PAS 21-Effects of Changes in Foreign Exchange Rates

SCOPE
The scope of the standard includes:
 Accounting for transactions and balances in foreign currencies not covered by PAS 39 Financial
Instruments: Recognition and Measurement
 Translating the results and financial position of foreign operations that are included in the
financial statements of the entity by consolidation, proportionate consolidation or the equity
method
 Translating results and financial position into a presentation currency
This standard does not include:
 Derivative transaction within the scope of PAS 39
 Hedge accounting for foreign currency items
 Presentation in a statement of cash flows of the cash flows arising from transactions in a foreign
currency

INITIAL RECOGNITION
A foreign currency transaction shall be recorded in the functional currency of the reporting entity
using the spot exchange rate between the functional currency and the foreign currency at the date of the
transaction. For practical reasons, unless exchange rates fluctuates significantly, use of approximate or
average rate is often used.

SUBSEQUENT RECOGNITION
At the end of each reporting period:
1. Foreign currency monetary items shall be translated using the closing rate;
2. Non-monetary items that are measured using historical cost in a foreign currency shall be
translated using the exchange rate at the date of transaction;
3. Non-monetary items that are measured at fair value in a foreign currency shall be translated
using the exchange rates at the date when the fair value was determined.

Monetary items are units of currency held and assets and liabilities to be received or paid in a
fixed or determinable number of units of currency.

Exchange differences:
Differences in translating monetary items from its initial recognition to its subsequent
measurement during the period or in previous financial statements shall be recognized in profit
or loss in the period in which they arise.

DISCLOSURE
 An entity shall disclose
(a) the amount of exchange differences recognized in profit or loss
(b) net exchange differences recognized in other comprehensive income and accumulated in
a separate component of equity, and a reconciliation of the amount of such differences
at the beginning and end of the period.
  When presentation currency is different from functional currency, the fact shall be stated,
together with disclosure of the functional currency and the reason for using a different
presentation currency.
 Disclosure shall be made when there is a change in the functional currency of the
reporting entity or a significant foreign operation.
 Entities presenting financial statements in a currency different from its functional
currency shall describe the financial statements as complying with PFRS only if they
comply with all the requirements of each applicable Standards and Interpretations.

PAS 28 INVESTMENTS IN ASSOCIATES

SCOPE
This Standard shall be applied in accounting for investments in associates, except for those investments
in associates held by:
(a) Venture capital organizations, or
(b) Mutual funds, unit trusts and similar entities including investment-linked insurance funds

INITIAL RECOGNITION
Investment in associates shall be accounted for using the equity method. Under the equity method, the
investment in an associate is initially recognized at cost.

SUBSEQUENT RECOGNITION
The carrying amount of the investment is increased or decreased to recognize the investor’s share of the
profit or loss of the investee after the date of acquisition. The carrying amount of the investment is
reduced by any distributions received from the investee.

DISCLOSURE
The following disclosures shall be made:
 the fair value of investments in associates for which there are published price quotations
 summarized financial information of associates, incl. aggregated amount of assets, liabilities,
revenues and profit or loss.
 reason/s for the presumption that an investor concludes that it has significant influence even if
the investor holds less than 20% of the voting or potential voting power of the investee, and vice
versa.
 the end of the reporting period of the financial statements of an associate which is different from
that of the investor, and the reason for using a different date or different period.
 the nature and extent of any significant restrictions on the ability of associates to transfer funds
to the investor in the form of cash dividends, or repayment of loans or advances.
 the unrecognized share of losses of an associate, both for the period and cumulatively, if an
investor has discontinued recognition of its share of losses of an associate
 the fact that an associate is not accounted for using the equity method
 summarized financial information of associates, either individually or in groups, that are not
accounted for using the equity method, incl. amounts of total assets, liabilities, revenues and
profits or loss
  investments in associates accounted for using the equity method shall be classified as non-current
assets. Investor’s share of the profit or loss of such associates, and the carrying amount of the
investments shall be separately disclosed. Investor’s share of any discontinued operations of such
associates shall also be disclosed.

