 producers of agricultural and forest products, agricultural produce after
ASSET
PAS 2: Inventories
Overview
PAS 2 Inventories contains the requirements on how to account for most types of
inventory. The standard requires inventories to be measured at the lower of cost and
net realizable value (NRV) and outlines acceptable methods of determining cost,
including specific identification (in some cases), first-in first-out (FIFO) and
weighted average cost.
A revised version of PAS 2 was issued in December 2003 and applies to annual
periods beginning on or after 1 January 2005.
Objective of PAS 2
The objective of PAS 2 is to prescribe the accounting treatment for inventories. It
provides guidance for determining the cost of inventories and for subsequently
recognizing an expense, including any write-down to net realizable value. It also
provides guidance on the cost formulas that are used to assign costs to inventories.
Scope
 Inventories include assets held for sale in the ordinary course of business
(finished goods), assets in the production process for sale in the ordinary
course of business (work in process), and materials and supplies that are
consumed in production (raw materials). [PAS 2.6]
 However, IAS 2 excludes certain inventories from its scope: [PAS 2.2]
 work in process arising under construction contracts (see PAS 11
Construction Contracts)
 financial instruments (see PAS 39 Financial Instruments: Recognition and
Measurement)
 Biological assets related to agricultural activity and agricultural produce at
the point of harvest (see PAS 41 Agriculture).
Also, while the following are within the scope of the standard, PAS 2 does not apply
to the measurement of inventories held by: [PAS 2.3]
harvest, and minerals and mineral products, to the extent that they are
measured at net realisable value (above or below cost) in accordance with
well-established practices in those industries. When such inventories are
measured at net realisable value, changes in that value are recognised in
profit or loss in the period of the change
 commodity brokers and dealers who measure their inventories at fair value
less costs to sell. When such inventories are measured at fair value less
costs to sell, changes in fair
Fundamental principle of PAS 2
Inventories are required to be stated at the lower of cost and net realisable value
(NRV). [PAS 2.9]
Measurement of inventories
 Cost should include all: [PAS 2.10]
 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
Inventory cost should not include: [PAS 2.16 and 2.18]
 Abnormal waste
 Storage costs
 Administrative overheads unrelated to production
 Selling costs
 Foreign exchange differences arising directly on the recent acquisition of
inventories invoiced in a foreign currency
 Interest cost when inventories are purchased with deferred settlement terms.
The standard cost and retail methods may be used for the measurement
of cost, provided that the results approximate actual cost. [PAS 2.21-22]
 For inventory items that are not interchangeable, specific costs are Scope of PAS 28
attributed to the specific individual items of inventory. [PAS 2.23] IAS 28 applies to all entities that are investors with joint control of, or
For items that are interchangeable, PAS 2 allows the FIFO or weighted significant influence over, an investee (associate or joint venture). [PAS
average cost formulas. [PAS 2.25] The LIFO formula, which had been 28(2011).2]
allowed prior to the 2003 revision of PAS 2, is no longer allowed. Key definitions
The same cost formula should be used for all inventories with similar [IAS 28.3]
characteristics as to their nature and use to the entity. For groups of Associate
inventories that have different characteristics, different cost formulas may be An entity over which the investor has significant influence
justified. [PAS 2.25] Significant influence- The power to participate in the financial and operating
policy decisions of the investee but is not control or joint control of those
PAS 28: Investments in Associates and Joint
policies
Ventures (2011) Joint arrangement - an arrangement of which two or more parties have joint

Overview control

IAS 28 Investments in Associates and Joint Ventures (as amended in Joint control - the contractually agreed sharing of control of an arrangement,

2011) outlines how to apply, with certain limited exceptions, the equity which exists only when decisions about the relevant activities require the

method to investments in associates and joint ventures. The standard also unanimous consent of the parties sharing control

defines an associate by reference to the concept of "significant influence", Joint venture - joint arrangement whereby the parties that have joint control

which requires power to participate in financial and operating policy of the arrangement have rights to the net assets of the arrangement

decisions of an investee (but not joint control or control of those polices). Joint venture - party to a joint venture that has joint control of that joint

IAS 28 was reissued in May 2011 and applies to annual periods venture

beginning on or after 1 January 2013. Equity method - a method of accounting whereby the investment is initially

Objective of PAS 28 recognised at cost and adjusted thereafter for the post-acquisition change in

