o the entitys

nancialperformance.

Material items

The nature and amount o items o income and expense are disclosed

separately,wheretheyarematerial.Disclosuremaybeinthestatementorin

the notes. Such income/expenses may include items such as restructuring

costs;write-downsofinventoriesorproperty,plantandequipment;litigation

settlements;andgainsorlossesondisposalsofnon-currentassets.


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Tax on components o other comprehensive income

An entity presents each component o other comprehensive income in the

statementeither(a)netofitsrelatedtaxeffects,or(b)beforeitsrelatedtaxeffects,withtheaggregatetaxeffectofthesecomponentsshownseparately.

Statement o changes in equity

The ollowing items are presented in the statement o changes in equity:

Totalcomprehensiveincomefortheperiod,showingseparatelythe

totalamountsattributabletotheparentsownersandtonon-controlling

interest.

Foreachcomponentofequity,theeffectsofretrospectiveapplication

orretrospectiverestatementrecognisedinaccordancewithIAS8,

Accountingpolicies,changesinaccountingestimates,anderrors.

Amountsoftransactionswithownersintheircapacityasowners,

showing separately contributions by and distributions to owners.

Foreachcomponentofequity,areconciliationbetweenthecarrying

amountatthebeginningandtheendoftheperiod,separately

disclosing each change.

Statement o cash fows

Cash fow statements are addressed in section 30 dealing with the

requirements o IAS 7.

Notes to the nancial statements

Thenotesareanintegralpartofthenancialstatements.Notesprovideinformationadditionaltotheamountsdisclosedintheprimary

statements. They include accounting policies and critical accounting

estimatesandjudgements.


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5 Accounting policies, accounting estimates and

errors IAS 8

An entity ollows the accounting policies required by IFRS that are relevant

totheparticularcircumstancesoftheentity.However,forsomesituations,

standards oer choice; there are other situations where there is no

guidance.Inthesesituations,managementshouldselectappropriate

accounting policies.

Managementusesitsjudgementindevelopingandapplyinganaccounting

policy that results in inormation that meets the qualitative characteristics

ofrelevanceandreliability,includingfaithfulrepresentation,substanceoverform,neutrality,prudenceandcompleteness.IfthereisnoIFRSstandardor

interpretationthatisspecicallyapplicable,managementshouldconsider

theapplicabilityoftherequirementsinIFRSonsimilarandrelatedissues,

andthenthedenitions,recognitioncriteriaandmeasurementconceptsfor

assets,liabilities,incomeandexpensesintheFramework.Managementmay

alsoconsiderthemostrecentpronouncementsofotherstandard-setting

bodies,otheraccountingliteratureandacceptedindustrypractices,where

these do not confict with IFRS.

Accounting policies should be applied consistently to similar transactions

and events.

Changes in accounting policies

Changes in accounting policies made on adoption o a new standard are

accounted or in accordance with the transition provisions (i any) within that

standard.Ifspecictransitionprovisionsdonotexist,achangeinpolicy

(whetherrequiredorvoluntary)isaccountedforretrospectively(thatis,by

restatingallcomparativegurespresented)unlessthisisimpracticable.


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Issue o new/revised standards not yet eective

Standards are normally published in advance o the required implementation

date.Intheinterveningperiod,whereanew/revisedstandardthatisrelevanttoanentityhasbeenissuedbutisnotyeteffective,theentitydisclosesthis

act. It also provides the known or reasonably estimable inormation relevant

to assessing the impact that the application o the standard might have on

theentitysnancialstatementsintheperiodofinitialrecognition.

Changes in accounting estimates

An entity recognises prospectively changes in accounting estimates by

includingtheeffectsinprotorlossintheperiodthatisaffected(theperiod

ofthechangeandfutureperiods),exceptifthechangeinestimategives

risetochangesinassets,liabilitiesorequity.Inthiscase,itisrecognisedby

adjustingthecarryingamountoftherelatedasset,liabilityorequityinthe

period o the change.

Errors

Errors may arise rom mistakes and oversights or misinterpretation oinormation.

Errorsthatarediscoveredinasubsequentperiodareprior-perioderrors.

Materialprior-perioderrorsareadjustedretrospectively(thatis,byrestating

comparativegures)unlessthisisimpracticable.


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6 Financial instruments IFRS 9, IFRS 7, IAS 32 and

IAS 39

Objectives and scope

Financial instruments are addressed in three standards:

IFRS7,Financialinstruments:Disclosure,whichdealswithdisclosures;

IAS32,Financialinstruments:Presentation,whichdealswith

distinguishing debt rom equity and with netting; and

IAS39,Financialinstruments:Recognitionandmeasurement,which

contains requirements or recognition and measurement.

Theobjectiveofthestandardsistoestablishrequirementsforallaspects

ofaccountingfornancialinstruments,includingdistinguishingdebtfrom

equity,netting,recognition,derecognition,measurement,hedgeaccounting

and disclosure.

Thestandardsscopeisbroad.Thestandardscoveralltypesofnancial

instrument,includingreceivables,payables,investmentsinbondsand

shares,borrowingsandderivatives.Theyalsoapplytocertaincontractstobuyorsellnon-nancialassets(suchascommodities)thatcanbenet-

settledincashoranothernancialinstrument.

InNovember2009,theIASBpublishedtherstpartofitsthree-stage

projecttoreplaceIAS39,intheformofanewstandardIFRS9,Financial

instruments.Thisrstphasedealswiththeclassicationandmeasurement

ofnancialassets.Thestandardappliesforannualperiodsbeginningonor

after1January2013.Earlyapplicationispermitted,althoughIFRS9hasnot

yet been endorsed or use in the EU.

IFRS9replacesthemultipleclassicationandmeasurementmodelsin

IAS39withasinglemodelthathasonlytwoclassicationcategories:

amortisedcostandfairvalue.ClassicationunderIFRS9isdrivenbythe

entitysbusinessmodelformanagingthenancialassetsandthecontractual

characteristicsofthenancialassets.


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Anancialassetismeasuredatamortisedcostiftwocriteriaaremet:

Theobjectiveofthebusinessmodelistoholdthenancialassetforthe

collection o the contractual cash fows; and Thecontractualcashowsundertheinstrumentsolelyrepresent

payments o principal and interest.

IFRS9removestherequirementtoseparateembeddedderivativesfrom

nancialassethosts.Itrequiresahybridcontracttobeclassiedinits

entirety at either amortised cost or air value.

Two o the existing three air value option criteria become obsolete under

IFRS9,asafairvaluedrivenbusinessmodelrequiresfairvalueaccounting,

andhybridcontractsareclassiedintheirentiretyatfairvalue.The

remainingfairvalueoptionconditioninIAS39iscarriedforwardtothenew

standardthatis,managementmaystilldesignateanancialassetasatfair

valuethroughprotorlossoninitialrecognitionifthissignicantlyreduces

anaccountingmismatch.Thedesignationatfairvaluethroughprotorloss

will continue to be irrevocable.

IFRS9prohibitsreclassicationsexceptinrarecircumstanceswhentheentitys business model changes.

Thereisspecicguidanceforcontractuallylinkedinstrumentsthatcreate

concentrationsofcreditrisk,whichisoftenthecasewithinvestment

tranches in a securitisation.

IFRS9sclassicationprinciplesindicatethatallequityinvestmentsshould

bemeasuredatfairvalue.However,managementhasanoptiontopresent

in other comprehensive income unrealised and realised air value gains andlosses on equity investments that are not held or trading.

IFRS9removesthecostexemptionforunquotedequitiesandderivatives

on unquoted equities but provides guidance on when cost may be an

appropriate estimate o air value.


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Nature and characteristics o nancial instruments

Financialinstrumentsincludeawiderangeofassetsandliabilities,such

astradedebtors,tradecreditors,loans,nanceleasereceivablesandderivatives.TheyarerecognisedandmeasuredaccordingtoIAS39s

requirements and are disclosed in accordance with IFRS 7.

Financial instruments represent contractual rights or obligations to receive or

paycashorothernancialassets.Non-nancialitemshaveamoreindirect,

non-contractualrelationshiptofuturecashows.