PFRS 5 NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

SCOPE
This standard shall apply to all recognized non-current assets and to all disposal groups of an entity except
for the following:
(a) Deferred taxes
(b) Assets arising from employee benefits
(c) Financial assets within the scope of PFRS 9
(d) Non-current assets that are accounted for in accordance with the fair value model.
(e) Non-current assets that are measured at fair-value les costs to sell
(f) Contractual rights under insurance contracts

INITIAL RECOGNITION
An entity shall classify a non-current asset or disposal group as held for sale if its carrying amount will be
recovered principally through a sale rather than continuing use.
 Asset or disposal group must be available for immediate sale in its present condition and the sale
must be highly probable.
 For sale to be highly probable:
o an appropriate level of management must be committed to a plan to sell the asset,
o an active program to locate a buyer and complete the plan must have been initiated
o asset or disposal group must be actively marketed for sale at a price that is reasonable in
relation to its current fair value.
A non-current asset or disposal group is classified as held for distribution to owners when the entity is
committed to distribute the asset or disposal group to owners.
 Assets must be available for immediate distribution in their present condition
 Distribution must be highly probable

INITIAL MEASUREMENT
 The entity shall measure noncurrent assets classified as held for sale at the lower of its carrying
amount and fair value less cost to sell.
 The entity shall measure a noncurrent asset classified as held for distribution to owners at the
lower of its carrying amount and fair value less cost to distribute

SUBSEQUENT RECOGNITION
 An entity shall recognize an impairment loss for any initial or subsequent write-down of the asset
or disposal group to fair value less costs to sell, to the extent that it has not been recognized in
accordance with PAS 36.
 An entity shall recognize a gain for any subsequent increase in fair value less costs to sell of an
asset only up to the extent of the cumulative impairment loss previously recognized
  An entity shall not depreciate/amortize a non-current asset while it is classified as held for sale or
it is part of a disposal group classified as held for sale. Interest and other expenses attributable to
liabilities of a disposal group classified as held for sale shall continue to be recognized.

 The entity shall measure a non-current asset/disposal group that ceases to be classified as held
for sale or as distribution to owners at the lower of:
a. Its carrying amount less any depreciation/amortization had the asset not be classified as held
for sale or held for distribution to owners
b. Its recoverable amount at the date of the subsequent decision not to sell or distribute.
 If the entity reclassifies an asset directly from being held for sale to being held for distribution to
owners, and vice versa, then the change in classification is considered a continuation of the
original plan of disposal.

PRESENTATION AND DISCLOSURE

For discontinued operations
 In the statement if comprehensive income
o A single amount comprising the total of:
 Post-tax profit or loss of discontinued operations
 Post-tax gain or loss recognized on the measurement to fair value less costs to
sell or on its disposal constituting the discontinued operation
o And analysis of the single amount into:
 The revenue, expense and pre-tax profit or loss of discontinued operations
 Post-tax gain or loss recognized on the measurement to fair value less costs to
sell or on its disposal constituting the discontinued operation
 Related income tax expense
 In the statement of cash flows
o Net cash flows attributable to the operating, investing, and financing activities of
discontinued operations

For continued operations

 In the statement of comprehensive income
o Any gain or loss on the remeasurement of a noncurrent asset classified as held for sale
that does not meet the definition of a discontinued operation in profit or loss from
continuing operations.
 In the statement of financial position
o Non-current asset classified as held for sale shall be presented separately from other
assets
o Liabilities associated with the assets classified as held for sale shall be presented
separately from other liabilities
o Those assets and liabilities shall not be offset and presented as a single amount.
 In the statement of comprehensive income
o Cumulative income or expense recognized relating to assets classified as held for sale shall
be presented separately in other comprehensive income
PAS 12 INCOME TAXES