The objective of IAS 28 (as amended in 2011) is to prescribe the the investor's share of the investee's net assets. The investor's profit or loss

accounting for investments in associates and to set out the requirements for includes its share of the investee's profit or loss and the investor's other

the application of the equity method when accounting for investments in comprehensive income includes its share of the investee's other

associates and joint ventures. [PAS 28(2011).1] comprehensive income

Significant influence
Where an entity holds 20% or more of the voting power (directly or
through subsidiaries) on an investee, it will be presumed the investor has
significant influence unless it can be clearly demonstrated that this is not the
case. If the holding is less than 20%, the entity will be presumed not to have
significant influence unless such influence can be clearly demonstrated. A
substantial or majority ownership by another investor does not necessarily
preclude an entity from having significant influence. [PAS 28(2011).5]
The existence of significant influence by an entity is usually
evidenced in one or more of the following ways: [PAS 28(2011).6]
 representation on the board of directors or equivalent governing body
of the investee;
 participation in the policy-making process, including participation in
decisions about dividends or other distributions;
 material transactions between the entity and the investee;
 interchange of managerial personnel; or
 provision of essential technical information
The existence and effect of potential voting rights that are currently
exercisable or convertible, including potential voting rights held by other
entities, are considered when assessing whether an entity has significant
influence. In assessing whether potential voting rights contribute to
significant influence, the entity examines all facts and circumstances that
affect potential rights [PAS 28(2011).7, PAS 28(2011).8]
An entity loses significant influence over an investee when it loses
the power to participate in the financial and operating policy decisions of that
investee. The loss of significant influence can occur with or without a change
in absolute or relative ownership levels. [PAS 28(2011).9]
The equity method of accounting
Basic Principl - under the equity method, on initial recognition the
investment in an associate or a joint venture is recognized at cost, and the
carrying amount is increased or decreased to recognize the investor's share of
the profit or loss of the investee after the date of acquisition. [PAS
28(2011).10]
Distributions and other adjustments to carrying amount - the investor's
share of the investee's profit or loss is recognized in the investor's profit or
loss. Distributions received from an investee reduce the carrying amount of
the investment. Adjustments to the carrying amount may also be necessary
for changes in the investor's proportionate interest in the investee arising
from changes in the investee's other comprehensive income (e.g. to account
for changes arising from revaluations of property, plant and equipment and
foreign currency translations.) [PAS 28(2011).10]
Potential voting rights - an entity's interest in an associate or a joint venture
is determined solely on the basis of existing ownership interests and,
generally, does not reflect the possible exercise or conversion of potential
voting rights and other derivative instruments. [PAS 28(2011).12]
PAS 32 Financial Instruments
Overview
IAS 32 Financial Instruments: Presentation outlines the accounting
requirements for the presentation of financial instruments, particularly as to
the classification of such instruments into financial assets, financial liabilities
and equity instruments. The standards also provide guidance on the
classification of related interest, dividends and gains/losses, and when
financial assets and financial liabilities can be offset.
 IAS 32 was reissued in December 2003 and applies to annual periods
beginning on or after 1 January 2005.
Objective of IAS 32
The stated objective of IAS 32 is to establish principles for
presenting financial instruments as liabilities or equity and for offsetting
financial assets and liabilities. [IAS 32.1]
IAS 32 addresses this in a number of ways:
 clarifying the classification of a financial instrument issued by an
entity as a liability or as equity
 prescribing the accounting for treasury shares (an entity's own
repurchased shares)
 prescribing strict conditions under which assets and liabilities may be
offset in the balance sheet
 interests in subsidiaries, associates and joint ventures that are
accounted for under IAS 27 Consolidated and Separate Financial
Statements, IAS 28 Investments in Associates or IAS 31 Interests in
Joint Ventures (or, for annual periods beginning on or after 1 January
2013, IFRS 10 Consolidated Financial Statements, IAS 27 Separate
Financial Statements and IAS 28 Investments in Associates and Joint
Ventures). However, IAS 32 applies to all derivatives on interests in
subsidiaries, associates, or joint ventures.
 employers' rights and obligations under employee benefit plans (see
IAS 19 Employee Benefits)
 insurance contracts(see IFRS 4 Insurance Contracts). However, IAS
32 applies to derivatives that are embedded in insurance contracts if
they are required to be accounted separately by IAS 39
 financial instruments that are within the scope of IFRS 4 because
they contain a discretionary participation feature are only exempt
from applying paragraphs 15-32 and AG25-35 (analysing debt and
equity components) but are subject to all other IAS 32 requirements
 contracts and obligations under share-based payment
transactions (see IFRS 2 Share-based Payment) with the
following exceptions:
this standard applies to contracts within the scope of IAS
32.8-10 (see below)
 paragraphs 33-34 apply when accounting for treasury
shares purchased, sold, issued or cancelled by employee
