Agenda
2 © 2014 IBM Corporation
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Section1
Introduction to IFRS
Adoption of IFRS in India
IFRS Roadmap
Hierarchy of IFRS
List of Standards to be followed
Section2
Elements of Financial statement
Section3
Presentation of additional disclosure
Segment reporting,EPS,Related party transaction
Snap shot of Financial report following these standards
What ?Who?How?Where?When………….
Follow me
What ?Who developed this? Where?When?
International Financial Reporting Standards (IFRS) - Global standard for the preparation of public
company financial statements.
Developed by IASB -The IASB is an independent accounting standard-setting body, based in London.
It consists of 15 members from multiple countries, including the United States. The IASB began
operations in 2001 when it succeeded the International Accounting Standards Committee.
Where is this used- Approximately 90 countries have fully conformed with IFRS as promulgated by the
IASB
IFRS History
The IFRS was formerly known as International Accounting Standards (IAS), but in 2001 the International
Accounting Standards Board (IASB) took over the responsibility for setting International Accounting
Standards. Since then, the IASB has continued to develop standards called IFRS
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Hierarchy of IFRS International Financial Reporting Standards v/s IAS
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IFRS History
The IFRS was formerly known as International Accounting Standards (IAS), but in 2001 the International
Accounting Standards Board (IASB) took over the responsibility for setting International Accounting
Standards. Since then, the IASB has continued to develop standards called IFRS
IASB Board requirements
Composition
The IASB currently has 14 board members, of whom one is appointed as Chair and up to two as Vice-
Chairs. Up to 3 members may be ‘part-time’ members. IASB members are appointed for an initial term of
five years, renewable for one extended term of three years (five years in the case of members appointed
before 2 July 2009). The Chair and Vice-Chairs may serve second terms of five years, subject to an
overall maximum term of ten years
Geographical balance
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4 Members from Asia/Oceania region:
4 members from Europe
:4 members from North America and
1 from Africa
And 1 from south America and
Adoption of IFRS in INDIA Currently while IFRSs are not permitted for primary reporting requirements in India, the Securities and
Exchange Board of India has provided an option to listed entities having subsidiaries to submit their
consolidated financial results either in accordance with the accounting standards specified in section
211(3C) of the Companies Act, 1956, or in accordance with IFRS. This option is permitted only for
consolidated financial results by listed entities and submission of stand-alone financial results to the
stock exchanges shall continue to be in accordance with Indian GAAP
IFRS converged Indian Accounting Standards (referred to as Ind AS) have been issued.
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IFRS Roadmap for India
Proposed roadmap for IFRS adoption in India (transition date is yet to be formally announced by
the Indian Ministry of Corporate Affairs (MCA))
The latest recommendations by the ICAI, which may or may not be accepted by the MCA, propose the
following:
Ind AS(35 Indian IFRS standards) will be applied by the following classes of companies in preparing
consolidated financial statements for accounting periods beginning on or after 1 April 2016, with
comparatives for the year ending 31 March 2016 or later
a) Entities with equity or debt securities listed, or in the process of listing, in or outside India
b)Companies having a net worth of Rs. 500 crore or more
Holding, subsidiary, joint venture or associate companies of the above two classes of entities
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Press Release by ICAI
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Important terms and principles
Different Methods of valuation of Financial Reporting:
Fair Market value- Fair market value is a specific type of market value. It is defined by a legal or regulatory jurisdiction and varies with individual jurisdictions
Market value- Market value is an opinion of the most probable buy-sell price. It reflects the probable amount of money a buyer would pay and a seller would accept for an item of property under specific conditions as noted in the following definition
Realizable value :
Above two usually applies in case of intellectual property, shares of stock.
Historical cost
Carrying amount
Principles
Cost
Accrual
Matching
Disclosure principle
Separate entity
Objective evidence
9
© 2014 IBM Corporation 9/4/2014
Brainstorm on valuation…………
if Sunny purchased an asset for $6,000 and estimated depreciation expense of $600 per year for 10
years, the cost of the asset after the first year less depreciation is $5,400. If the market value of the asset
were $5,800 after year one in the open market, Sunny would not write up the asset after the first year.
Rather, the asset would remain at original cost less any depreciation until the asset is sold. Pass JE if
asset is sold after a year.
if my stock investment, purchased for $2,000, falls in value to $1,400, then fair-value accounting would
show that investment on my financial statements at………?
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Underlying assumptions in IFRS
There are four underlying assumptions in IFRS:
Accrual basis
Going concern
Stable measuring unit assumption -(i.e. traditional historical cost accounting: assets and liabilities are
recorded at their originally acquired values; not generally restated for changes in values).
Units of constant purchasing power-The rejection of the stable measuring unit assumption in certain
situations:- it has other name as real value accounting or current cost accounting.
Formula=Book value X current month general price index/ average index of holding period
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CPPA Brainstorm……..
Nexus Ltd recorded administration expenses of $115 000 for the year ended 30 June 2012. Assume that
these costs were incurred evenly over the year. If the general price level index was 170 on 1 July 2011
and 190 on 30 June 2012 with an average of the year of 180, what amount would be recorded to
administration expenses for the year in accounts restated to a constant purchasing power basis?
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CPPA Brainstorm……..
IBM Company had a closing balance of inventory at 30 June 2012 equal to $10000. This inventory had
been purchased in the last three months of the financial year. Assume the general price level index
was 140 on 1 July 2011, 144 on 31 December 2011, 150 on 30 June 2012, the average for the year (July
2011-June 2012) was 145 and the average for April 2012 - June 2012 was 147.
For showing updated inventory with CPPA, we will use following formula
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CPPA Brainstorm……..
Sourit Ltd purchased a vehicle on 1 July 2011 for $140 000. The vehicle is depreciated on a straight-line
basis over a 4-year period, with nil residual value. The following general price level indices are available:
1 July 2011 130
30 June 2012 140
Average for year 135
What is the amount of depreciation shown in the income statement (restated to a constant
purchasing power basis) for the year ended 30 June 2012?
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Effect on Report
How it can effect?
Under IFRS, an entity is required to depreciate separately the significant parts of PPE if they have different
useful life (Component Approach-each part of item which is significant to the cost of an asset must
be depreciated separately).Change in the method of depreciation is treated as change in accounting
estimates and impact is prospective.