SCOPE
 This standard shall be applied in accounting for income taxes

INITIAL RECOGNITION
 A deferred tax liability shall be recognized for all taxable temporary differences, except to the
extent that the deferred tax liability arises from:
(a) the initial recognition of goodwill; or
(b) the initial recognition of an asset or liability in a transaction which:
(i) is not a business combination; and
(ii) at the time of the transaction, affects neither accounting profit nor taxable profit
(tax loss).
 A deferred tax asset shall be recognised for all deductible temporary differences to the extent
that it is probable that taxable profit will be available against which the deductible temporary
difference can be utilised, unless the deferred tax asset arises from the initial recognition of an
asset or liability in a transaction that:
(a) is not a business combination; and
(b) at the time of the transaction, affects neither accounting profit nor taxable profit (tax
loss).

MEASUREMENT
 Current tax liabilities (assets) for the current and prior periods shall be measured at the amount
expected to be paid to (recovered from) the taxation authorities, using the tax rates (and tax laws)
that have been enacted or substantively enacted by the balance sheet date.
 Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to
the period when the asset is realized or the liability is settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted by the balance sheet date.

PRESENTATION
 An entity shall offset current tax assets and current tax liabilities if, and only if, the entity:
(a) has a legally enforceable right to set off the recognized amounts; and
(b) intends either to settle on a net basis, or to realize the asset and settle the liability
simultaneously.
(c) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the
same taxation authority on either:
(i) the same taxable entity; or
(ii) different taxable entities which intend either to settle current tax liabilities and
assets on a net basis, or to realize the assets and settle the liabilities
simultaneously, in each future period in which significant amounts of deferred
tax liabilities or assets are expected to be settled or recovered.
 The tax expense (income) related to profit or loss from ordinary activities shall be presented on
the face of the income statement.

DISCLOSURE
 The major components of tax expense (income) shall be disclosed separately.
 The following shall also be disclosed separately:
 (a) the aggregate current and deferred tax relating to items that are charged or credited to
equity;
(d) an explanation of the relationship between tax expense (income) and accounting profit
in either or both of the following forms:
(i) a numerical reconciliation between tax expense (income) and the product of
accounting profit multiplied by the applicable tax rate(s), disclosing also the basis
on which the applicable tax rate(s) is (are) computed; or
(ii) a numerical reconciliation between the average effective tax rate and the
applicable tax rate, disclosing also the basis on which the applicable tax rate is
computed;
(d) an explanation of changes in the applicable tax rate(s) compared to the previous
accounting period;
(e) the amount (and expiry date, if any) of deductible temporary differences, unused tax
losses, and unused tax credits for which no deferred tax asset is recognized in the balance
sheet;
(f) the aggregate amount of temporary differences associated with investments in
subsidiaries, branches and associates and interests in joint ventures, for which deferred
tax liabilities have not been recognized;
(g) in respect of each type of temporary difference, and in respect of each type of unused tax
losses and unused tax credits:
(i) the amount of the deferred tax assets and liabilities recognized in the balance
sheet for each period presented;
(ii) the amount of the deferred tax income or expense recognized in the income
statement, if this is not apparent from the changes in the amounts recognized in the
balance sheet;

PAS 23 BORROWING COSTS

SCOPE
 An entity shall apply this Standard in accounting for borrowing costs.
 The Standard does not deal with the actual or imputed cost of equity, including preferred capital
not classified as a liability.
 An entity is not required to apply the Standard to borrowing costs directly attributable to the
acquisition, construction or production of:
(a) a qualifying asset measured at fair value, for example a biological asset; or
(b) inventories that are manufactured, or otherwise produced, in large quantities on a repetitive
basis.

RECOGNITION
 An entity shall capitalize borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset as part of the cost of that asset. An entity shall
recognize other borrowing costs as an expense in the period in which it incurs them.