share option plans or similar arrangements
Key definitions [IAS 32.11]
Financial instrument: a contract that gives rise to a financial asset of
one entity and a financial liability or equity instrument of another entity.
Financial asset: any asset that is:
 Cash
 An equity instrument of another entity
 A contractual right
 to receive cash or another financial asset from another entity;
or
 to exchange financial assets or financial liabilities with
another entity under conditions that are potentially favorable
to the entity; or
 a contract that will or may be settled in the entity's own equity
instruments and is
 a non-derivative for which the entity is or may be obliged to
receive a variable number of the entity's own equity
instruments
  a derivative that will or may be settled other than by the
exchange of a fixed amount of cash or another financial asset
for a fixed number of the entity's own equity instruments.
For this purpose the entity's own equity instruments do not
include instruments that are themselves contracts for the
future receipt or delivery of the entity's own equity
instruments
 Puttable instruments classified as equity or certain liabilities
arising on liquidation classified by IAS 32 as equity
instruments
PAS 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, with changes in the fair value under the fair value model being
recognised in profit or loss.
IAS 40 was reissued in December 2003 and applies to annual periods
beginning on or after 1 January 2005.
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. [IAS 40.5]
Examples of investment property: [IAS 40.8]
 land held for long-term capital appreciation
 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 that is being constructed or developed for future use as
investment property
The following are not investment property and, therefore, are outside the
scope of IAS 40: [IAS 40.5 and 40.9]
 property held for use in the production or supply of goods or services
or for administrative purposes property held for sale in the ordinary
course of business or in the process of construction of development
for such sale (IAS 2 Inventories)
 property being constructed or developed on behalf of third parties
(IAS 11 Construction Contracts)
 owner-occupied property (IAS 16 Property, Plant and Equipment),
including property held for future use as owner-occupied property,
property held for future development and subsequent use as owner-
occupied property, property occupied by employees and owner-
occupied property awaiting disposal
 property leased to another entity under a finance lease
Recognition
Investment property should be recognised as an asset when it is
probable that the future economic benefits that are associated with the
property will flow to the entity, and the cost of the property can be
reliably measured. [IAS 40.16]
Initial measurement
Investment property is initially measured at cost, including
transaction costs. Such cost should not include start-up costs, abnormal
waste, or initial operating losses incurred before the investment property
achieves the planned level of occupancy. [IAS 40.20 and 40.23]
Measurement subsequent to initial recognition  contractual obligations to purchase, construct, or develop investment
IAS 40 permits entities to choose between: [IAS 40.30] property or for repairs, maintenance or enhancements
 a fair value model, and Additional Disclosures for the Fair Value Model [IAS 40.76]
 a cost model  and end of the period, showing additions, disposals, fair value
Disclosure adjustments, net foreign exchange differences, transfers to and from
 Both Fair Value Model and Cost Model [IAS 40.75] inventories and owner-occupied property, and other changes [IAS
 whether the fair value or the cost model is used 40.76]
 if the fair value model is used, whether property interests held under  significant adjustments to an outside valuation (if any) [IAS 40.77]
operating leases are classified and accounted for as investment  if an entity that otherwise uses the fair value model measures an item
property of investment property using the cost model, certain additional
 if classification is difficult, the criteria to distinguish investment disclosures are required [IAS 40.78]
property from owner-occupied property and from property held for Additional Disclosures for the Cost Model [IAS 40.79]
sale the extent to which the fair value of investment property is based  the depreciation methods used
on a valuation by a qualified independent valuer; if there has been no  the useful lives or the depreciation rates used
such valuation, that fact must be disclosed  the gross carrying amount and the accumulated depreciation
 the amounts recognised in profit or loss for: (aggregated with accumulated impairment losses) at the
 rental income from investment property beginning and end of the perio
 direct operating expenses (including repairs and  a reconciliation of the carrying amount of investment property at
maintenance) arising from investment property that the beginning and end of the period, showing additions,
generated rental income during the period disposals, depreciation, impairment recognised or reversed,
 direct operating expenses (including repairs and foreign exchange differences, transfers to and from inventories
maintenance) arising from investment property that did not and owner-occupied property, and other changes
generate rental income during the period  the fair value of investment property. If the fair value of an item
 the cumulative change in fair value recognised in profit or of investment property cannot be measured reliably, additional
loss on a sale from a pool of assets in which the cost model disclosures are required, including, if possible, the range of
is used into a pool in which the fair value model is used estimates within which fair value is highly likely to lie
 restrictions on the realizability of investment property or the
remittance of income and proceeds of disposal