Under Indian GAAP, Generally component approach is not required or followed. Change in depreciation
method is treated as change in accounting policies and impact is determined by retrospectively
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Example of component approach
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Assume that EuroAsiaAirlines purchases an airplane for €100,000,000 on January
1, 2013. The airplane has a useful life of 20 years and a residual value of €0.
EuroAsia uses the straight-line method of depreciation for all its airplanes.
EuroAsia identifies the following components, amounts, and useful lives, as shown
below,calculate depreciation as per component approach.
List of International Accounting Standards
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1. IAS1 Presentation of Financial Statements
2. IAS 2 Inventories
3. IAS 7 Statement of Cash Flows
4. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
5. IAS10 Events After the Reporting Period
6. IAS 11 Construction Contract
7 . IAS 12 Income Tax
8. IAS 14 Segment Reporting
9. IAS 15 Information Reflecting the Effects of Changing Prices (Withdrawn)
10. IAS 16 Property, Plant and Equipment
11. IAS 17 Leases
Sl No
Std No Description
Note- Few Standards have been
withdrawn or Superseded by
new standard
List of International Accounting Standards continue…….
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12. IAS18 Revenue
13. IAS 19 Employee Benefits (2011)
14. IAS 20 Accounting for Government Grants and Disclosure of Government Assistance
15. IAS 21 The Effects of Changes in Foreign Exchange Rates
16. IAS 22 Business Combinations (Superseded)
17. IAS 23 Borrowing Cost
18. IAS 24 Related Party Disclosures
19. IAS 26 Accounting and Reporting by Retirement Benefit Plans
20. IAS 27 Consolidated and Separate Financial Statements (2008)
21. IAS 28 Investments in Associates (2003)
22. IAS 29 Financial Reporting in Hyperinflationary Economies
Sl No
Std No Description
List of International Accounting Standards continue…….
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23. IAS30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions
24. IAS 31 Interests In Joint Ventures
25. IAS 32 Financial Instruments: Presentation
26. IAS 33 Earnings Per Share
27. IAS 34 Interim Financial Reporting
28. IAS 35 Discontinuing Operations (Superseded)
29. IAS 36 Impairment of Assets
30. IAS 37 Provisions, Contingent Liabilities and Contingent Assets
31. IAS 38 Intangible Assets
32. IAS 39 Financial Instruments: Recognition and Measurement
33. IAS 40
34. IAS 41
Investment Property
Agriculture
Sl No
Std No Description
Section 1- Elements of financial statements
Chapter 1-Revenue IAS18
Chapter 2- Property, plant and equipment IAS16,
( Depreciation, Government grants,Borrowing cost, Asset held for sale, Investment Property)
Chapter 3 - Impairment of assets
Chapter 4 - Leases
Chapter 5- Intangible assets and goodwill
Chapter 6 - Inventories and construction contract
Chapter 7 - Liabilities-provisions, contingent assets and liabilities
*Note-Screen shots of slide about financial report belongs to Unilever Group.
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Chapter 1 IAS-18 Revenue
IAS-18 Revenue
Overview:
It outlines the accounting requirements for when to recognise revenue from the sale of goods,
rendering of services, and for interest, royalties and dividends.
Objective
accounting treatment for revenue arising from certain types of transactions and events.
Measurement of revenue
Revenue should be measured at the fair value of the consideration received or receivable.
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Term and criteria in case of Point Of Sale:
Term and criteria:
Recognisation should be when it is probable that future economic benefits will flow to the entity and these
can be measured. Source of revenue is sale of goods, fee from service, interest, dividend and royalties.
If revenue has already recognised but collectability of cash is brought in to doubt, the amount should be
recognised as an expenses, not an adjustment of the revenue previously recognised.
Four criteria should meet to recognise it. Basic requirement of point of sale is as follow:
Product has been provided to the buyer
Ownership passed to buyer
Buyer indicated his willingness to pay
Monetary value of goods/service has been established
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Recognition and Disclosure
Recognition of revenue
incorporating an item that meets the definition of revenue (above) in the income statement when it meets
the following criteria:
it is probable that any future economic benefit associated with the item of revenue will flow to the entity,
and
the amount of revenue can be measured with reliability
Disclosure
accounting policy for recognising revenue
amount of each of the following types of revenue:
– sale of goods
– rendering of services
– interest
– royalties
– dividends
– within each of the above categories, the amount of revenue from exchanges of goods or services
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Advance payment received
Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the
services have been rendered or products have been delivered.
For example, a company that receives an advance payment of $100,000 for delivery of a product would
book it as deferred revenue on its balance sheet. Once it delivers the product to the customer, the
company would transfer the $100,000 from the deferred revenue account to regular revenue on its income
statement.
Collection of tax is not a revenue.
Recognise revenue only if below criteria are satisfied.
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Sale of goods Rendering Service
Revenue can be measured reliably Revenue can be measured reliably
Economic benefit will flow to entity Economic benefit will flow to entity
Cost incurred can be measured Cost incurred can be measured
Transfer of risk and reward of ownership and
no continuing managerial involvement
Stage of completion can be measured
Warranty cost and service fee
Matching of revenue to warranty cost and service fee
The sale price of a product may include identifiable amount for subsequent servicing. In this case amount
will be deferred and recognise as revenue over the period during which the service is performed.
Warranty cost
Washing machine sells for $500 with a one year warranty. The dealer knows from experience that 15% of
these machines develop a fault in the first year and that the average cost of repair is $100.He sells 200
machines. How does he account for this sale?
Service fee
A Computerised accountancy package is sold with one years after sales support. Cost of providing
support to one customer for one year is calculated to be $50.The company has a mark-up on cost of 15%
on service fee.Product is sold for $350.How is sale accounted for?
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Interest, royalties, and dividends
For interest, royalties and dividends, provided that it is probable that the economic benefits will flow to the
enterprise and the amount of revenue can be measured reliably, revenue should be recognised as
follows:
interest: using the effective interest method, based on calculation of period
royalties: on an accruals basis in accordance with the substance of the relevant agreement
dividends: when the shareholder's right to receive payment is established
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Chapter 1 Roundup
Recognisation of revenue, Terms for point of sale and service performed.
Treatment of revenue in case of advance payment and cash collectability is in doubt.
Treatment in case of sale with cash on delivery, right of return exist, consignment goods etc.