Anancialassetiscash;acontractualrighttoreceivecashoranother

nancialasset;acontractualrighttoexchangenancialassetsorliabilities

with another entity under conditions that are potentially avourable; or an

equity instrument o another entity.

Anancialliabilityisacontractualobligationtodelivercashoranother

nancialasset;ortoexchangenancialinstrumentswithanotherentity

under conditions that are potentially unavourable.

An equity instrument is any contract that evidences a residual interest in theentitys assets ater deducting all o its liabilities.

Aderivativeisanancialinstrumentthatderivesitsvaluefromanunderlying

price or index; requires little or no initial net investment; and is settled at a

uture date.

Embedded derivatives in host contracts

Somenancialinstrumentsandothercontractscombineaderivativeandanon-derivativeinasinglecontract.Thederivativepartofthecontract

isreferredtoasanembeddedderivative.Itseffectisthatsomeofthe

contractscashowsvaryinasimilarwaytoastand-alonederivative.For

example,theprincipalamountofabondmayvarywithchangesinastock

marketindex.Inthiscase,theembeddedderivativeisanequityderivativeon

the relevant stock market index.


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Embeddedderivativesthatarenotcloselyrelatedtotherestofthe

contractareseparatedandaccountedforasstand-alonederivatives(that

is,measuredatfairvalue,generallywithchangesinfairvaluerecognisedin

protorloss).Anembeddedderivativeisnotcloselyrelatedifitseconomiccharacteristics and risks are dierent rom those o the rest o the contract.

IAS39setsoutmanyexamplestohelpdeterminewhenthistestis(andis

not) met.

Analysing contracts or potential embedded derivatives is one o the more

challengingaspectsofIAS39.

Classication o nancial instruments

ThewaythatnancialinstrumentsareclassiedunderIAS39driveshow

they are subsequently measured and where changes in measurement are

accounted or.

Undernancialinstrumentsaccounting,priortotheimpactofIFRS9,there

arefourclassesofnancialasset(underIAS39):fairvaluethroughprot

orloss,heldtomaturity,loansandreceivablesandavailableforsale.The

factorstotakeintoaccountwhenclassifyingnancialassetsinclude:

Arethecashowsarisingfromtheinstrumentxedordeterminable?

Doestheinstrumenthaveamaturitydate?

Aretheassetsheldfortrading?Doesmanagementintendtoholdthe

instrumentstomaturity?

Istheinstrumentaderivative,ordoesitcontainan

embeddedderivative?

Istheinstrumentquotedonanactivemarket?

Hasmanagementdesignatedtheinstrumentintoaparticular classicationatinception?

Financialliabilitiesareatfairvaluethroughprotorlossiftheyare

designatedassuch(subjecttovariousconditions),iftheyareheldfortrading

oriftheyarederivatives(exceptforaderivativethatisanancialguarantee

contract or a designated and eective hedging instrument). They are

otherwiseclassiedasotherliabilities.


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Financial assets and liabilities are measured either at air value or at

amortisedcost,dependingontheirclassication.Changesaretakento

either the income statement or to other comprehensive income.

Reclassicationofnancialassetsfromonecategorytoanotherispermitted under limited circumstances. Various disclosures are required

whereareclassicationhasbeenmade.Derivativesandassetsdesignated

asatfairvaluethroughprotorlossunderthefairvalueoptionarenot

eligibleforthisreclassication.

Financial liabilities and equity

Theclassicationofanancialinstrumentbytheissueraseithera

liability(debt)orequitycanhaveasignicantimpactonanentitysgearing

(debt-to-equityratio)andreportedearnings.Itcouldalsoaffecttheentitys

debt covenants.

Thecriticalfeatureofaliabilityisthatunderthetermsoftheinstrument,the

issuerisorcanberequiredtodelivereithercashoranothernancialassetto

theholder;itcannotavoidthisobligation.Forexample,adebenture,under

which the issuer is required to make interest payments and redeem the

debentureforcash,isanancialliability.

Aninstrumentisclassiedasequitywhenitrepresentsaresidualinterestin

theissuersassetsafterdeductingallitsliabilities;or,putanotherway,when

the issuer has no obligation under the terms o the instrument to deliver cash

orothernancialassetstoanotherentity.Ordinarysharesorcommonstock

where all the payments are at the discretion o the issuer are examples o

equity o the issuer.

Inaddition,thefollowingtypesofnancialinstrumentareaccountedforasequity,providedtheyhaveparticularfeaturesandmeetspecicconditions:

Puttablenancialinstruments(forexample,somesharesissuedbyco-

operative entities and some partnership interests).

Instrumentsorcomponentsofinstrumentsthatimposeontheentity

an obligation to deliver to another party a pro rata share o the net

assetsoftheentityonlyonliquidation(forexample,somesharesissued

by limited lie entities).


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Theclassicationofthenancialinstrumentaseitherdebtorequityisbased

on the substance o the contractual arrangement o the instrument rather

thanitslegalform.Thismeans,forexample,thataredeemablepreference

share,whichiseconomicallythesameasabond,isaccountedforinthesame way as a bond. The redeemable preerence share is thereore treated

asaliabilityratherthanequity,eventhoughlegallyitisashareoftheissuer.

Otherinstrumentsmaynotbeasstraightforward.Ananalysisoftheterms

ofeachinstrumentinthelightofthedetailedclassicationrequirements

isnecessary,particularlyassomenancialinstrumentscontainboth

liabilityandequityfeatures.Suchinstruments,forexamplebondsthat

areconvertibleintoaxednumberofequityshares,areaccountedforas

separate liability and equity (being the option to convert) components.

Thetreatmentofinterest,dividends,lossesandgainsintheincome

statementfollowstheclassicationoftherelatedinstrument.Ifapreference

shareisclassiedasaliability,itscouponisshownasinterest.However,the

coupon on an instrument that is treated as equity is shown as a distribution.

Recognition and derecognition

Recognition

Recognitionissuesfornancialassetsandnancialliabilitiestendtobe

straightforward.Anentityrecognisesanancialassetoranancialliabilityat

the time it becomes a party to a contract.

Derecognition

Derecognitionisthetermusedforceasingtorecogniseanancialassetornancialliabilityonanentitysbalancesheet.Theserulesaremorecomplex.

Derecognition o assets

Anentitythatholdsanancialassetmayraisenanceusingtheassetas

securityforthenance,orastheprimarysourceofcashowsfromwhich

torepaythenance.ThederecognitionrequirementsofIAS39determine

whetherthetransactionisasaleofthenancialassets(andthereforethe


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entityceasestorecognisetheassets)orwhethernancehasbeensecured

on the assets (and the entity recognises a liability or any proceeds received).

Thisevaluationmightbestraightforward.Forexample,itisclearwithlittleor

noanalysisthatanancialassetisderecognisedinanunconditionaltransferofittoanunconsolidatedthirdparty,withnorisksandrewardsoftheasset

beingretained.Conversely,derecognitionisnotallowedwhereanassethas

been transerred but substantially all the risks and rewards o the asset have

beenretainedthroughthetermsoftheagreement.However,theanalysis

may be more complex in other cases. Securitisation and debt actoring

are examples o more complex transactions where derecognition will need

careul consideration.

Derecognition o liabilities

Anentitymayonlyceasetorecognise(derecognise)anancialliabilitywhen

itisextinguishedthatis,whentheobligationisdischarged,cancelledor

expired,orwhenthedebtorislegallyreleasedfromtheliabilitybylaworby

the creditor agreeing to such a release.

Measurement o nancial assets and liabilities

Allnancialassetsandnancialliabilitiesaremeasuredinitiallyatfair

valueunderIAS39.Thefairvalueofanancialinstrumentisnormallythe

transactionpricethatis,theamountoftheconsiderationgivenor

received.However,insomecircumstances,thetransactionpricemaynot

beindicativeoffairvalue.Insuchasituation,anappropriatefairvalueis

determined using data rom current observable transactions in the same

instrument or based on a valuation technique whose variables include only

data rom observable markets.