IFRS 6: Exploration for and Evaluation of
Mineral Resources
Overview
IFRS 6 Exploration for and Evaluation of Mineral Resources has the
effect of allowing entities adopting the standard for the first time to use
accounting policies for exploration and evaluation assets that were applied
before adopting IFRSs. It also modifies impairment testing of exploration
and evaluation assets by introducing different impairment indicators and
allowing the carrying amount to be tested at an aggregate level (not greater
than a segment).
IFRS 6 was issued in December 2004 and applies to annual periods
beginning on or after 1 January 2006.
Summary of IFRS 6 required. The facts and circumstances outlined in IFRS 6 are non-
Definitions
Exploration for and evaluation of mineral resources means the search
for mineral resources, including minerals, oil, natural gas and similar non-
regenerative resources after the entity has obtained legal rights to explore in a
specific area, as well as the determination of the technical feasibility and
commercial viability of extracting the mineral resource.[IFRS 6.Appendix A]
Exploration and evaluation expenditures are expenditures incurred in
connection with the exploration and evaluation of mineral resources before
the technical feasibility and commercial viability of extracting a mineral
resource is demonstrable. [IFRS 6.Appendix A]
Accounting policies for exploration and evaluation
IFRS 6 permits an entity to develop an accounting policy for
recognition of exploration and evaluation expenditures as assets without
specifically considering the requirements of paragraphs 11 and 12 of IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors. [IFRS
6.9] Thus, an entity adopting IFRS 6 may continue to use the accounting
policies applied immediately before adopting the IFRS. This includes
continuing to use recognition and measurement practices that are part of
those accounting policies.
Impairment
IFRS 6 effectively modifies the application of IAS 36 Impairment of
Assets to exploration and evaluation assets recognised by an entity under its
accounting policy. Specifically:
 Entities recognising exploration and evaluation assets are required to
perform an impairment test on those assets when specific facts and
circumstances outlined in the standard indicate an impairment test is
exhaustive, and are applied instead of the 'indicators of impairment'
in IAS 36 [IFRS 6.19-20]
 Entities are permitted to determine an accounting policy for
allocating exploration and evaluation assets to cash-generating units
or groups of CGUs. [IFRS 6.21] This accounting policy may result in
a different allocation than might otherwise arise on applying the
requirements of IAS 36
 If an impairment test is required, any impairment loss is measured,
presented and disclosed in accordance with IAS 36. [IFRS 6.18]
Presentation and disclosure
An entity treats exploration and evaluation assets as a separate class
of assets and make the disclosures required by either IAS 16 Property, Plant
and Equipment or IAS 38 Intangible Assets consistent with how the assets
are classified. [IFRS 6.25]
IFRS 6 requires disclosure of information that identifies and explains
the amounts recognised in its financial statements arising from the
exploration for and evaluation of mineral resources, including: [IFRS 6.23–
24]
 its accounting policies for exploration and evaluation expenditures
including the recognition of exploration and evaluation assets
 the amounts of assets, liabilities, income and expense and operating
and investing cash flows arising from the exploration for and
evaluation of mineral resources.
IFRS 7: Financial Instruments: Disclosures
Overview
IFRS 7 Financial Instruments: Disclosures requires disclosure of
information about the significance of financial instruments to an entity, and
the nature and extent of risks arising from those financial instruments, both in
qualitative and quantitative terms. Specific disclosures are required in
relation to transferred financial assets and a number of other matters.
IFRS 7 was originally issued in August 2005 and applies to annual
periods beginning on or after 1 January 2007.
 adds certain new disclosures about financial instruments to those
previously required by IAS 32 Financial Instruments: Disclosure
and Presentation (as it was then cited)
 replaces the disclosures previously required by IAS 30
Disclosures in the Financial Statements of Banks and Similar
Financial Institutions
 puts all of those financial instruments disclosures together in a
new standard on Financial Instruments: Disclosures. The
remaining parts of IAS 32 deal only with financial instruments
presentation matters.
Disclosure requirements of IFRS 7
IFRS requires certain disclosures to be presented by category of
instrument based on the IAS 39 measurement categories. Certain other
disclosures are required by class of financial instrument. For those
disclosures an entity must group its financial instruments into classes of
similar instruments as appropriate to the nature of the information presented.
[IFRS 7.6]
The two main categories of disclosures required by IFRS 7 are:
 information about the significance of financial instruments
 information about the nature and extent of risks arising from
financial instruments.
IFRS 9: Financial Instruments
Overview
IFRS 9 Financial Instruments issued on 24 July 2014 is the IASB's
replacement of IAS 39 Financial Instruments: Recognition and Measurement.
The Standard includes requirements for recognition and measurement,
impairment, derecognition and general hedge accounting. The IASB
completed its project to replace IAS 39 in phases, adding to the standard as it
completed each phase.
Overview of IFRS 9
Initial measurement of financial instruments
All financial instruments are initially measured at fair value plus or
minus, in the case of a financial asset or financial liability not at fair value
through profit or loss, transaction costs. [IFRS 9, paragraph 5.1.1]
Subsequent measurement of financial assets
IFRS 9 divides all financial assets that are currently in the scope of
IAS 39 into two classifications - those measured at amortised cost and those
measured at fair value.
Where assets are measured at fair value, gains and losses are either
recognised entirely in profit or loss (fair value through profit or loss,
FVTPL), or recognised in other comprehensive income (fair value through
other comprehensive income, FVTOCI).
For debt instruments the FVTOCI classification is mandatory for
certain assets unless the fair value option is elected. Whilst for equity
investments, the FVTOCI classification is an election. Furthermore, the
requirements for reclassifying gains or losses recognised in other
comprehensive income are different for debt instruments and equity
investments.
The classification of a financial asset is made at the time it is initially
recognised, namely when the entity becomes a party to the contractual
provisions of the instrument. [IFRS 9, paragraph 4.1.1] If certain conditions
are met, the classification of an asset may subsequently need to be
reclassified.
Debt instruments
A debt instrument that meets the following two conditions must be
measured at amortised cost (net of any write down for impairment) unless the
asset is designated at FVTPL under the fair value option (see below):
[IFRS 9, paragraph 4.1.2A]
 Business model test: The objective of the entity's business
model is to hold the financial asset to collect the contractual
cash flows (rather than to sell the instrument prior to its
contractual maturity to realise its fair value changes).
 Cash flow characteristics test: The contractual terms of the
financial asset give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal
amount outstanding.
A debt instrument that meets the following two conditions must be
measured at FVTOCI unless the asset is designated at FVTPL under the fair
value option (see below):
[IFRS 9, paragraph 4.1.2A]
 Business model test: The financial asset is held within a
business model whose objective is achieved by both
collecting contractual cash flows and selling financial assets.
 Cash flow characteristics test: The contractual terms of the
financial asset give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal
amount outstanding.
Fair value option
IFRS 9 contains an option to designate a financial liability as
measured at FVTPL if [IFRS 9, paragraph 4.2.2]:
 doing so eliminates or significantly reduces a measurement or
recognition inconsistency (sometimes referred to as an 'accounting
mismatch') that would otherwise arise from measuring assets or
 liabilities or recognising the gains and losses on them on different
bases, or
 the liability is part or a group of financial liabilities or financial
assets and financial liabilities that is managed and its performance is
evaluated on a fair value basis, in accordance with a documented risk
management or investment strategy, and information about the group
is provided internally on that basis to the entity's key management
personnel.
Derecognition of financial assets
 The basic premise for the derecognition model in IFRS 9 (carried
over from IAS 39) is to determine whether the asset under
consideration for derecognition is: [IFRS 9, paragraph 3.2.2]
 an asset in its entirety or
significantly reduces a measurement or recognition inconsistency (sometimes
referred to as an 'accounting mismatch') that would otherwise arise from
measuring assets or liabilities or recognising the gains and losses on them on
different bases. [IFRS 9, paragraph 4.1.5]
Equity instruments
All equity investments in scope of IFRS 9 are to be measured at fair
value in the statement of financial position, with value changes recognised in
profit or loss, except for those equity investments for which the entity has
elected to present value changes in 'other comprehensive income'. There is no
'cost exception' for unquoted equities.
'Other comprehensive income' option
If an equity investment is not held for trading, an entity can make an
irrevocable election at initial recognition to measure it at FVTOCI with only
dividend income recognised in profit or loss. [IFRS 9, paragraph 5.7.5]
Measurement guidance