MEASUREMENT
 To the extent that an entity borrows funds specifically for the purpose of obtaining a qualifying
asset, the entity shall determine the amount of borrowing costs eligible for capitalization as the
actual borrowing costs incurred on that borrowing during the period less any investment income
on the temporary investment of those borrowings.
  To the extent that an entity borrows funds generally and uses them for the purpose of obtaining
a qualifying asset, the entity shall determine the amount of borrowing costs eligible for
capitalization by applying a capitalization rate to the expenditures on that asset. The capitalization
rate shall be the weighted average of the borrowing costs applicable to the borrowings of the
entity that are outstanding during the period, other than borrowings made specifically for the
purpose of obtaining a qualifying asset. The amount of borrowing costs that an entity capitalizes
during a period shall not exceed the amount of borrowing costs it incurred during that period.
 An entity shall begin capitalizing borrowing costs as part of the cost of a qualifying asset on the
commencement date. The commencement date for capitalization is the date when the entity first
meets all of the following conditions:
(a) it incurs expenditures for the asset;
(b) it incurs borrowing costs; and
(c) it undertakes activities that are necessary to prepare the asset for its intended use or sale.
 An entity shall suspend capitalization of borrowing costs during extended periods in which it
suspends active development of a qualifying asset.
 An entity shall cease capitalizing borrowing costs when substantially all the activities necessary to
prepare the qualifying asset for its intended use or sale are complete.
 When an entity completes the construction of a qualifying asset in parts and each part is capable
of being used while construction continues on other parts, the entity shall cease capitalizing
borrowing costs when it completes substantially all the activities necessary to prepare that part
for its intended use or sale.

DISCLOSURE
 An entity shall disclose:
(a) the amount of borrowing costs capitalized during the period; and
(b) the capitalization rate used to determine the amount of borrowing costs eligible for
capitalization.

CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING

OBJECTIVE
 To provide financial information that is useful to users in making decisions relating to providing
resources to the entity

QUALITATIVE CHARACTERISTICS OF USEFUL FINANCIAL INFORMATION

 Relevance and faithful representation are the fundamental qualitative characteristics of useful
financial information, and the guiding concepts that apply throughout the revised Conceptual
Framework.
o Relevance
 information is relevant if it is capable of making a difference to the decisions
made by users
 financial information is capable of making a difference in decisions if it has
predictive value or confirmatory value
 o Faithful representation
 information must faithfully represent the substance of what it purports to
represent
 a faithful representation is, to the maximum extent possible, complete, neutral
and free from error
 a faithful representation is affected by level of measurement uncertainty
 Enhancing qualitative characteristics are
o Comparability
o Verifiability
o Timeliness
o Understandability
 Cost constraint
o the benefit of providing the information needs to justify the cost of providing and using
the information

FINANCIAL STATEMENTS AND THE REPORTING ENTITY

 Reporting entity
o an entity that is required, or chooses, to prepare financial statements
o not necessarily a legal entity—could be a portion of an entity or comprise more than one
entity
 Financial statements
o a particular form of financial reports that provide information about the reporting entity’s
assets, liabilities, equity, income and expenses

THE ELEMENTS OF FINANCIAL STATEMENTS

 Asset
o A present economic resource controlled by the entity as a result of past events
o An economic resource is a right that has the potential to produce economic benefits
 Liability
o A present obligation of the entity to transfer an economic resource as a result of past
events
o An obligation is a duty or responsibility that the entity has no practical ability to avoid
 Income
o Increases in assets, or decreases in liabilities, that result in increases in equity, other than
those relating to contributions from holders of equity claims
 Expenses
o Decreases in assets, or increases in liabilities, that result in decreases in equity, other than
those relating to distributions to holders of equity claims

RECOGNITION AND DERECOGNITION

 Recognition
o The process of capturing for inclusion in the statement of financial position or the
statement(s) of financial performance an item that meets the definition of an asset, a
liability, equity, income or expenses
  Derecognition
o The removal of all or part of a recognized asset or liability from an entity’s statement of
financial position