Themeasurementofnancialinstrumentsafterinitialrecognition

dependsontheirinitialclassication.Allnancialassetsaremeasuredat

fairvalueexceptforloansandreceivables,held-to-maturityassetsand,

inrarecircumstances,unquotedequityinstrumentswhosefairvalues

cannotbemeasuredreliably,orderivativeslinkedtoandthatmustbe

settled by the delivery o such unquoted equity instruments that cannot be

measured reliably.


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Loansandreceivablesandheld-to-maturityinvestmentsaremeasuredat

amortisedcost.Theamortisedcostofanancialassetornancialliabilityis

measuredusingtheeffectiveinterestmethod.

Available-for-salenancialassetsaremeasuredatfairvalue,withchangesin

fairvaluerecognisedinothercomprehensiveincome.Foravailable-for-sale

debtsecurities,interestisrecognisedinincomeusingtheeffectiveinterest

method.Dividendsonavailable-for-saleequitysecuritiesarerecognisedin

protorlossastheholderbecomesentitledtothem.Derivatives(including

separated embedded derivatives) are measured at air value. All air value

gainsandlossesarerecognisedinprotorlossexceptwheretheyqualifyas

hedging instruments in cash fow hedges.

Financial liabilities are measured at amortised cost using the eective

interestmethodunlesstheyareclassiedatfairvaluethroughprotorloss.

Financialassetsandnancialliabilitiesthataredesignatedashedgeditems

mayrequirefurtheradjustmentsunderthehedgeaccountingrequirements.

Allnancialassetsaresubjecttoreviewforimpairment,exceptthose

measuredatfairvaluethroughprotorloss.Wherethereisobjective

evidencethatsuchanancialassetmaybeimpaired,theimpairmentlossiscalculatedandrecognisedinprotorloss.

Hedge accounting

Hedgingistheprocessofusinganancialinstrument(usuallyaderivative)

tomitigateallorsomeoftheriskofahedgeditem.Hedgeaccounting

changes the timing o recognition o gains and losses on either the hedged

itemorthehedginginstrumentsothatbotharerecognisedinprotorloss

in the same accounting period in order to record the economic substance othe combination o the hedged item and instrument.

Toqualifyforhedgeaccounting,anentitymust(a)formallydesignateand

document a hedge relationship between a qualiying hedging instrument

and a qualiying hedged item at the inception o the hedge; and (b) both

atinceptionandonanongoingbasis,demonstratethatthehedgeis

highly eective.


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There are three types o hedge relationship:

Fairvaluehedgeahedgeoftheexposuretochangesinthefairvalue

ofarecognisedassetorliability,orarmcommitment. Cashowhedgeahedgeoftheexposuretovariabilityincashows

ofarecognisedassetorliability,armcommitmentorahighlyprobable

orecast transaction.

Netinvestmenthedgeahedgeoftheforeigncurrencyriskonanet

investment in a oreign operation.

Forafairvaluehedge,thehedgeditemisadjustedforthegainorloss

attributable to the hedged risk. That element is included in the income

statement where it will oset the gain or loss on the hedging instrument.

Foraneffectivecashowhedge,gainsandlossesonthehedging

instrument are initially included in other comprehensive income. The amount

included in other comprehensive income is the lesser o the air value o the

hedginginstrumentandhedgeitem.Wherethehedginginstrumenthasafair

valuegreaterthanthehedgeditem,theexcessisrecordedwithintheprot

or loss as ineectiveness. Gains or losses deerred in other comprehensive

incomearereclassiedtoprotorlosswhenthehedgeditemaffectstheincomestatement.Ifthehedgeditemistheforecastacquisitionofanon-

nancialassetorliability,theentitymaychooseanaccountingpolicyof

adjustingthecarryingamountofthenon-nancialassetorliabilityforthe

hedginggainorlossatacquisition,orleavingthehedginggainsorlosses

deferredinequityandreclassifyingthemtoprotandlosswhenthehedged

itemaffectsprotorloss.

Hedges o a net investment in a oreign operation are accounted or similarly

to cash fow hedges.


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Disclosure

Therehavebeensignicantdevelopmentsinriskmanagementconceptsand

practicesinrecentyears.Newtechniqueshaveevolvedformeasuringandmanagingexposurestorisksarisingfromnancialinstruments.This,coupled

withthesignicantvolatilityexperiencedinthenancialmarkets,has

increased the need or more relevant inormation and greater transparency

aboutanentitysexposuresarisingfromnancialinstrumentsandhowthose

risks are managed. Financial statement users and other investors need such

informationtomakemoreinformedjudgementsaboutrisksthatentitiesrun

fromtheuseofnancialinstrumentsandtheirassociatedreturns.

IFRS 7 sets out disclosure requirements that are intended to enable users

toevaluatethesignicanceofnancialinstrumentsforanentitysnancial

positionandperformance,andtounderstandthenatureandextentofrisks

arisingfromthosenancialinstrumentstowhichtheentityisexposed.

Theserisksincludecreditrisk,liquidityriskandmarketrisk.Italsorequires

disclosureofathree-levelhierarchyforfairvaluemeasurementandrequires

somespecicquantitativedisclosuresfornancialinstrumentsatthelowest

level in the hierarchy.

IFRS7doesnotjustapplytobanksandnancialinstitutions.Allentitiesthat

havenancialinstrumentsareaffectedevensimpleinstrumentssuchas

borrowings,accountspayableandreceivable,cashandinvestments.


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7 Foreign currencies IAS 21, IAS 29

Manyentitiesdobusinesswithoverseassuppliersorcustomers,orhave

overseas operations. This gives rise to two main accounting issues:

Sometransactions(forexample,thosewithoverseassuppliersor

customers) may be denominated in oreign currencies. These

transactionsareexpressedintheentitysowncurrency(functional

currency)fornancialreportingpurposes.

Anentitymayhaveforeignoperationssuchasoverseassubsidiaries,

branches or associates that maintain their accounting records in

theirlocalcurrency.Becauseitisnotpossibletocombine transactionsmeasuredindifferentcurrencies,theforeignoperations

resultsandnancialpositionaretranslatedintoasinglecurrency,

namelythatinwhichthegroupsconsolidatednancialstatementsare

reported(presentationcurrency).

The methods required or each o the above circumstances are

summarised below.

Expressing oreign currency transactions in the entitys unctionalcurrency

A oreign currency transaction is expressed in the unctional currency

using the exchange rate at the transaction date. Foreign currency balances

representingcashoramountstobereceivedorpaidincash(monetary

items) are reported at the end o the reporting period using the exchange

rate on that date. Exchange dierences on such monetary items are

recognisedasincomeorexpensefortheperiod.Non-monetarybalances

thatarenotre-measuredatfairvalueandaredenominatedinaforeigncurrency are expressed in the unctional currency using the exchange rate at

thetransactiondate.Whereanon-monetaryitemisre-measuredatfairvalue

inthenancialstatements,theexchangerateatthedatewhenfairvaluewas

determined is used.


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Translating unctional currency nancial statements into a

presentation currency

Assets and liabilities are translated rom the unctional currency to thepresentation currency at the closing rate at the end o the reporting

period. The income statement is translated at exchange rates at the dates

o the transactions or at the average rate i that approximates the

actual rates. All resulting exchange dierences are recognised in other

comprehensive income.

Thenancialstatementsofaforeignoperationthathasthecurrencyofa

hyperinationaryeconomyasitsfunctionalcurrencyarerstrestatedin

accordancewithIAS29,Financialreportinginhyperinationaryeconomies.

All components are then translated to the presentation currency at the

closing rate at the end o the reporting period.


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8 Insurance contracts IFRS 4

Insurancecontractsarecontractswhereanentityacceptssignicant

insurance risk rom another party (the policyholder) by agreeing to

compensate the policyholder i the insured event adversely aects the

policyholder.Therisktransferredinthecontractmustbeinsurancerisk,

whichisanyriskexceptfornancialrisk.