 specifically identified cash flows from an asset (or a group of Despite the fair value requirement for all equity investments, IFRS 9

similar financial assets) or contains guidance on when cost may be the best estimate of fair value and
also when it might not be representative of fair value.

 a fully proportionate (pro rata) share of the cash flows from an

asset (or a group of similar financial assets). or IFRS 13: FAIR VALUE MEASUREMENT
Overview
 a fully proportionate (pro rata) share of specifically identified IFRS 13 Fair Value Measurement applies to IFRSs that require or
cash flows from a financial asset (or a group of similar financial permit fair value measurements or disclosures and provides a single IFRS
assets) framework for measuring fair value and requires disclosures about fair value
Fair value option measurement. The Standard defines fair value on the basis of an 'exit price'
Even if an instrument meets the two requirements to be measured at notion and uses a 'fair value hierarchy', which results in a market-based,
amortised cost or FVTOCI, IFRS 9 contains an option to designate, at initial rather than entity-specific, measurement.
recognition, a financial asset as measured at FVTPL if doing so eliminates or
 IFRS 13 was originally issued in May 2011 and applies to annual Overview of fair value measurement approach
periods beginning on or after 1 January 2013. The objective of a fair value measurement is to estimate the price at
Objective which an orderly transaction to sell the asset or to transfer the liability would
IFRS 13: [IFRS 13:1] take place between market participants at the measurement date under
 defines fair value current market conditions. A fair value measurement requires an entity to
 set out in a single IFRS a framework for measuring fair value determine all of the following: [IFRS 13:B2]
requires disclosures about fair value measurements.  the particular asset or liability that is the subject of the
Key definitions measurement (consistently with its unit of account)
 for a non-financial asset, the valuation premise that is
Fair value - the price that would be received to sell an asset or paid to appropriate for the measurement (consistently with its
transfer a liability in an orderly transaction between market participants at the highest and best use)
measurement date  the principal (or most advantageous) market for the asset or
Active market - a market in which transactions for the asset or liability take liability
place with sufficient frequency and volume to provide pricing information on the valuation technique(s) appropriate for the measurement,
an ongoing basis considering the availability of data with which to develop
Exit price - the price that would be received to sell an asset or paid to inputs that represent the assumptions that market participants
transfer a liability would use when pricing the asset or liability and the level of
the fair value hierarchy within which the inputs are