MEASUREMENT
 Historical cost
o historical cost provides information derived, at least in part, from the price of the
transaction or other event that gave rise to the item being measured
o historical cost of assets is reduced if they become impaired and historical cost of liabilities
is increased if they become onerous
o one way to apply a historical cost measurement basis to financial assets and financial
liabilities is to measure them at amortized cost
 Current value
o Fair value
 the price that would be received to sell an asset, or paid to transfer a liability, in
an orderly transaction between market participants at the measurement date
 reflects market participants’ current expectations about the amount, timing and
uncertainty of future cash flows
o Value in use(assets)/fulfillment value(liabilities)
 reflects entity-specific current expectations about the amount, timing and
uncertainty of future cash flows
o current cost
 reflects the current amount that would be:
a. paid to acquire an equivalent asset
b. received to take on an equivalent liability

PRESENTATION AND DISCLOSURE

 Statement of profit or loss
o The statement of profit or loss is the primary source of information about an entity’s
financial performance for the reporting period
o Profit or loss could be a section of a single statement of financial performance or a
separate statement
o The statement(s) of financial performance include(s) a total (subtotal) for profit or loss
o In principle, all income and expenses are classified and included in the statement of profit
or loss
 Other comprehensive income
o In exceptional circumstances, the Board may decide to exclude from the statement of
profit or loss income or expenses arising from a change in current value of an asset or
liability and include those income and expenses in other comprehensive income
o The Board may make such a decision when doing so would result in the statement of
profit or loss providing more relevant information or a more faithful representation
 Recycling
o In principle, income and expenses included in other comprehensive income in one period
are recycled to the statement of profit or loss in a future period when doing so results in
the statement of profit or loss providing more relevant information or a more faithful
representation
 o When recycling does not result in the statement of profit or loss providing more relevant
information or a more faithful representation, the Board may decide income and
expenses included in other comprehensive income are not to be subsequently recycled

PFRS 3 BUSINESS COMBINATIONS

SCOPE
 This IFRS applies to a transaction or other event that meets the definition of a business
combination. This IFRS does not apply to:
o the formation of a joint venture.
o the acquisition of an asset or a group of assets that does not constitute a business. In such
cases the acquirer shall identify and recognize the individual identifiable assets acquired
and liabilities assumed. The cost of the group shall be allocated to the individual
identifiable assets and liabilities on the basis of their relative fair values at the date of
purchase. Such a transaction or event does not give rise to goodwill.
o a combination of entities or businesses under common control

MEASUREMENT
 An entity shall account for each business combination by applying the acquisition method.
o Applying the acquisition method requires:
(a) identifying the acquirer;
(b) determining the acquisition date;
(c) recognizing and measuring the identifiable assets acquired, the liabilities assumed and
any noncontrolling interest in the acquiree; and
(d) recognizing and measuring goodwill or a gain from a bargain purchase.

SUBSEQUENT MEASUREMENT
 In general, an acquirer shall subsequently measure and account for assets acquired, liabilities
assumed or incurred and equity instruments issued in a business combination in accordance with
other applicable IFRSs for those items, depending on their nature. However, this IFRS provides
guidance on subsequently measuring and accounting for the following assets acquired, liabilities
assumed or incurred and equity instruments issued in a business combination:
(a) reacquired rights;
(b) contingent liabilities recognized as of the acquisition date;
(c) indemnification assets; and
(d) contingent consideration.

DISCLOSURE
 The acquirer shall disclose information that enables users of its financial statements to evaluate
the nature and financial effect of a business combination that occurs either:
(a) during the current reporting period; or
(b) after the end of the reporting period but before the financial statements are authorized for
issue.
 The acquirer shall disclose information that enables users of its financial statements to evaluate
the financial effects of adjustments recognised in the current reporting period that relate to
business combinations that occurred in the period or previous reporting periods
PFRS 10 CONSOLIDATED FINANCIAL STATEMENTS

SCOPE
PFRS 10 applies to all entities, except as follows:

a. If all the following conditions are met, a parent need not present consolidated financial
statements:
 It is a subsidiary of another entity and all its other owners, including those not
otherwise entitled to vote, have been informed about (and do not object to), the
parent not presenting consolidated financial statements;
 Its debt or equity instruments are not traded in a public market; - It did not file, nor
is in the process of filing, financial statements for the purpose of issuing instruments
in a public market; andIts ultimate or any intermediate parent produces
consolidated financial statements that comply with the IFRSs and are available for
public use.
b. Post or long-term employee benefit plans to which Employee Benefits applies.
Investment entity need not present consolidated financial statements but rather measure all
of its subsidiaries at fair value through profit or loss.