IFRS4,Insurancecontracts,appliestoallissuersofinsurancecontracts

whether or not the entity is legally an insurance company. It does not apply

to accounting or insurance contracts by policyholders.

IFRS4isaninterimstandardpendingcompletionofPhase2oftheIASBs

projectoninsurancecontracts.Itallowsentitiestocontinuewiththeir

existing accounting policies or insurance contracts i those policies meet

certainminimumcriteria.Oneoftheminimumcriteriaisthattheamount

oftheinsuranceliabilityissubjecttoaliabilityadequacytest.Thistest

considers current estimates o all contractual and related cash fows. I the

liabilityadequacytestidentiesthattheinsuranceliabilityisinadequate,the

entiredeciencyisrecognisedintheincomestatement.

AccountingpoliciesmodelledonIAS37,Provisions,contingentliabilities

andcontingentassets,areappropriateincaseswheretheissuerisnotan

insurancecompanyandwherethereisnospeciclocalGAAPforinsurance

contracts (or the local GAAP is only directed at insurance companies).

Disclosure is particularly important or inormation relating to insurance

contracts,asentitiescancontinuetouselocalGAAPaccountingpolicies

or measurement. IFRS 4 has two main principles or disclosure. Entities

should disclose:

Informationthatidentiesandexplainstheamountsinitsnancial

statements arising rom insurance contracts.

Informationthatenablesusersofitsnancialstatementstoevaluatethe

nature and extent o risks arising rom insurance contracts.


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Income statement and related notes


9 Revenue IAS 18, IAS 11 and IAS 20

Revenue is measured at the air value o the consideration received or

receivable.Whenthesubstanceofasingletransactionindicatesthatit

includesseparatelyidentiablecomponents,revenueisallocatedtothese

components by reerence to their air values. It is recognised or each

component separately by applying the recognition criteria below. For

example,whenaproductissoldwithasubsequentservice,revenueis

allocated initially to the product component and the service component; it is

recognised separately thereater when the criteria or revenue recognition aremet or each component.

Revenue IAS 18

Revenue arising rom the sale o goods is recognised when an entity

transfersthesignicantrisksandrewardsofownershipandgivesup

managerialinvolvementusuallyassociatedwithownershiporcontrol,ifit

isprobablethateconomicbenetswillowtotheentityandtheamountof

revenue and costs can be measured reliably.

Revenue rom the rendering o services is recognised when the outcome

o the transaction can be estimated reliably. This is done by reerence to

thestageofcompletionofthetransactionatthebalancesheetdate,using

requirements similar to those or construction contracts. The outcome o a

transaction can be estimated reliably when: the amount o revenue can be

measuredreliably;itisprobablethateconomicbenetswillowtotheentity;

the stage o completion can be measured reliably; and the costs incurred

and costs to complete can be reliably measured.

Examplesoftransactionswheretheentityretainssignicantrisksand

rewards o ownership and revenue is not recognised are when:

Theentityretainsanobligationforunsatisfactoryperformancenot

covered by normal warranty provisions;

Thereceiptofrevenuefromaparticularsaleiscontingentonthebuyer

in turn obtaining revenue rom its sale o the goods;


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Thebuyerhasthepowertorescindthepurchaseforareasonspecied

in the sales contract and the entity is uncertain about the probability o

return; and

Thenthegoodsareshippedsubjecttoinstallationandthatinstallationis asignicantpartofthecontract.

Interest income is recognised using the eective interest rate method.

Royalties are recognised on an accruals basis in accordance with the

substance o the relevant agreement. Dividends are recognised when the

shareholders right to receive payment is established.

IFRIC13,Customerloyaltyprogrammes,clariestheaccountingforaward

creditsgrantedtocustomerswhentheypurchasegoodsorservices-for

example,underfrequentyerschemesorsupermarketloyaltyschemes.The

air value o the consideration received or receivable in respect o the initial

sale is allocated between the award credits and the other components o

the sale.

IFRIC18,Transfersofassetsfromcustomers,clariestheaccountingfor

arrangementswhereanitemofproperty,plantandequipmentistransferred

by a customer in return or connection to a network and/or ongoing accesstogoodsorservices.IFRIC18willbemostrelevanttotheutilityindustry,

butitmayalsoapplytoothertransactions,suchaswhenacustomer

transfersownershipofproperty,plantandequipmentaspartofan

outsourcing agreement.

This interpretation is eective prospectively or transactions occurring rom

1July2009;itisendorsedforapplicationintheEUforannualperiods

beginningonorafter31October2009.

Construction contracts IAS 11

Aconstructioncontractisacontractspecicallynegotiatedforthe

constructionofanassetorcombinationofassets,includingcontractsforthe

rendering o services directly related to the construction o the asset (such as

projectmanagersandarchitectsservices).Suchcontractsaretypicallyxed-

priceorcost-pluscontracts.


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Revenue and expenses on construction contracts are recognised using the

percentage-of-completionmethod.Thismeansthatrevenue,expensesand

thereforeprotarerecognisedgraduallyascontractactivityoccurs.

Whentheoutcomeofthecontractcannotbeestimatedreliably,revenue

is recognised only to the extent o costs incurred that it is probable will be

recovered;contractcostsarerecognisedasanexpenseasincurred.When

itisprobablethattotalcontractcostswillexceedtotalcontractrevenue,the

expected loss is recognised as an expense immediately.

IFRIC15,Agreementsforconstructionofrealestate,clarieswhich

standard(IAS18,Revenue,orIAS11,Constructioncontracts)shouldbe

appliedtoparticulartransactions.Thisinterpretationiseffectivefornon-EU

accountingperiodsbeginningonorafter1January2009or1January2010

in the EU. Earlier adoption permitted.

Government grants IAS 20

Government grants are recognised when there is reasonable assurance that

the entity will comply with the conditions related to them and that the grants

will be received.

Grantsrelatedtoincomearerecognisedinprotorlossovertheperiods

necessary to match them with the related costs that they are intended to

compensate.Thetimingofsuchrecognitioninprotorlosswilldependon

thefullmentofanyconditionsorobligationsattachingtothegrant.

Grants related to assets are either oset against the carrying amount o

the relevant asset or presented as deerred income in the balance sheet.

Protorlosswillbeaffectedeitherbyareduceddepreciationchargeorbydeerred income being recognised as income systematically over the useul

lie o the related asset.


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10 Segment reporting IFRS 8

TheIASBissuedIFRS8,Operatingsegments,inNovember2006aspartof

convergence with US GAAP. IFRS 8 is similar to the US standard SFAS 131.

All entities with listed or quoted equity or debt instruments or that are in the

process o obtaining a listing or quotation o debt or equity instruments in a

public market are required to disclose segment inormation.

Operatingsegmentsarecomponentsofanentity,identiedbasedon

internal reports on each segment that are regularly used by the entitys chie

operatingdecision-maker(CODM)toallocateresourcestothesegmentandto assess its perormance.

Operatingsegmentsareseparatelyreportediftheymeetthedenitionofa

reportable segment. A reportable segment is an operating segment or group

o operating segments that exceed the quantitative thresholds set out in the

standard.However,anentitymaydiscloseanyadditionaloperatingsegment

i it chooses to do so.

AllreportablesegmentsarerequiredtoprovideameasureofprotintheformatviewedbytheCODM,aswellasdisclosureoftherevenuefrom

customersforeachgroupofsimilarproductsandservices,revenueby

geographyanddependenceonmajorcustomers.Otherdetaileddisclosures

ofperformanceandresourcesarerequirediftheCODMreviewsthese

amounts.Areconciliationofthetotalsofrevenue,protandloss,assets

andothermaterialitemsreviewedbytheCODMtotheprimarynancial

statements is required.


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11 Employee benets IAS 19

Employeebenetsareallformsofconsiderationgivenorpromisedbyan

entityinexchangeforservicesrenderedbyitsemployees.Thesebenets

includesalary-relatedbenets(suchaswages,prot-sharing,bonuses

andcompensatedabsences,suchaspaidholidayandlong-service

leave),terminationbenets(suchasseveranceandredundancypay)and

post-employmentbenets(suchasretirementbenetplans).Share-based

payments are addressed in IFRS 2.