Highest and best use - the use of a non-financial asset by market categorize

participants that would maximize the value of the asset or the group of assets Valuation techniques

and liabilities (e.g. a business) within which the asset would be used An entity uses valuation techniques appropriate in the circumstances

Most advantageous market - the market that maximizes the amount that and for which sufficient data are available to measure fair value, maximising

would be received to sell the asset or minimizes the amount that would be the use of relevant observable inputs and minimising the use of unobservable

paid to transfer the liability, after taking into account transaction costs and inputs. [IFRS 13:61, IFRS 13:67]

transport costs.  market approach – uses prices and other relevant information

Principal market – the market with the greatest volume and level of activity generated by market transactions involving identical or

for the asset or liability. comparable (similar) assets, liabilities, or a group of assets

Measurement of fair value and liabilities (e.g. a business)

  cost approach – reflects the amount that would be required
currently to replace the service capacity of an asset (current
EQUITY
replacement cost)
 income approach – converts future amounts (cash flows or PAS 1: Presentation of Financial Statements
income and expenses) to a single current (discounted)
Overview
amount, reflecting current market expectations about those
PAS 1 Presentation of Financial Statements sets out the overall
future amounts.
requirements for financial statements, including how they should be
Disclosure
structured, the minimum requirements for their content and overriding
Disclosure objective
concepts such as going concern, the accrual basis of accounting and the
IFRS 13 requires an entity to disclose information that helps users of
current/non-current distinction. The standard requires a complete set of
its financial statements assess both of the following: [IFRS 13:91]
financial statements to comprise a statement of financial position, a statement
 for assets and liabilities that are measured at fair value on a
of profit or loss and other comprehensive income, a statement of changes in
recurring or non-recurring basis in the statement of financial
equity and a statement of cash flows.
position after initial recognition, the valuation techniques
IAS 1 was reissued in September 2007 and applies to annual periods
and inputs used to develop those measurements
beginning on or after 1 January 2009.
 for fair value measurements using significant unobservable
Objective of PAS 1
inputs (Level 3), the effect of the measurements on profit or
The objective of PAS 1 (2007) is to prescribe the basis for
loss or other comprehensive income for the period.
presentation of general purpose financial statements, to ensure comparability
Effective date and transition
both with the entity's financial statements of previous periods and with the
IFRS 13 is applicable to annual reporting periods beginning on or
financial statements of other entities. PAS 1 sets out the overall requirements
after 1 January 2013. An entity may apply IFRS 13 to an earlier accounting
for the presentation of financial statements, guidelines for their structure and
period, but if doing so it must disclose the fact.
minimum requirements for their content. [PAS 1.1] Standards for
Application is required prospectively as of the beginning of the
recognising, measuring, and disclosing specific transactions are addressed in
annual reporting period in which the IFRS is initially applied. Comparative
other Standards and Interpretations. [PAS 1.3]
information need not be disclosed for periods before initial application.
Scope
PAS 1 applies to all general purpose financial statements that are
prepared and presented in accordance with International Financial Reporting
Standards (PFRSs). [PAS 1.2]
 General purpose financial statements are those intended to serve
users who are not in a position to require financial reports tailored to their
particular information needs. [PAS 1.7]
Objective of financial statements
The objective of general purpose financial statements is to provide
information about the financial position, financial performance, and cash
flows of an entity that is useful to a wide range of users in making economic
decisions. To meet that objective, financial statements provide information
about an entity's: [PAS 1.9]
 assets
 liabilities
 equity
 income and expenses, including gains and losses
 contributions by and distributions to owners (in their
capacity as owners)
 cash flows
That information, along with other information in the notes, assists users of
financial statements in predicting the entity's future cash flows and, in
particular, their timing and certainty..
Components of financial statements
A complete set of financial statements includes: [PAS 1.10]
 a statement of financial position (balance sheet) at the end of the
period
 a statement of profit or loss and other comprehensive income for
the period (presented as a single statement, or by presenting the
profit or loss section in a separate statement of profit or loss,
immediately followed by a statement presenting comprehensive
income beginning with profit or loss)
 a statement of changes in equity for the period
 a statement of cash flows for the period
 notes, comprising a summary of significant accounting policies
and other explanatory notes
 comparative information prescribed by the standard.
An entity may use titles for the statements other than those stated
above. All financial statements are required to be presented with equal
prominence. [PAS 1.10]
When an entity applies an accounting policy retrospectively or
makes a retrospective restatement of items in its financial statements, or
when it reclassifies items in its financial statements, it must also present a
statement of financial position (balance sheet) as at the beginning of the
earliest comparative period.
Reports that are presented outside of the financial statements –
including financial reviews by management, environmental reports, and