Service and warranty cost attached to revenue
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Chapter 2 IAS-16 property plant equipment
Depreciation accounting
IAS 20-Government grants
IAS 40 Investment property
IAS 23 Borrowing costs
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IAS-16 Property plant and equipment
Overview: Property, plant and equipment is initially measured at its cost, subsequently measured either
using a cost or revaluation model, and depreciated over its useful life.
Scope-Property, plant and equipment are tangible items that:
– are held for use in the production or supply of goods or services, for rental to others, or for
administrative purposes; and
– are expected to be used during more than one period.
The cost of an item of property, plant and equipment shall be recognised as an asset if, and only if:
– it is probable that future economic benefits associated with the item will flow to the entity; and
– the cost of the item can be measured reliably.
Does not apply to biological assets related to agriculture activity, non-regenerative resources(oil, gas etc)
and exploration and evaluation assets.
Objective: recognition of assets, the determination of their carrying amounts, and the depreciation charges
and impairment losses related to assets
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Recognisation and Measurment
Recognition:
Items of property, plant, and equipment should be recognised as assets when it is probable that:
it is probable that the future economic benefits associated with the asset will flow to the entity, and
the cost of the asset can be measured reliably.
Measurment
Initial measurement:
Cost includes all costs necessary to bring the asset to working condition for its intended use.
Measurement subsequent to initial recognition
IAS 16 permits two accounting models: Cost and revaluation model (at fair value).
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In scope of PPE
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Measurement
After initial recognition:
An entity shall choose either the cost model or the revaluation model as its accounting
policy and shall apply that policy to an entire class of property, plant and equipment.
Historical Cost
-
Depreciation of historical
amount over useful life
-
Impairment losses
Model
Carr
yin
g A
mount Revalued amount
-
Depreciation of revalued
amount over useful life
-
Impairment losses
Regular valuations to ensure
that carrying amount does
not differ materially from fair
value at balance sheet date
Cost Revaluation
Revaluation Accounting
Market value usually represent its fair value.
When an item of PPE is revalued, the whole class of assets to be revalued at the same time.
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• Debit asset value(statement of financial position)
• Credit Profit or Loss(offset earlier decrease)
• Credit Revaluation reserve(B.F)
Increase in value
• Debit revaluation surplus(offset previous increase)
• Debit profit or loss(B.F)
• Credit Asset value(statement of financial position)
Decrease in value
Brainstorming………..
Revaluation surplus
ABC co has as item of land carried in its books @$13,000.Two years ago a slump in land values led the
company to reduce the carrying value from $15,000.This was taken as an expenses in profit or loss.
There has been a surge in land prices in the current year, however, and the land is now worth $20,000.
Account for revaluation in current year.
Revaluation Decrease
Swap round the example given above: The original cost was $15,000,revalued upward to $20,000 two
years ago. The value has now fallen to $13,000.Account for decrease in value.
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Important definition and terms
Depreciation:
is the systematic allocation of the depreciable amount of an asset over its useful life;
depreciation of an asset begins when it is available for use.
Depreciable amount:
is the cost of an asset, or other amount substituted for cost, less its residual value.
Useful life:
the period over which an asset is expected to be available for use by an entity; or
the number of production or similar units expected to be obtained from the asset by an
entity.
Residual value:
the estimated amount that an entity would currently obtain from disposal of the asset,
after deducting the estimated costs of disposal, if the asset were already of the age and
in the condition expected at the end of its useful life.
The carrying amount: amount at which assets is recognised in the financial statements(B/S)
after deducting any accumulated depreciation and accumulated impairment losses.
Impairment loss: Amount by which the carrying amount exceeds its recoverable amount.
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Depreciation
Define
A method of allocating the cost of a tangible asset over its useful life
Note-Land and building are dealt with separately even when they are acquired together because land
normally has an unlimited life and is therefore not depreciated. Any increase in the value of land on which
a building is standing will have no impact n the determination of the building’s useful life.
Review of useful life and depreciation method:
It should be carried out at least at each financial year end and the depreciation charge for the current
and future period should be adjusted. Change in accounting estimates for prospectively as
adjustment to future depreciation. Similar to US GAAP
Overhauls-Repairs and Maintenance:
Where an assets requires regular overhauls in order to continue to operate, the cost of the overhaul is
treated as an additional component and depreciated over the period to the next overhaul.
Retirement and disposal: When an assets is permanently withdrawn from use, sold or scrapped, and no
future economic benefits are expected from its disposal, it should be withdrawn from financial
statements.
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Brainstorm on PPE…………….
What will be asset value in books if one asset from the block has completely depreciated.
We Calculate depreciation for Leasehold land or freehold land, please explain?
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Disclosures
For PPE
Measurement base for determining the gross carrying amount
Recoverable amount
Revalued assets-basis used to revalue, effective date of revaluation, who was valuer, revaluation surplus
or deficit.
For Deprecation
Depreciation method
Useful lives or depreciation rates
Total depreciation allocated for the period
Gross amount of depreciable assets and the related accumulated depreciation
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Example of other non current assets line items
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IAS 20 — Accounting for Government Grants and Disclosure of Government Assistance
It is common for entity to receive grants for various purpose( subsidies, premium, etc..).We will cover below
topics.
Objective of IAS 20
Scope
Definition
Accounting treatment
Disclosure
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Scope, Accounting and disclosure
Scope
The benefit of a government loan at a below-market rate of interest is treated as a government grant.
Do not include:
Government acting as part owner
Government assistance: Government grants do not include government assistance whose value cannot be reasonably measured, such as technical or marketing advice. It also does not include if given in the form of ‘Tax breaks’(in the form of benefits in determining taxable income)
Accounting for grants
A government grant is recognised only when there is reasonable assurance that (a) the entity will comply with any conditions attached to the grant and (b) the grant will be received. The grant is recognised as income over the period necessary to match them with the related costs, for which they are intended to compensate, on a systematic basis.
A grant relating to assets may be presented in one of two ways:
as deferred income, or
by deducting the grant from the asset's carrying amount.
A grant relating to income may be reported separately as 'other income' or deducted from the related expense
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IAS 40 — Investment Property
Overview
IAS 40 Investment Property applies to the accounting for property (land and/or buildings) held to earn
rentals or for capital appreciation (or both). Investment properties are initially measured at cost and, with
some exceptions. may be subsequently measured using a cost model or fair value model.