Post-employmentbenetsincludepensions,post-employmentlifeinsurance

and medical care. Pensions are provided to employees either throughdenedcontributionplansordenedbenetplans.

Recognitionandmeasurementforshort-termbenetsisstraightforward,

because actuarial assumptions are not required and the obligations are not

discounted.However,long-termbenets,particularlypost-employment

benets,giverisetomorecomplicatedmeasurementissues.

Dened contribution plans

Accountingfordenedcontributionplansisstraightforward:thecostof

denedcontributionplansisthecontributionpayablebytheemployerfor

that accounting period.

Dened benet plans

Accountingfordenedbenetplansiscomplexbecauseactuarial

assumptions and valuation methods are required to measure the balance

sheet obligation and the expense. The expense recognised is not necessarilythe contributions made in the period.

Theamountrecognisedonthebalancesheetisthedenedbenet

obligationlessplanassetsadjustedforactuarialgainsandlosses(see

corridorapproachbelow).


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Tocalculatethedenedbenetobligation,estimates(actuarialassumptions)

about demographic variables (such as employee turnover and mortality) and

nancialvariables(suchasfutureincreasesinsalariesandmedicalcosts)are

inputintoavaluationmodel.Thebenetisthendiscountedtopresentvalue.This normally requires the expertise o an actuary.

Wheredenedbenetplansarefunded,theplanassetsaremeasuredatfair

value using discounted cash fow estimates i market prices are not available.

Planassetsaretightlydened,andonlyassetsthatmeetthedenitionof

planassetsmaybeoffsetagainsttheplansdenedbenetobligations

thatis,thenetsurplusordecitisshownonthebalancesheet.

There-measurementateachbalancesheetdateoftheplanassetsand

thedenedbenetobligationgivesrisetoactuarialgainsandlosses.There

arethreepermissiblemethodsunderIAS19forrecognisingactuarialgains

and losses:

UndertheOCIapproach,actuarialgainsandlossesarerecognised

immediately in other comprehensive income.

Underthecorridorapproach,anyactuarialgainsandlossesthatfall

outsidethehigherof10percentofthepresentvalueofthedened benetobligationor10percentofthefairvalueoftheplanassets

(i any) are amortised over no more than the remaining working lie o

the employees.

Undertheincomestatementapproach,actuarialgainsandlossesare

recognisedimmediatelyinprotorloss.

IAS19analysesthechangesintheplanassetsandliabilitiesintovarious

components,thenettotalofwhichisrecognisedasanexpenseorincomein

the income statement. These components include:

currentservicecost(thepresentvalueofthebenetsearnedbyactive

employees in the current period);

interestcost(theunwindingofthediscountonthedenedbenet

obligation);


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expectedreturnonanyplanassets(expectedinterest,dividendsand

capital growth o plan assets);

actuarialgainsandlosses,totheextenttheyarerecognisedinthe

income statement (see above); and past-servicecosts(thechangeinthepresentvalueoftheplanliabilities

relating to employee service in prior periods arising rom changes to

post-employmentbenets).

Past-servicecostsarerecognisedasanexpenseonastraight-linebasis

overtheaverageperioduntilthebenetsbecomevested.Ifthebenets

arealreadyvested,thepast-servicecostisrecognisedasanexpense

immediately.Gainsandlossesonthecurtailmentorsettlementofadened

benetplanarerecognisedinprotandlosswhenthecurtailmentor

settlement occurs.

Whenplanassetsexceedthedenedbenetobligationcreatinganet

surplus,IFRIC14,IAS19Thelimitonadenedbenetasset,minimum

fundingrequirementsandtheirinteraction,providesguidanceonassessing

the amount that can be recognised as an asset. It also explains how the

pension asset or liability may be aected by a statutory or contractual

minimum unding requirement.


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12 Share-based payment IFRS 2

Share-basedpaymenttransactionsaretransactionsinwhichentitiesreceive

goods or services as consideration or either:

equityinstrumentsoftheentity(ortheentitysparentoranotherentity

withinthesamegroup)equity-settledshare-basedpayment;or

cashorotherassets,wheretheamountisbasedonthepriceorvalueof

theentityssharescash-settledshare-basedpayment.

Themostcommonapplicationistoemployeeshareschemes,suchasshare

optionschemes.However,entitiessometimesalsopayforotherexpenses such as proessional ees and or the purchase o assets by means o

share-basedpayment.

The accounting treatment under IFRS 2 is based on the air value o the

instruments.Boththevaluationofandtheaccountingforawardscanbe

difcult,duetothecomplexmodelsthatneedtobeusedtocalculatethe

fairvalueofoptions,andalsoduetothevarietyandcomplexityofschemes.

Inaddition,thestandardrequiresextensivedisclosures.Theresultgenerally

istoreducereportedprots,especiallyinentitiesthatuseshare-basedpayment extensively as part o their remuneration strategy.

Alltransactionsinvolvingshare-basedpaymentarerecognisedasexpenses

or assets over any vesting period.

Equity-settledshare-basedpaymenttransactionsaremeasuredatthegrant

datefairvalueforemployeeservices;and,fornon-employeetransactions,

at the air value o the goods or services received at the date on which

the entity recognises the goods or services. I the air value o the goodsor services cannot be estimated reliably such as employee services

andcircumstancesinwhichthegoodsorservicescannotbespecically

identiedtheentityusesthefairvalueoftheequityinstrumentsgranted.

Additionally,managementneedstoconsiderifthereareanyunidentiable

goodsorservicesreceivedortobereceivedbytheentity,asthesealsohave

to be recognised and measured in accordance with IFRS 2.


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Equity-settledshare-basedpaymenttransactionsarenotre-measured

once the grant date air value has been determined.

Thetreatmentisdifferentforcash-settledshare-basedpaymenttransactions:cash-settledawardsaremeasuredatthefairvalueofthe

liability.Theliabilityisre-measuredateachbalancesheetdateandat

thedateofsettlement,withchangesinfairvaluerecognisedinthe

income statement.


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13 Taxation IAS 12

IAS12onlydealswithtaxesonincome,comprisingcurrenttaxand

deerred tax.

Current tax expense or a period is based on the taxable and deductible

amounts that will be shown on the tax return or the current year. An entity

recognises a liability in the balance sheet in respect o current tax expense

or the current and prior periods to the extent unpaid. It recognises an asset

i current tax has been overpaid.

Current tax assets and liabilities or the current and prior periods are

measured at the amount expected to be paid to (recovered rom) the

taxationauthorities,usingthetaxratesandtaxlawsthathavebeen

enacted or substantively enacted by the balance sheet date.

Taxpayablebasedontaxableprotseldommatchesthetaxexpensethat

mightbeexpectedbasedonpre-taxaccountingprot.Themismatchcan

occur because IFRS recognition criteria or items o income and expense

are dierent rom the treatment o items under tax law.

Deerred tax accounting seeks to deal with this mismatch. It is based on

the temporary dierences between the tax base o an asset or liability and

itscarryingamountinthenancialstatements.Forexample,aproperty

isrevaluedupwardsbutnotsold,therevaluationcreatesatemporary

difference(thecarryingamountoftheassetinthenancialstatements

isgreaterthanthetaxbaseoftheasset),andthetaxconsequenceisa

deerred tax liability.

Deerred tax is provided in ull or all temporary dierences arising betweenthe tax bases o assets and liabilities and their carrying amounts in the

nancialstatements,exceptwhenthetemporarydifferencearisesfrom:

initialrecognitionofgoodwill(fordeferredtaxliabilitiesonly);

initialrecognitionofanassetorliabilityinatransactionthatisnota

businesscombinationandthataffectsneitheraccountingprotnor

taxableprot;and

investmentsinsubsidiaries,branches,associatesandjointventures,

but only where certain criteria apply.


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Deerred 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

issettled,basedontaxrates(andtaxlaws)thathavebeenenactedor

substantively enacted by the balance sheet date. The discounting o deerredtax assets and liabilities is not permitted.