value added statements – are outside the scope of IFRSs. [PAS 1.14]
Fair presentation and compliance with PFRSs
The financial statements must "present fairly" the financial position,
financial performance and cash flows of an entity. Fair presentation requires
the faithful representation of the effects of transactions, other events, and
conditions in accordance with the definitions and recognition criteria for
assets, liabilities, income and expenses set out in the Framework. The
application of IFRSs, with additional disclosure when necessary, is presumed
to result in financial statements that achieve a fair presentation. [PAS 1.15]
PAS 1 requires an entity whose financial statements comply with
PFRSs to make an explicit and unreserved statement of such compliance in
the notes. Financial statements cannot be described as complying with IFRSs
unless they comply with all the requirements of PFRSs (which includes
International Financial Reporting Standards, International Accounting
Standards, PFRIC Interpretations and SIC Interpretations). [PAS 1.16]
Inappropriate accounting policies are not rectified either by disclosure of the
accounting policies used or by notes or explanatory material. [PAS 1.18]
IAS 1 acknowledges that, in extremely rare circumstances,
management may conclude that compliance with an IFRS requirement would
be so misleading that it would conflict with the objective of financial
statements set out in the Framework. In such a case, the entity is required to
depart from the IFRS requirement, with detailed disclosure of the nature,
reasons, and impact of the departure. [PAS 1.19-21]
Going concern
The Conceptual Framework notes that financial statements are
normally prepared assuming the entity is a going concern and will continue
in operation for the foreseeable future. [Conceptual Framework, paragraph
4.1]
PAS 1 requires management to make an assessment of an entity's
ability to continue as a 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 PAS 1 requires a series of disclosures.
[PAS 1.25]
Accrual basis of accounting
PAS 1 requires that an entity prepare its financial statements, except
for cash flow information, using the accrual basis of accounting. [PAS 1.27]
Consistency of presentation
he 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 PFRS. [PAS
1.45]
Materiality and aggregation
Information is material if omitting, misstating or obscuring it could
reasonably be expected to influence decisions that the primary users of
general purpose financial statements make on the basis of those financial
statements, which provide financial information about a specific reporting
entity. [PAS 1.7]
Each material class of similar items must be presented separately in
the financial statements. Dissimilar items may be aggregated only if they are
individually immaterial. [PAS 1.29]
However, information should not be obscured by aggregating or by
providing immaterial information, materiality considerations apply to the all
parts of the financial statements, and even when a standard requires a specific
disclosure, materiality considerations do apply. [PAS 1.30A-31]
Offsetting
Assets and liabilities, and income and expenses, may not be offset
unless required or permitted by an PFRS. [PAS 1.32]
Comparative information
PAS 1 requires that comparative information to be disclosed in
respect of the previous period for all amounts reported in the financial
statements, both on the face of the financial statements and in the notes,
unless another Standard requires otherwise. Comparative information is
provided for narrative and descriptive where it is relevant to understanding
the financial statements of the current period. [PAS 1.38]
 An entity is required to present at least two of each of the following  the level of rounding used (e.g. thousands, millions).
primary financial statements: [PAS 1.38A] Reporting period
 statement of financial position* There is a presumption that financial statements will be prepared at least
 statement of profit or loss and other comprehensive income annually. If the annual reporting period changes and financial statements are
 separate statements of profit or loss (where presented) prepared for a different period, the entity must disclose the reason for the
 statement of cash flows change and state that amounts are not entirely comparable. [IAS 1.36]
 statement of changes in equity
PAS 7: Statement of Cash Flows
 related notes for each of the above items.
Overview
A third statement of financial position is required to be presented if
PAS 7 Statement of Cash Flows requires an entity to present a
the entity retrospectively applies an accounting policy, restates items, or
statement of cash flows as an integral part of its primary financial statements.
reclassifies items, and those adjustments had a material effect on the
Cash flows are classified and presented into operating activities (either using
information in the statement of financial position at the beginning of the
the 'direct' or 'indirect' method), investing activities or financing activities,
comparative period. [PAS 1.40A]
with the latter two categories generally presented on a gross basis.
Where comparative amounts are changed or reclassified, various
IAS 7 was reissued in December 1992, retitled in September 2007,
disclosures are required. [PAS 1.41]
and is operative for financial statements covering periods beginning on or
Structure and content of financial statements in general
after 1 January 1994.
PAS 1 requires an entity to clearly identify: [PAS 1.49-51]
Objective of IAS 7
 the financial statements, which must be distinguished from other
The objective of IAS 7 is to require the presentation of information about the
information in a published document
historical changes in cash and cash equivalents of an entity by means of a
 each financial statement and the notes to the financial statements.
statement of cash flows, which classifies cash flows during the period
In addition, the following information must be displayed
according to operating, investing, and financing activities.
prominently, and repeated as necessary: [PAS 1.51]