E.g: Entity hold land and building as an investment for capital appreciation rather than for use in the
business.
land held for a currently undetermined future use
building leased out under an operating lease
vacant building held to be leased out under an operating lease
Property being constructed or developed for future use
Definition of investment property
Investment property is property (land or a building or part of a building or both) held (by the owner or by
the lessee under a finance lease) to earn rentals or for capital appreciation or both
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Brainstorming
Rich co has piece of land. The directors have not yet decided whether to build a factory on it for use in its
business or to keep it and sell when its value has risen. Would this be classified as investment property
under IAS40?
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Continue
Measurement
Initial measurement => Cost
Subsequent measurement => an accounting policy that must be applied to all investment property
– Fair Value Model; or
– Cost Model
Cannot choose to have some investment properties at cost and some at fair value
Where an entity chooses to classify a property held under an operating lease as an investment
property, there is no choice. The Fair value model must be used for all the entity’s investment
property, regardless of whether it is owned or leased.
What happens with dual-use property?
Dual-use purposes properties are those which are occupied by the owner to use in the production or
supply of goods and services; and also to earn rentals.
The entity shall give a different treatment to the portions held to earn rentals / capital appreciation vs.
those portions held for use in the production or supply of goods and services
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If the portions:
Accounting
Could be sold or leased out separately Each portion is accounted separately
Could not be sold or leased out separately Investment Property
– Only if owner-occupied portion is
insignificant
Disposal and Disclosure
Disposal
An investment property should be derecognised on disposal or when the investment property is
permanently withdrawn from use and no future economic benefits are expected from its disposal. The gain
or loss on disposal should be calculated as the difference between the net disposal proceeds and the
carrying amount of the asset and should be recognised as income or expense in the income statement.
Disclosure
whether the fair value or the cost model is used
if the fair value model is used, whether property interests held under operating leases are classified and
accounted for as investment property
if classification is difficult, the criteria to distinguish investment property from owner-occupied property and
from property held for sale
Rental income and expenses
Any restriction or obligations
Assumption in determining fair value.
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IAS 23 — Borrowing Costs
Overview
Interest and other costs that the entity incurs to borrow funds are considered borrowing costs.
Borrowing Costs directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset.
– Qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.
Income on temporary investment of funds borrowed specifically for construction of an asset reduces borrowing cost eligible for capitalization.
Other borrowing costs are recognized as an expense.
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Capitalization conditions
Commencement Cessation
The entity meets all of the following conditions:
• expenditures for the asset are incurred;
• borrowing costs are incurred; and
• activities to prepare the asset for its use or sale are in
progress
The entity shall cease capitalizing he capitalization of
borrowing costs when the preparation activities are
complete and the asset is ready for use.
Borrowing Costs (cont.)
General Borrowing Costs:
– The entity shall apply a capitalization rate to the expenditures on the qualifying asset.
– Capitalization rate shall be the weighted average of the borrowing costs applicable to the period.
– Capitalized amount could not exceed the borrowing costs incurred in the period.
Example: What is the amount to be capitalized if the borrowing amount was expensed as intended?
– Borrowing = 1000
– Interest Rate = 1%
– Borrowing usage = 40% building construction, 50% vendors payments, 10% cash
Disclosure [IAS 23.26]
amount of borrowing cost capitalised during the period
capitalisation rate used
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% Total Interest 1%
building construction 40 400 4
Vendor payment 50 500 5
Cash 10 100 1
Borrowing(Total) 1000 10
Total amount to be capitalized in
the period is:
$ 404
Unilever Report
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Chapter Roundup
IAS 16 covers accounting of PPE which are tangible and non-current assets.
It is common for entities to receive grants from government for various purpose. Treatment of this is
covered under IAS 20 Accounting for Government Grants and Disclosure of Government
Assistance.
An entity may own land and building as an investment rather then for use in business. It may generate
cash flow largely independent of the other assets which the entity holds. The treatment of investment
property is covered by IAS40.
IAS 23 looks at the treatment of Borrowing Cost, where related borrowing are applied to the
construction of certain assets. These are what are usually called ‘self constructed assets’, where an entity
builds its own inventory or non-current assets.
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Chapter 3 IAS 36 — Impairment of Assets Overview
Impairment is determined by comparing the carrying amount of the assets with its recoverable amount. It
applies to all tangible, Intangible and financial assets with few exceptions listed below. It means fall in
value of assets.
inventories (see IAS 2)
assets arising from construction contracts (see IAS 11)
deferred tax assets (see IAS 12)
assets arising from employee benefits (see IAS 19)
financial assets (see IAS 39)
investment property carried at fair value (see IAS 40)
agricultural assets carried at fair value (see IAS 41)
insurance contract assets (see IFRS 4)
non-current assets held for sale (see IFRS 5)
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Scope and objective
Scope: When and how to test for impairment How to recognize impairments Determining cash generating units (CGUs) Determining the appropriate level to allocate goodwill and test for impairment How to record or reverse an impairment The principles of disclosure.
Objective
When to test for impairment-Indicators of impairment
Recoverable Amount (RA)
Cash Generating Units (CGU)
Calculation of Recoverable Amount
Goodwill: allocation and disposal
Reversal of prior losses
– Indicators of reversal of impairment losses
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When to test assets for impairment
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9/4/2014 55 IFRS Policy & Implementation Team
Is asset goodwill or
indefinite-lived
Intangible asset?
YES
Test for impairment annually
whether or not there is an
Indication of impairment
NO
Any indication of
Impairment?
Test asset for
impairment YES
No impairment test needed
NO Annual testing may be performed at any time during the year, provided the same assets are tested at the same time each year. Different assets may be tested at different times.
All other assets (not excluded from the scope of IAS 36) should be tested only when an indicator of impairment exists.
An assessment of impairment indicators must be performed at the end of each reporting period.
When to test assets for impairment - Continued
Indicators of Impairment: Triggering Events
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External Significant decline in market value
Significant changes in the
technological, market, economic and
legal environment in which the entity
operates
Market interest rates or other market
rates of return on investments have
increased during the period
Carrying amount of the net assets of
the entity is more than its market
capitalization
Internal Evidence of obsolescence or
physical damage of an asset
Significant adverse changes on
the entity have taken place
during the period, or are to take
place in the near future
Internal reporting indicates that
the economic performance of an
asset is, or will be, worse than
expected
Recognisation and Measurment
Impairment Loss= Carrying Amount-Recoverable amount
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Recoverable Amount = higher of FVLCTS or VIU
Terminology:
•Fair value less costs to sell (FVLCTS) is the amount obtainable from the sale of an asset less the
costs of disposal.