The measurement o deerred tax liabilities and deerred tax assets refects

the tax consequences that would ollow rom the manner in which the

entityexpects,atthebalancesheetdate,torecoverorsettlethecarrying

amount o its assets and liabilities. The expected manner o recovery or

landwithanunlimitedlifeisalwaysthroughsale.Forotherassets,the

mannerinwhichmanagementexpectstorecovertheasset(thatis,through

use or through sale or through a combination o both) is considered at each

balance sheet date.

Management only recognises a deerred tax asset or deductible temporary

differencestotheextentthatitisprobablethattaxableprotwillbeavailable

against which the deductible temporary dierence can be utilised. This also

applies to deerred tax assets or unused tax losses carried orward.

Currentanddeferredtaxisrecognisedinprotorlossfortheperiod,unlessthe tax arises rom a business combination or a transaction or event that is

recognisedoutsideprotorloss,eitherinothercomprehensiveincomeor

directly in equity in the same or dierent period. The tax consequences that

accompany,forexample,achangeintaxratesortaxlaws,areassessment

o the recoverability o deerred tax assets or a change in the expected

mannerofrecoveryofanassetarerecognisedinprotorloss,excepttothe

extentthattheyrelatetoitemspreviouslychargedorcreditedoutsideprot

or loss.


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14 Earnings per share IAS 33

Earningspershare(EPS)isaratiothatiswidelyusedbynancialanalysts,

investorsandotherstogaugeanentitysprotabilityandtovalueitsshares.EPS is normally calculated in the context o ordinary shares o the entity.

Earnings attributable to ordinary shareholders are thereore determined by

deducting rom net income the earnings attributable to holders o more

senior equity instruments.

An entity whose ordinary shares are listed on a recognised stock exchange

or are otherwise publicly traded is required to disclose both basic and diluted

EPSwithequalprominenceinitsseparateorindividualnancialstatements,

orinitsconsolidatednancialstatementsifitisaparent.Furthermore,

entitiesthatleorareintheprocessoflingnancialstatementswitha

securities commission or other regulatory body or the purposes o issuing

ordinaryshares(thatis,notaprivateplacement)arealsorequiredtocomply

with the standard.

BasicEPSiscalculatedbydividingtheprotorlossfortheperiod

attributable to the equity holders o the parent by the weighted average

numberofordinarysharesoutstanding(includingadjustmentsforbonusandrights issues).

DilutedEPSiscalculatedbyadjustingtheprotorlossandtheweighted

average number o ordinary shares by taking into account the conversion

o any dilutive potential ordinary shares. Potential ordinary shares are those

nancialinstrumentsandcontractsthatmayresultinissuingordinaryshares

such as convertible bonds and options (including employee share options).

BasicanddilutedEPSforbothcontinuingandtotaloperationsarepresentedwith equal prominence in the statement o comprehensive income or in

the separate income statement where one is presented or each class

ofordinaryshares.SeparateEPSguresfordiscontinuedoperationsare

disclosed in the same statements or in the notes.


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Balance sheet and related notes

15 Intangible assets IAS 38

Anintangibleassetisanidentiablenon-monetaryassetwithoutphysical

substance.Theidentiablecriterionismetwhentheintangibleassetis

separable(thatis,whenitcanbesold,transferredorlicensed)orwhereit

arises rom contractual or other legal rights.

Separately acquired intangible assets

Separately acquired intangible assets are recognised initially at cost. Costcomprisesthepurchaseprice,includingimportdutiesandnon-refundable

purchasetaxes,andanydirectlyattributablecostsofpreparingtheasset

or its intended use. The purchase price o a separately acquired intangible

assetincorporatesassumptionsabouttheprobableeconomicfuturebenets

that may be generated by the asset.

Internally generated intangible assets

The process o generating an intangible asset is divided into a researchphaseandadevelopmentphase.Nointangibleassetsarisingfromthe

research phase may be recognised. Intangible assets arising rom the

development phase are recognised when the entity can demonstrate:

technicalfeasibilityoftheproject;

itsintentiontocompletethedevelopments;

itsabilitytouseorselltheintangibleasset;

howtheintangibleassetwillgenerateprobablefutureeconomicbenets

(forexample,theexistenceofamarketfortheoutputoftheintangibleasset or or the intangible asset itsel);

theavailabilityofresourcestocompletethedevelopment;and

itsabilitytomeasuretheattributableexpenditurereliably.

Any expenditure written o during the research or development phase

cannotsubsequentlybecapitalisediftheprojectmeetsthecriteriafor

recognition at a later date.


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The costs relating to many internally generated intangible items cannot be

capitalisedandareexpensedasincurred.Thisincludesresearch,start-

upandadvertisingcosts.Expendituresoninternallygeneratedbrands,

mastheads,customerlists,publishingtitlesandgoodwillarenotrecognisedas intangible assets.

Intangible assets acquired in a business combination

Ifanintangibleassetisacquiredinabusinesscombination,boththe

probability and measurement criterion are always considered to be met. An

intangibleassetwillthereforealwaysberecognised,regardlessofwhetherit

hasbeenpreviouslyrecognisedintheacquireesnancialstatements.

Subsequent measurement

Intangibleassetsareamortisedunlesstheyhaveanindeniteusefullife.

Amortisation is carried out on a systematic basis over the useul lie o the

intangibleasset.Anintangibleassethasanindeniteusefullifewhen,

basedonananalysisofalltherelevantfactors,thereisnoforeseeablelimit

to the period over which the asset is expected to generate net cash infows

or the entity.

Intangibleassetswithniteusefullivesareconsideredforimpairmentwhen

there is an indication that the asset has been impaired. Intangible assets with

indeniteusefullivesandintangibleassetsnotyetinusearetestedannually

or impairment and whenever there is an indication o impairment.


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16 Property, plant and equipment IAS 16

Property,plantandequipment(PPE)isrecognisedwhenthecostofanasset

can be reliably measured and it is probable that the entity will obtain utureeconomicbenetsfromtheasset.

PPE is measured initially at cost. Cost includes the air value o the

consideration given to acquire the asset (net o discounts and rebates) and

any directly attributable cost o bringing the asset to working condition or its

intendeduse(inclusiveofimportdutiesandnon-refundablepurchasetaxes).

Directlyattributablecostsincludethecostofsitepreparation,delivery,

installationcosts,relevantprofessionalfeesandtheestimatedcostof

dismantling and removing the asset and restoring the site (to the extent

that such a cost is recognised as a provision). Classes o PPE are carried

at historical cost less accumulated depreciation and any accumulated

impairmentlosses(thecostmodel),oratarevaluedamountlessany

accumulated depreciation and subsequent accumulated impairment

losses (the revaluation model). The depreciable amount o PPE (being the

gross carrying value less the estimated residual value) is depreciated on a

systematic basis over its useul lie.

Subsequent expenditure relating to an item o PPE is capitalised i it meets

the recognition criteria.

PPE may comprise parts with dierent useul lives. Depreciation is calculated

basedoneachindividualpartslife.Incaseofreplacementofonepart,the

new part is capitalised to the extent that it meets the recognition criteria o

anasset,andthecarryingamountofthepartsreplacedisderecognised.

Thecostofamajorinspectionoroverhaulofanitemoccurringatregularintervals over the useul lie o the item is capitalised to the extent that it

meets the recognition criteria o an asset. The carrying amounts o the parts

replaced are derecognised.

IFRIC18,Transferofassetsfromcustomers,clariestheaccountingfor

arrangements where an item o PPE that is provided by the customer is used

to provide an ongoing service. The interpretation applies prospectively to

transfersofassetsfromcustomersreceivedonorafter1July2009,although

EUendorsedforannualperiodsbeginningonorafter31October2009.


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Borrowing costs

UnderIAS23,Borrowingcosts,costsaredirectlyattributabletothe

acquisition,constructionorproductionofaqualifyingassettobecapitalised.