CONTROL
An investor, regardless of the nature of its involvement with an entity (the investee), shall determine
whether it is a parent by assessing whether it controls the investee.
An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns through its power over the investee.
Thus, an investor controls an investee if and only if the investor has all the following:
(a) power over the investee
(b) exposure, or rights, to variable returns from its involvement with the investee
(c) the ability to use its power over the investee to affect the amount of the investor’s returns.

ACCOUNTING REQUIREMENTS
 A parent shall prepare consolidated financial statements using uniform accounting policies for like
transactions and other events in similar circumstances.
 Consolidation of an investee shall begin from the date the investor obtains control of the investee
and cease when the investor loses control of the investee.
 Non-controlling interest
o A parent shall present non-controlling interests in the consolidated statement of financial
position within equity, separately from the equity of the owners of the parent.
o Changes in a parent’s ownership interest in a subsidiary that do not result in the parent
losing control of the subsidiary are equity transactions (ie transactions with owners in
their capacity as owners).
 If a parent loses control of a subsidiary, the parent:
o derecognises the assets and liabilities of the former subsidiary from the consolidated
statement of financial position.
o recognises any investment retained in the former subsidiary at its fair value when control
is lost and subsequently accounts for it and for any amounts owed by or to the former
 subsidiary in accordance with relevant IFRSs. That fair value shall be regarded as the fair
value on initial recognition of a financial asset in accordance with IFRS 9 or, when
appropriate, the cost on initial recognition of an investment in an associate or joint
venture.
o recognises the gain or loss associated with the loss of control attributable to the former
controlling interest.

PFRS 11 JOINT ARRANGEMENTS

SCOPE
 This IFRS shall be applied by all entities that are a party to a joint arrangement.

TYPES OF JOINT ARRANGEMENTS

 An entity shall determine the type of joint arrangement in which it is involved. The classification
of a joint arrangement as a joint operation or a joint venture depends upon the rights and
obligations of the parties to the arrangement.
o A joint operation is a joint arrangement whereby the parties that have joint control of the
arrangement have rights to the assets, and obligations for the liabilities, relating to the
arrangement. Those parties are called joint operators.
o A joint venture is a joint arrangement whereby the parties that have joint control of the
arrangement have rights to the net assets of the arrangement. Those parties are called
joint venturers.

PRESENTATION
A. JOINT OPERATIONS
 A joint operator shall recognise in relation to its interest in a joint operation:
o its assets, including its share of any assets held jointly;
o its liabilities, including its share of any liabilities incurred jointly;
o its revenue from the sale of its share of the output arising from the joint operation;
o its share of the revenue from the sale of the output by the joint operation; and
o its expenses, including its share of any expenses incurred jointly.
B. JOINT VENTURES
 A joint venturer shall recognise its interest in a joint venture as an investment and shall account
for that investment using the equity method in accordance with PAS 28 Investments in Associates
and Joint Ventures unless the entity is exempted from applying the equity method as specified in
that standard.

 In its separate financial statements, a joint operator or joint venturer shall account for its
interest in:
o a joint operation;
o a joint venture in accordance with PAS 27 Separate Financial Statements.
 In its separate financial statements, a party that participates in, but does not have joint control
of, a joint arrangement shall account for its interest in:
o a joint operation;
o a joint venture in accordance with PFRS 9, unless the entity has significant influence
over the joint venture, in which case it shall apply PAS 27.