•Value in use (VIU) is the present value of the future cash flows expected to be derived from an
asset
•The recoverable amount shall be estimated for the individual asset
Recoverable Amount
Asset’s/CGU’s
carrying
amount
An asset/CGU is impaired if:
58 © 2014 IBM Corporation
9/4/2014 58 IFRS Policy & Implementation Team
Allocating Impairment Loss
Is an asset/CGU impaired?
Process ends
Is the impairment loss
greater than the carrying
amount of goodwill?
YES NO
Reduce goodwill carrying
value by total impairment
loss
Allocate excess impairment
loss to other assets in the
CGU pro-rata using
their carrying amounts
NO YES
An asset’s carrying amount should not be
reduced below the highest of: – Its fair value less costs to sell (if
determinable);
– Value in use (if determinable); or
– Zero
A liability should be recognized for any
remaining amount of an impairment loss
for a CGU only if it is required by another
standard.
And it should be charged to p&l account
as an expenses
Allocation treatment of an impairment loss
Allocate between assets in following order:
A)Damaged stock, If any
B)Goodwill
All other assets on pro rata basis.
Any remaining amount will be recognised as liability.
The carrying amount of an asset should not be reduced below the highest of:
its fair value less costs of disposal (if measurable)
its value in use (if measurable)
zero.
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Brainstorming………
A company has acquired another business for $4.5m:Tangible assets are valued at $4.0m and goodwill at
$0.5m.
An assets with carrying value of $1m is destroyed in a terrorist attack. The assets was not insured. The loss
of the asset, without insurance, has prompted the company to assess whether there has been an
impairment of assets in the acquired business and what the amount of any such loss is.
The recoverable amount of the business is measured as $3.1m.
Calculate impairment loss, allocate it and determine new carrying value.
60 © 2014 IBM Corporation
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Reversal of an impairment loss and Disclosure
Reversal of an impairment loss
Recoverable amount of an assets that has previously been impaired might turn out to be the higher then
the assets carrying value. It should be recognise as income in profit/loss and assets value should be
increased to its new recoverable amount.
Reversal of an impairment loss for goodwill is prohibited
Disclosure
Disclosure by class of assets: [IAS 36.126]
impairment losses recognised in profit or loss
impairment losses reversed in profit or loss
which line item(s) of the statement of comprehensive income
impairment losses on revalued assets recognised in other comprehensive income
impairment losses on revalued assets reversed in other comprehensive income
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Unilever report
62 © 2014 IBM Corporation
9/4/2014
Chapter Roundup
IAS 36 consider:
Indication of impairment of assets
Measuring recoverable amount
Measuring value in use
Cash generating units
Accounting treatment of impairment of loss
Reversal of an impairment of assets.
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Chapter 4 IAS 17 — Leases Agenda
Characteristics of a lease
Determine lease type
Effect on incorrect treatment of lease in financial statement.
Account for operating lease in Financial statements of the lessor and the lessee
Account for Finance lease in Financial statements of the lessor and the lessee
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Continue…….
Overview:
IAS 17 Leases prescribes the accounting policies and disclosures applicable to leases, both for lessees
and lessors for Finance and operating lease.
Lease-A contract between a lessee for the hire of specific asset. Lessor retains ownership of assets but
conveys the right of the use of the asset to the lessee for an agreed period of time in return for the
payment of specified rentals.
Classification of leases
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incident to
ownership. Title may or may not eventually be transferred. All other leases are classified as operating
leases. Classification is made at the inception of lease
Question:
A businessman hire (lease)a car while his own is being repaired. A lease of this nature is for short period
of time. lessor is responsible for the maintenance. Agreement of this type is called?
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Leases of Land and Building
Both Land and Building elements included in a lease are classified separately:
- Land element (indefinite economic life) is normally classified as an operating lease, unless
title is expected to pass to the lessee by the end of the lease term;
- Building could be either finance or operating lease.
Minimum lease payments are allocated between land and building elements proportionally to their relative fair value at the inception of the lease.
Land and buildings are not separated when:
- The land element is immaterial at the inception of the lease; - The lease payments cannot be allocated reliably; - The lessee’s interest in both is classified as investment property.
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Section Summary
Is ownership transferred by the end of the lease term?
Does the lease contain a bargain purchase option?
Is the lease term for a major part of the asset’s useful life?
Is the present value of minimum lease payments substantially equal to the assets’s
fair value.
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Yes
Yes
Yes
Yes
F
I
N
A
N
C
E
L
E
A
S
E
No
No
No
Operating lease
Lessee Accounting
Lessee Accounting
Finance lease: Record as an asset in the statement of financial position and a liability to pay for it(lower
of FV or MLP(discounted at the interest rate implicit in the lease, if practicable, or else at the entity's
incremental borrowing rate)), finance charge and the reduction of the outstanding liability
.If there is no reasonable certainty that the lessee will obtain ownership at the end of the lease – the asset
should be depreciated over the shorter of the lease term or the life of the asset
Operating lease: Write of rental on a straight line basis.(the lease payments should be recognised as an
expense in the income statement over the lease term on a straight-line basis)
Lessor Accounting
Finance Leases at commencement of the lease term, the lessor should record a finance lease in the
balance sheet as a receivable, at an amount equal to the net investment in the lease
the lessor should recognise finance income based on a pattern reflecting a constant periodic rate of return
on the lessor's net investment outstanding in respect of the finance lease
Operating Leases Record as an long-term asset and depreciate over useful life, record on a straight line
basis over the lease term.
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Chapter Roundup
IAS 17 covers the accounting under lease transaction for both lessees and lessors.
There are 2 forms of lease
Lease accounting:
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Unilever report
70 © 2014 IBM Corporation
9/4/2014
Chapter 5 IAS 38 — Intangible Assets Topic List
IAS 38 Intangible assets
Research and development costs
Goodwill (IFRS3)
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Objective and Definition of Intangible assets
The Objective of the standard:
A)To establish as standard when an intangible asset may or should be recognised
B)To specify how an intangible asset should be measured
C)To specify the disclosure requirement for intangible assets.
Definition of Intangible assets:
Intangible asset: an identifiable non-monetary asset without physical substance. An asset is a resource
that is (a) controlled by the entity as a result of past events (for example, purchase or self-creation) and
from which future economic benefits (inflows of cash or other assets) are expected. [IAS 38.8] Thus, the
three critical attributes of an intangible asset are:
Identifiability
control (power to obtain benefits from the asset)
future economic benefits (such as revenues or reduced future costs)
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Recognition
Recognition criteria.