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17 Investment property IAS 40

Certainpropertiesareclassiedasinvestmentpropertiesfornancial

reportingpurposesinaccordancewithIAS40,Investmentproperty,asthecharacteristicsofthesepropertiesdiffersignicantlyfromowner-occupied

properties. It is the current value o such properties and changes to those

valuesthatarerelevanttousersofnancialstatements.

Investmentpropertyisproperty(landorabuilding,orpartofabuilding

or both) held by an entity to earn rentals and/or or capital appreciation.

Since1January2009,thiscategoryincludessuchpropertyinthecourse

o construction or development. Any other properties are accounted or as

property,plantandequipment(PPE)inaccordancewith:

IAS16,Property,plantandequipment,iftheyareheldforuseinthe

production or supply o goods or services; or

IAS2,Inventories,asinventory,iftheyareheldforsaleintheordinary

course o business.

Owner-occupiedpropertydoesnotmeetthedenitionofinvestment

property.

Initial measurement o an investment property is the air value o its purchase

consideration plus any directly attributable costs. Subsequent to initial

measurement,managementmaychooseasitsaccountingpolicyeitherto

carry investment properties at air value or at cost. The policy chosen is

applied consistently to all the investment properties that the entity owns.

Ifthefairvalueoptionischosen,investmentpropertiesinthecourseof

construction or development are measured at air value i this can be reliablymeasured;otherwise,theyaremeasuredatcost.

Fair value is the price at which the property could be exchanged between

knowledgeable,willingpartiesinanarmslengthtransaction.Changesinfair

valuearerecognisedinprotorlossintheperiodinwhichtheyarise.

The cost model requires investment properties to be carried at cost

less accumulated depreciation and any accumulated impairment losses

consistent with the treatment o PPE; the air value o these properties isdisclosed in the notes.


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18 Impairment o assets IAS 36

Nearlyallassetscurrentandnon-currentaresubjecttoanimpairment

test to ensure that they are not overstated on balance sheets.

The basic principle o impairment is that an asset may not be carried on the

balancesheetaboveitsrecoverableamount.Recoverableamountisdened

as the higher o the assets air value less costs to sell and its value in use.

Fair value less costs to sell is the amount obtainable rom a sale o an asset

inanarmslengthtransactionbetweenknowledgeable,willingparties,less

costs o disposal. Value in use requires management to estimate the uture

cashowstobederivedfromtheassetanddiscountthemusingapre-tax

market rate that refects current assessments o the time value o money and

therisksspecictotheasset.

Allassetssubjecttotheimpairmentguidancearetestedforimpairment

where there is an indication that the asset may be impaired. Certain assets

(goodwill,indenitelivedintangibleassetsandintangibleassetsthatarenot

yet available or use) are also tested or impairment annually even i there is

no impairment indicator.

Assessment o whether an asset is impaired involves consideration o

bothexternalindicators(forexample,signicantadversechangesinthe

technological,market,economicorlegalenvironmentorincreasesinmarket

interestrates)andinternalindicators(forexample,evidenceofobsolescence

or physical damage o an asset or evidence rom internal reporting that the

economicperformanceofanassetis,orwillbe,worsethanexpected).

Recoverableamountiscalculatedattheindividualassetlevel.However,an

assetseldomgeneratescashowsindependentlyofotherassets,andmostassetsaretestedforimpairmentingroupsofassetsdescribedascash-

generatingunits(CGUs).ACGUisthesmallestidentiablegroupofassets

that generates infows that are largely independent rom the cash fows rom

other CGUs.


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The carrying value o an asset is compared to the recoverable amount

(being the higher o value in use or air value less costs to sell). An asset or

CGU is impaired when its carrying amount exceeds its recoverable amount.

AnyimpairmentisallocatedtotheassetorassetsoftheCGU,withtheimpairmentlossrecognisedintheprotorloss.

Goodwill acquired in a business combination is allocated to the acquirers

CGUsorgroupsofCGUsthatareexpectedtobenetfromthesynergiesof

thebusinesscombination.However,thelargestgroupofCGUspermitted

or goodwill impairment testing is the lowest level o operating segment

beore aggregation.


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19 Leases IAS 17

A lease gives one party (the lessee) the right to use an asset over an agreed

periodoftimeinreturnforpaymenttothelessor.Leasingisanimportantsourceofmedium-andlong-termnancing;accountingforleasescanhave

asignicantimpactonlesseesandlessorsnancialstatements.

Leasesareclassiedasnanceoroperatingleasesatinception,depending

on whether substantially all the risks and rewards o ownership transer to

thelessee.Underanancelease,thelesseehassubstantiallyalloftherisks

andrewardofownership.Allotherleasesareoperatingleases.Leasesof

land and buildings are considered separately under IFRS.

Underanancelease,thelesseerecognisesanassetheldunderanance

lease and a corresponding obligation to pay rentals. The lessee depreciates

the asset.

The lessor recognises the leased asset as a receivable. The receivable is

measuredatthenetinvestmentintheleasetheminimumleasepayments

receivable,discountedattheinternalrateofreturnofthelease,plusthe

unguaranteed residual which accrues to the lessor.

Underanoperatinglease,thelesseedoesnotrecogniseanassetand

lease obligation. The lessor continues to recognise the leased asset

and depreciates it. The rentals paid are normally charged to the income

statement o the lessee and credited to that o the lessor on a

straight-linebasis.

Linkedtransactionswiththelegalformofaleaseareaccountedforonthe

basisoftheirsubstanceforexample,asaleandleasebackwheretheselleris committed to repurchase the asset may not be a lease in substance i the

sellerretainstherisksandrewardsofownershipandsubstantiallythesame

rights o use as beore the transaction.

Equally,sometransactionsthatdonothavethelegalformofaleaseare

in substance leases i they are dependent on a particular asset that the

purchaser can control physically or economically.


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20 Inventories IAS 2

Inventories are initially recognised at cost. Cost o inventories includes

importduties,non-refundabletaxes,transportandhandlingcosts,andanyotherdirectlyattributablecostslesstradediscounts,rebatesand

similar items.

Inventoriesarevaluedatthelowerofcostandnetrealisablevalue(NRV).

NRVistheestimatedsellingpriceintheordinarycourseofbusiness,lessthe

estimated costs o completion and estimated selling expenses.

IAS2,Inventories,requiresthecostforitemsthatarenotinterchangeable

orthathavebeensegregatedforspeciccontractstobedeterminedonan

individual-itembasis.Thecostofotheritemsofinventoryusedisassigned

byusingeithertherst-in,rst-out(FIFO)orweightedaveragecostformula.

Last-in,rst-out(LIFO)isnotpermitted.Anentityusesthesamecost

ormula or all inventories that have a similar nature and use to the entity.

Adifferentcostformulamaybejustiedwhereinventorieshaveadifferent

nature or use. The cost ormula used is applied on a consistent basis rom

period to period.


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21 Provisions and contingencies IAS 37

Aliabilityisapresentobligationoftheentityarisingfrompastevents,

the settlement o which is expected to result in an outfow rom the entityofresourcesembodyingeconomicbenets.Aprovisionfallswithinthe

categoryofliabilitiesandisdenedasaliabilityofuncertaintiming

or amount.

Recognition and initial measurement

A provision is recognised when: the entity has a present obligation to transer

economicbenetsasaresultofpastevents;itisprobable(morelikelythannot) that such a transer will be required to settle the obligation; and a reliable

estimate o the amount o the obligation can be made.

The amount recognised as a provision is the best estimate o the expenditure

requiredtosettletheobligationatthebalancesheetdate,measuredatthe

expected cash fows discounted or the time value o money. Provisions are

not recognised or uture operating losses.

A present obligation arises rom an obligating event and may take the ormo either a legal obligation or a constructive obligation. An obligating event

leaves the entity no realistic alternative to settling the obligation. I the entity

canavoidthefutureexpenditurebyitsfutureactions,ithasnopresent

obligation,andnoprovisionisrequired.Forexample,anentitycannot

recognise a provision based solely on the intent to incur expenditure at some

uture date or the expectation o uture operating losses (unless these losses

relate to an onerous contract).