IAS 38 requires an entity to recognise an intangible asset, whether purchased or self-created (at cost) if,
and only if: [IAS 38.21]
it is probable that the future economic benefits that are attributable to the asset will flow to the entity; and
the cost of the asset can be measured reliably.
If recognition criteria not met. If an intangible item does not meet both the definition of and the criteria for
recognition as an intangible asset, IAS 38 requires the expenditure on this item to be recognised as an
expense when it is incurred.
Reinstatement. The Standard also prohibits an entity from subsequently reinstating as an intangible asset,
at a later date, an expenditure that was originally charged to expense
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Examples of intangible assets
Patented technology, computer software, databases and trade secrets
trademarks, trade dress, newspaper mastheads, internet domains
video and audiovisual material (e.g. motion pictures, television programmes)
customer lists
mortgage servicing rights
licensing, royalty and standstill agreements
import quotas
franchise agreements
customer and supplier relationships (including customer lists)
marketing rights
Intangibles can be acquired:
by separate purchase
as part of a business combination
by a government grant
by exchange of assets
by self-creation (internal generation)
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Key Categories of Intangible Assets
Intangible assets acquired separately :Cost can be measured reliably
Intangible assets acquired in a business combination : Cost = FMV at the date of
acquisation
Intangible assets generated internally – Note: Internally generated goodwill shall not be recognized as an intangible asset
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Research and Development costs - Initial recognition
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Technical feasibility
Intention to complete and use or sell
Ability to use or sell
Probable future economic benefits
Adequate resources to complete development
Ability to measure expenditures
Research Phase Development Phase
Expense costs Capitalize costs when these criteria are met:
Brainstorming………
Doug co is developing a new production process. During 2013,expenditure incurred was $100000 of
which $90,000 was incurred before 2013 and $10,000 between 1 December 2013 and 31 December
2013. Doug co can demonstrate that, at 1 December 2013,the production process met the criteria for
recognisation as an intangible asset. The recoverable amount of the know-how embodied in the process
is estimated to be $50,000.
How should the expenditure be treated?
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Examples of spending considered to be part of the research phase:
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Development Phase expenditure example
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Measurement of Intangible Assets
Initial measurement
• Intangible assets are initially measured at cost.
Subsequent measurement
• An entity must choose either the cost model or the revaluation model for each class of intangible asset
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Brainstorming……
Downward revaluation
An intangible asset is measured by a company at fair value. The asset was revalued by $400 in 2013,and
there is a revaluation surplus of $400 in the statement of financial position. At the end of 2014,the asset is
valued again, and a downward valuation of $500 is required.
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Example of Internally generated intangibles
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9/4/2014 82 IFRS Policy & Implementation Team
XYZ Ltd. is in the process of developing a new operating system software code that will
be integrated into its new mid-range servers targeted at medium size companies to
take market share in that space. XYZ Ltd has incurred and expensed the following
expenses.
Type of Cost Amount
Lab costs $6000
Personnel costs $7500
Material costs $10,000
Lab costs comprise allocated rent and utility costs. It is determined that 80% of the total
rental space in the lab is dedicated to development activities. 70% of the personnel
costs was incurred on people that directly worked on developing the new technology
and 90% of the material costs were incurred on developing the prototype. XYZ expects
the new technology to be ready by 4Q 2X10. How much of this expense should be
reclassified from expense and capitalize assuming the recognition criteria are met?
Facts/Question:
Example of Internally generated intangibles
Answer:
83 © 2014 IBM Corporation
9/4/2014 83 IFRS Policy & Implementation Team
Research Phase Development Phase*
Lab costs $1,200 $4,800
Personnel costs $2,250 $5,250
Material costs $1,000 $9,000
Total $4,450 $19,050
The amount to be reclassified from expense and capitalize is $19,050 as that
represents the expense incurred in the development phase (*assuming 100% of
this spending was incurred upon achieving TF) and the recognition criteria are
met.
Useful Life and Amortization
Classification of intangible assets based on useful life
Intangible assets are classified as: [IAS 38.88]
Indefinite life: no foreseeable limit to the period over which the asset is expected to generate net cash
inflows for the entity.
Finite life: a limited period of benefit to the entity.
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Finite useful life Amortize over useful life
Indefinite useful life Test annually for impairment
Disclosure
useful life or amortisation rate
amortisation method
gross carrying amount
accumulated amortisation and impairment losses
line items in the income statement in which amortisation is included
reconciliation of the carrying amount at the beginning and the end of the period showing: – additions (business combinations separately) – assets held for sale – retirements and other disposals – revaluations – impairments – reversals of impairments – amortisation – foreign exchange differences – other changes
basis for determining that an intangible has an indefinite life
description and carrying amount of individually material intangible assets
certain special disclosures about intangible assets acquired by way of government grants,etc
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Section summary
An Intangible asset should be recognised if, and only if, it is probable that future economic benefits will
flow to the entity and the cost of the asset can be measured reliably.
An asset is the initially recognised at cost and subsequently carried at cost or revalued amount.
Cost that do not met the recognisation criteria should be expenses as incurred.
Finite useful life intangible asset should be amortised over its useful life.
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Unilever Group Report
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IFRS 3 — Business Combinations and Goodwill
Scope – It covers accounting treatment of goodwill acquired in business combination
but does not apply to:
The formation of a joint venture* [IFRS 3.2(a)]
The acquisition of an asset or group of assets that is not a business, although general guidance is
provided on how such transactions should be accounted for [IFRS 3.2(b)]
Combinations of entities or businesses under common control (the IASB has a separate agenda project
on common control transactions) [IFRS 3.2(c)]
Acquisitions by an investment entity of a subsidiary that is required to be measured at fair value through
profit or loss under IFRS 10 Consolidated Financial Statements. [IFRS 3.2A]
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Initial and subsequent measurement
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Cost = Cost of combination – NFV of assets,
liabilities and contingent liabilities
Subsequent measurement at cost less any accumulated impairment
losses,it is not amortised instead it is tested for impairment at least
anually
Initial measured at cost
No matter how goodwill is calculated within the total agreed purchase price,It will be always shown
as per his(purchaser) valuation .
Brainstorming…….