Anobligationdoesnotgenerallyhavetotaketheformofalegalobligationbeore a provision is recognised. An entity may have an established pattern

o past practice that indicates to other parties that it will accept certain

responsibilities and as a result has created a valid expectation on the part

ofthoseotherpartiesthatitwilldischargethoseresponsibilities(thatis,the

entity is under a constructive obligation).


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I an entity has an onerous contract (the unavoidable costs o meeting the

obligationsunderthecontractexceedtheeconomicbenetsexpectedto

bereceivedunderit),thepresentobligationunderthecontractisrecognised

as a provision. Impairments o any assets dedicated to the contract arerecognised beore making a provision.

Restructuring provisions

Therearespecicrequirementsforrestructuringprovisions.Aprovision

is recognised when there is: (a) a detailed ormal plan identiying the main

eatures o the restructuring; and (b) a valid expectation in those aected that

the entity will carry out the restructuring by starting to implement the plan or

by announcing its main eatures to those aected.

A restructuring plan does not create a present obligation at the balance

sheetdateifitisannouncedafterthatdate,evenifitisannouncedbefore

thenancialstatementsareapproved.Noobligationarisesforthesaleofan

operationuntiltheentityiscommittedtothesale(thatis,thereisabinding

sale agreement).

The provision includes only incremental costs necessarily resulting rom therestructuring and not those associated with the entitys ongoing activities.

Any expected gains on the sale o assets are not considered in measuring a

restructuring provision.

Reimbursements

An obligation and any anticipated recovery are presented separately as a

liabilityandanassetrespectively;however,anassetcanonlybe

recognised i it is virtually certain that settlement o the obligation will resultinareimbursement,andtheamountrecognisedforthereimbursement

should not exceed the amount o the provision. The amount o any

expectedreimbursementisdisclosed.Netpresentationispermittedonlyin

the income statement.


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Subsequent measurement

Management perorms an exercise at each balance sheet date to identiy the

best estimate o the expenditure required to settle the present obligation atthebalancesheetdate,discountedatanappropriaterate.Theincreasein

provision due to the passage o time is recognised as interest expense.

Contingent liabilities

Contingent liabilities are possible obligations whose existence will be

conrmedonlyontheoccurrenceornon-occurrenceofuncertainfuture

eventsoutsidetheentityscontrol,orpresentobligationsthatarenot

recognised because: (a) it is not probable that an outfow o economic

benetswillberequiredtosettletheobligation;or(b)theamountcannotbe

measured reliably.

Contingent liabilities are not recognised but are disclosed and described in

thenotestothenancialstatements,includinganestimateoftheirpotential

nancialeffectanduncertaintiesrelatingtotheamountortimingofany

outow,unlessthepossibilityofsettlementisremote.

Contingent assets

Contingentassetsarepossibleassetswhoseexistencewillbeconrmed

onlyontheoccurrenceornon-occurrenceofuncertainfutureevents

outsidetheentityscontrol.Contingentassetsarenotrecognised.Whenthe

realisationofincomeisvirtuallycertain,therelatedassetisnotacontingent

asset; it is recognised as an asset.

Contingentassetsaredisclosedanddescribedinthenotestothenancialstatements,includinganestimateoftheirpotentialnancialeffectifthe

inowofeconomicbenetsisprobable.


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22 Events ater the reporting period and nancial

commitments IAS 10

Itisnotgenerallypracticableforpreparerstonalisenancialstatements

without a period o time elapsing between the balance sheet date and

thedateonwhichthenancialstatementsareauthorisedforissue.The

question thereore arises as to the extent to which events occurring between

thebalancesheetdateandthedateofapproval(thatis,eventsafterthe

reportingperiod)shouldbereectedinthenancialstatements.

Eventsafterthereportingperiodareeitheradjustingeventsornon-adjusting

events.Adjustingeventsprovidefurtherevidenceofconditionsthatexistedatthebalancesheetdateforexample,determiningaftertheyearendthe

considerationforassetssoldbeforetheyearend.Non-adjustingevents

relatetoconditionsthataroseafterthebalancesheetdateforexample,

announcing a plan to discontinue an operation ater the year end.

The carrying amounts o assets and liabilities at the balance sheet date are

adjustedonlyforadjustingeventsoreventsthatindicatethatthegoing-

concern assumption in relation to the whole entity is not appropriate.

Signicantnon-adjustingpost-balance-sheetevents,suchastheissueofsharesormajorbusinesscombinations,aredisclosed.

Dividends proposed or declared ater the balance sheet date but beore

thenancialstatementshavebeenauthorisedforissuearenotrecognised

asaliabilityatthebalancesheetdate.Detailsofthesedividendsare,

however,disclosed.

Anentitydisclosesthedateonwhichthenancialstatementswere

authorisedforissueandthepersonsauthorisingtheissueand,wherenecessary,thefactthattheownersorotherpersonshavetheabilityto

amendthenancialstatementsafterissue.


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23 Equity (share capital and reserves)

Equity,alongwithassetsandliabilities,isoneofthethreeelements

usedtoportrayanentitysnancialposition.EquityisdenedintheIASBsFrameworkastheresidualinterestintheentitysassetsafter

deductingallitsliabilities.Thetermequityisoftenusedtoencompassan

entitys equity instruments and reserves. Equity is given various

descriptionsinthenancialstatements.Corporateentitiesmayrefertoit

asownersequity,shareholdersequity,capitalandreserves,shareholders

unds and proprietorship. Equity includes various components with

dierent characteristics.

Determining what constitutes an equity instrument or the purpose o IFRS

andhowitshouldbeaccountedforfallswithinthescopeofthenancial

instrumentstandardIAS32,Financialinstruments:Presentation.

Differentclassesofsharecapitalmaybetreatedaseitherdebtorequity,

or a compound instrument with both debt and equity components. Equity

instruments(forexample,issued,non-redeemableordinaryshares)are

generally recorded at the proceeds o issue net o transaction costs. Equity

instrumentsarenotre-measuredafterinitialrecognition.

Reservesincluderetainedearnings,togetherwithfairvaluereserves,

hedgingreserves,assetrevaluationreservesandforeigncurrencytranslation

reserves and other statutory reserves.

Treasury shares

Treasurysharesaredeductedfromequity.Nogainorlossisrecognisedin

protorlossonthepurchase,sale,issueorcancellationofanentitysownequity instruments.

Non-controlling interests

Non-controllinginterests(previouslytermedminorityinterests)in

consolidatednancialstatementsarepresentedasacomponentofequity,

separately rom the parent shareholders equity.


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Disclosures

IAS1,Presentationofnancialstatements,requiresvariousdisclosures.

Theseincludethetotalissuedsharecapitalandreserves,presentationofastatementofchangesinequity,capitalmanagementpoliciesand

dividend inormation


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Consolidated and separate inancial statements

Consolidated and separate nancial statements

24 Consolidated and separate nancial statements IAS 27

IAS27,Consolidatedandseparatenancialstatements,requires

consolidatednancialstatementstobepreparedinrespectofagroup,

subjecttocertainexceptions.Allsubsidiariesshouldbeconsolidated.A

subsidiary is an entity that is controlled by the parent. Control is the power

togovernthenancialandoperatingpoliciesofanentitysoastoobtain

benetsfromitsactivities.Itispresumedtoexistwhentheinvestordirectly

orindirectlyholdsmorethan50percentoftheinvesteesvotingpower;

this presumption may be rebutted i there is clear evidence to the contrary.Controlmayalsoexistwherelessthan50percentoftheinvesteesvoting

power is held and the parent has the power to control through or example

control o the board o directors.

Consolidation o a subsidiary takes place rom the date o acquisition; this

is the date on which control o the acquirees net assets and operations is

effectivelytransferredtotheacquirer.Consolidatednancialstatementsare

prepared to show the eect as i the parent and all the subsidiaries were one

entity.Transactionswithinthegroup(forexample,salesfromonesubsidiaryto another) are eliminated.

An entity with one or more subsidiaries (a parent) presents consolidated

nancialstatements,unlessallthefollowingc

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Pocket Guide 2010 FINAL