If A values his net assets at $40,000,goodwill is agreed at $21,000 and B agrees to pay $61,000 for the
business but values the net assets at only $38,000,then the goodwill in the B’s book will be?
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Chapter Roundup
Intangible asset are defined by IAS 38 as non-monetary assets, that must be identifiabale, controlled as
a result of past event and able to provide future economic benefits.
Development cost and research cost as an expenses or an assets.
Initially measured at cost, but subsequently at cost or a revalued amount
Goodwill purchased on arising on consolidation is retained in the statement of financial position as an
intangible assets under IFRS 3.
Anually impairment
Purchased goodwill is shown an intangible non-current assets but non-purchased is not shown as an
asset.
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Chapter 6 IAS 2 — Inventories and IAS 11 — Construction Contracts
IAS 2 — Inventories The objective of IAS 2 is to prescribe the accounting treatment for inventories. It
provides guidance for determining the cost of inventories and for subsequently recognising an expense,
including any write-down to net realisable value, It also provides guidance on the cost formulas
IAS 11 — Construction Contracts IAS 11 Construction Contracts provides requirements on the
allocation of contract revenue and contract costs to accounting periods in which construction work is
performed. Contract revenues and expenses are recognised by reference to the stage of completion of
contract activity where the outcome of the construction contract can be estimated reliably, otherwise
revenue is recognised only to the extent of recoverable contract costs incurred.
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IAS 2 — Inventories and short-term WIP
Define inventory and its scope:
a) held for sale in the ordinary course of the business (e.g. finished goods or merchandise purchased by a retailer held for sale)
b) in the process of production for such sale (e.g. unfinished goods); or
c) in the form of materials or supplies to be consumed in the production process or in the rendering of services (e.g. raw materials/ supplies awaiting use in the production process )
This Standard doesn’t apply to: Work in progress arising under construction contracts (IAS 11), i.e.
a contract specifically negotiated for the construction of an asset Financial instruments (IAS 32) Biological assets related to agricultural activity and agricultural produce at the point of the harvest (IAS
41) Inventory includes Raw material Finished goods WIP And Goods purchased and held for resale.
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Cost
Inventories are required to be stated at the lower of cost and net realisable value (NRV).
Where NRV =estimated selling price in the ordinary course of business- estimated costs of
completion and the estimated costs necessary to make the sale
Cost should include all:
costs of purchase (including taxes, transport, and handling) net of trade discounts received
costs of conversion (including fixed and variable manufacturing overheads) and
other costs incurred in bringing the inventories to their present location and condition
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Measurement of Inventories-Initial Measurement
Specific identification of costs is inappropriate when there are large numbers of items of inventory
that are ordinarily interchangeable. In such circumstances cost formulas deem appropriate in
determining the cost of inventories:
First-in, First-out formula [FIFO]: The FIFO formula assumes that the items of inventory that were purchased or produced first are sold first, and consequently the items remaining in inventory at the end of the period are those most recently purchased or produced.
Weighted average cost formula: Under the weighted average cost formula, the cost of each item is determined from the weighted average of the cost of similar items at the beginning of a period and the cost of similar items purchased or produced during the period.
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Assignment of cost
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• specific costs are attributed to the specific individual items of inventory Inventories that are not
interchangeable(identical or similar)
• IAS 2 allows the FIFO or weighted average cost formulas. [IAS 2.25] The LIFO formula, which had been allowed prior to the 2003 revision of IAS 2, is no longer allowed.
Inventories that are interchangeable
Measurement of Inventories
Subsquent measurment
Inventories shall be measured at the lower of cost and net realisable value (NRV).
The cost of inventories may not be recoverable
- if those inventories are damaged,
- if they have become wholly or partially obsolete,
- if their selling price have declined or
- if the estimated costs of completion or the estimated costs
to be incurred to make the sale have increased.
The practice of writing inventories down below cost to net realisable value is consistent with the
the view, that assets should not be carried in excess of amounts expected to be realised from their
sale or use.
NRV =estimated selling price in the ordinary course of business- estimated costs of completion
and the estimated costs necessary to make the sale
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Similarities and Differences to US GAAP
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a) Lower of Cost or net realisable Value (IFRS) vs. Lower of cost or Market/LCM (US GAAP)
US GAAP:
Cost ‘Market‘
(*)
Lower of cost or ‘market‘
IFRS:
NRV (upper limit)
Base principle:
replacement cost
NRV ./. normal profit
margin (lower limit)
NRV Cost
Lower of cost and NRV
(*) market is defined as the ‘median’
of the three presented values
III. Similarities and Differences to US GAAP
b) Illustrative Example
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QUESTION (A):
How should 100 monitors on stock [e.g. vendor equipment] be measured on the 30th of
September, 2010 under US GAAP and IFRS accounting policies ?
Price per unit in US $
Cost of
purchase
Replacement
cost
Est.
selling
price
Est. cost to
make the
sale
NRV Profit
margin
NRV ex
profit
margin
420 390 450 50 400 30 370
Answer
100 © 2014 IBM Corporation
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ANSWER (A):
US GAAP =
IFRS =
Price per unit in US $
Cost of
purchase
Replacement
cost
Est.
selling
price
Est. cost to
make the
sale
NRV Profit
margin
NRV ex
profit
margin
420 390 450 50 400 30 370
39,000 USD [390 $ x 100 units]
40,000 USD [400 $ x 100 units]
Brainstorming as per IFRS
A company has inventory on hand at the end of the reporting period as follows: At what amount inventory
will be stated in financial statement.
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Units Raw
material
cost $
Production
overhead $
Selling
cost $
Expected
Selling
price
Item
A
300 160 15 12 185
Item
B
250 50 10 10 75
Units cost $ NRV Lower Total
Item
A
300 175 173 173 51,900
Item
B
250 60 65 60
15,000
Write down to NRV and expenses recognisation
Any write-down to NRV should be recognised as an expense in the period in which the write-down occurs.
Any reversal should be recognised in the income statement in the period in which the reversal occurs
Expense recognition
When inventories are sold and revenue is recognised, the carrying amount of those inventories is
recognised as an expense (often called cost-of-goods-sold).
Any write-down to NRV and any inventory losses are also recognised as an expense when they occur.
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Disclosure
Disclosure
accounting policy for inventories
carrying amount, generally classified as merchandise, supplies, materials, work in progress, and finished
goods. The classifications depend on what is appropriate for the entity
carrying amount of any inventories carried at fair value less costs to sell
amount of any write-down of inventories recognised as an expense in the period
amount of any reversal of a write-down to NRV and the circumstances that led to such reversal
cost of inventories recognised as expense (cost of goods sold). etc
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Unilever Report
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Unilever Report
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Section 3 - Presentation of additional disclosure
Presentation of published financial statements
Reporting financial performance
EPS
Related party disclosures and segment reporting
Reporting for small and medium sized entities
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IAS 1 - Presentation of Financial Statements
Financial statements are a structured representation of the financial position and financial performance of an entity.
Scope and Objective
Entities shall apply this standard when preparing and presenting financial statements for general purposes in accordance with IFRS. The requirements from this standard shall be applied in both separate and consolidated financial statements
The objective of this standard is to enhance the quality and comparability of financial statements by: – Setting minimum requirements for the presentation of primary statements – Setting minimum requirements for the notes accompanying the financial statements
In order to meet the objective prescribed in the standard, financial statements shall include information
about the entity’s:
– Assets
– Liabilities
– Equity
– Income and Expenses, Gains and Losses
– Cash Flows
– Contributions by and distributions to owners (Shareholder equity.)
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Set of Financial Statements
Which Financial Statements are required to be prepared by the entity?
1. Statement of financial position as at the end of the period
2. Statement of Total comprehensive income for the period
3. Statement of changes in equity for the period
4. Statement of cash flows for the period
5. Notes, comprising a summary of significant accounting policies and other explanatory information
6. comparative information prescribed by the standard
* An entity may use titles for the statements other than those stated above
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Snap shot of Comprehensive income as a single statement
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OCI: Presentation in separate statements
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Other comphensive income
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General Features Explanation
Fair Presentation and
Compliance
An entity whose financial statements are compliant with IFRS shall explicitly state this situation in
the notes. Financial statements should not be describe as compliant if they do not comply with all
the requirements.
Going Concern
If management has significant concerns about the entity's ability to continue as a going concern,
the uncertainties must be disclosed.
If management concludes that the entity is not a going concern, the financial statements should
not be prepared on a going concern basis, in which case IAS 1 requires a series of disclosures.
Consistency
The presentation and classification of items in the financial statements shall be retained from one
period to the next unless a change is justified either by a change in circumstances or a
requirement of a new IFRS.
Materiality and
Aggregation
Each material class of similar items must be presented separately in the financial statements.
Dissimilar items may be aggregated only if the are individually immaterial and provide specific
disclosures required.
Offsetting
Assets and liabilities, and income and expenses, shall not be offset unless required or permitted
by an IFRS.
Measuring assets net of valuation allowances is not offsetting.
Reporting Period
An entity shall present a complete set of financial statements (including comparative
information) at least annually.
If the annual reporting period changes and financial statements are prepared for a different
period, the entity must disclose the reason for the change and a warning about problems of
comparability.
Requirements
Minimum line items
Minimum line items
The minimum line items to be included on the face of the statement of financial position are: [IAS 1.54]
(a)property, plant and equipment(b)investment property(c)intangible assets(d)financial assets (excluding
amounts shown under (e), (h), and (i))(e)investments accounted for using the equity method(f)biological
assets(g)inventories(h)trade and other receivables(i)cash and cash equivalents(j)assets held for
sale(k)trade and other payables(l)provisions(m)financial liabilities (excluding amounts shown under (k)
and (l))(n)current tax liabilities and current tax assets, as defined in IAS 12(o)deferred tax liabilities and
deferred tax assets, as defined in IAS 12(p)liabilities included in disposal groups(q)non-controlling
interests, presented within equity(r)issued capital and reserves attributable to owners of the parent.
Format of statement
IAS 1 does not prescribe the format of the statement of financial position. Assets can be presented
current then non-current, or vice versa, and liabilities and equity can be presented current then non-
current then equity, or vice versa. A net asset presentation (assets minus liabilities) is allowed
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IFRS 8 — Operating Segments
Overview
IFRS 8 Operating Segments requires particular classes of entities (essentially those with publicly traded
securities) to disclose information about their operating segments, products and services, the
geographical areas in which they operate, and their major customers.
Scope
IFRS 8 applies to the separate or individual financial statements of an entity (and to the consolidated
financial statements of a group with a parent):
whose debt or equity instruments are traded in a public market or
that files, or is in the process of filing, its (consolidated) financial statements with a securities commission
or other regulatory organisation for the purpose of issuing any class of instruments in a public market
[IFRS 8.2]
However, when both separate and consolidated financial statements for the parent are presented in a
single financial report, segment information need be presented only on the basis of the consolidated
financial statements
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Operating segments
IFRS 8 defines an operating segment as follows.
An operating segment is a component of an entity:
that engages in business activities from which it may earn revenues and incur expenses (including
revenues and expenses relating to transactions with other components of the same entity)
whose operating results are reviewed regularly by the entity's chief operating decision maker to make
decisions about resources to be allocated to the segment and assess its performance and
for which discrete financial information is available
Reportable segments
Reportable segments are operating segments or aggregations of operating segments that meet specified
criteria
its reported revenue, from both external customers and intersegment sales or transfers, is 10 per cent or
more of the combined revenue, internal and external, of all operating segments, or
the absolute measure of its reported profit or loss is 10 per cent or more of the greater, in absolute
amount, of (i) the combined reported profit of all operating segments that did not report a loss and (ii) the
combined reported loss of all operating segments that reported a loss, or
its assets are 10 per cent or more of the combined assets of all operating segments.
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Notes
Two or more operating segments may be aggregated into a single operating segment if aggregation is
consistent with the core principles of the the standard, the segments have similar economic characteristics
and are similar in various prescribed respects.
If the total external revenue reported by operating segments constitutes less than 75 per cent of the
entity's revenue, additional operating segments must be identified as reportable segments (even if they do
not meet the quantitative thresholds set out above) until at least 75 per cent of the entity's revenue is
included in reportable segments
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Unilever Group
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Unilever report
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9/4/2014
Unilever Report
118 © 2014 IBM Corporation
9/4/2014
Disclosure requirements
Required disclosures include:
general information about how the entity identified its operating segments and the types of products and
services from which each operating segment derives its revenues [IFRS 8.22]
judgements made by management in applying the aggregation criteria to allow two or more operating
segments to be aggregated
119 © 2014 IBM Corporation
9/4/2014
EPS
120 © 2014 IBM Corporation
9/4/2014
121
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