Fundamental principle in IAS 7
 the name of the reporting entity and any change in the name
All entities that prepare financial statements in conformity with
 whether the financial statements are a group of entities or an
IFRSs are required to present a statement of cash flows. [PAS 7.1]
individual entity
The statement of cash flows analyses changes in cash and cash
 information about the reporting period
equivalents during a period. Cash and cash equivalents comprise cash on
 the presentation currency (as defined by PAS 21 The Effects of
hand and demand deposits, together with short-term, highly liquid
Changes in Foreign Exchange Rates)
investments that are readily convertible to a known amount of cash, and that
are subject to an insignificant risk of changes in value. Guidance notes  for operating cash flows, the direct method of presentation is encouraged,
indicate that an investment normally meets the definition of a cash equivalent but the indirect method is acceptable [IAS 7.18]
when it has a maturity of three months or less from the date of acquisition. The direct method shows each major class of gross cash receipts and
Equity investments are normally excluded, unless they are in substance a gross cash payments. The operating cash flows section of the statement
cash equivalent (e.g. preferred shares acquired within three months of their of cash flows under the direct method would appear something like this:
specified redemption date). Bank overdrafts which are repayable on demand Cash receipts from customers xx,xxx
and which form an integral part of an entity's cash management are also Cash paid to suppliers xx,xxx
included as a component of cash and cash equivalents. [PAS 7.7-8] Cash paid to employees xx,xxx
Presentation of the Statement of Cash Flows Cash paid for other operating expenses xx,xxx
 Cash flows must be analysed between operating, investing and financing Interest paid xx,xxx
activities. [PAS 7.10] Income taxes paid xx,xxx
 Key principles specified by IAS 7 for the preparation of a statement of Net cash from operating activities xx,xxx
cash flows are as follows:  The indirect method adjusts accrual basis net profit or loss for the effects
 operating activities are the main revenue-producing activities of the of non-cash transactions. The operating cash flows section of the
entity that are not investing or financing activities, so operating cash statement of cash flows under the indirect method would appear
flows include cash received from customers and cash paid to suppliers something like this:
and employees [IAS 7.14] Profit before interest and income taxes xx,xxx
 Investing activities are the acquisition and disposal of long-term assets Add back depreciation xx,xxx
and other investments that are not considered to be cash equivalents [IAS Add back impairment of assets xx,xxx
7.6] Increase in receivables xx,xxx
 Financing activities are activities that alter the equity capital and Decrease in inventories xx,xxx
borrowing structure of the entity [IAS 7.6] Increase in trade payables xx,xxx
 interest and dividends received and paid may be classified as operating, Interest expense xx,xxx
investing, or financing cash flows, provided that they are classified Less Interest accrued but not yet paid xx,xxx
consistently from period to period [IAS 7.31] Interest paid xx,xxx
 cash flows arising from taxes on income are normally classified as Income taxes paid xx,xxx
operating, unless they can be specifically identified with financing or Net cash from operating activities xx,xxx
investing activities [IAS 7.35]
 the exchange rate used for translation of transactions denominated in
a foreign currency should be the rate in effect at the date of the cash
flows [PAS 7.25]
 cash flows of foreign subsidiaries should be translated at the
exchange rates prevailing when the cash flows took place [PAS 7.26]
 as regards the cash flows of associates, joint ventures, and
subsidiaries, where the equity or cost method is used, the statement
of cash flows should report only cash flows between the investor and
the investee; where proportionate consolidation is used, the cash
flow statement should include the venturer's share of the cash flows
of the investee [PAS 7.37]
 aggregate cash flows relating to acquisitions and disposals of
subsidiaries and other business units should be presented separately
and classified as investing activities, with specified additional
disclosures. [PAS 7.39] The aggregate cash paid or received as
consideration should be reported net of cash and cash equivalents
acquired or disposed of [PAS 7.42]
 cash flows from investing and financing activities should be reported
gross by major class of cash receipts and major class of cash
payments except for the following cases, which may be reported on a
net basis: [PAS 7.22-24]
 cash receipts and payments on behalf of customers (for
example, receipt and repayment of demand deposits by
banks, and receipts collected on behalf of and paid over to
the owner of a property)
 cash receipts and payments for items in which the turnover is
quick, the amounts are large, and the maturities are short,
generally less than three months (for example, charges and
collections from credit card customers, and purchase and
sale of investments)
 cash receipts and payments relating to deposits by financial
institutions
 cash advances and loans made to customers and repayments
thereof
 investing and financing transactions which do not require the use of
cash should be excluded from the statement of cash flows, but they
should be separately disclosed elsewhere in the financial statements
[PAS 7.43]
 entities shall provide disclosures that enable users of financial
statements to evaluate changes in liabilities arising from financing
activities [PAS 7.44A-44E]*
 the components of cash and cash equivalents should be disclosed,
and a reconciliation presented to amounts reported in the statement
of financial position [PAS 7.45]
 the amount of cash and cash equivalents held by the entity that is not
available for use by the group should be disclosed, together with a
commentary by management [PAS 7.48]
PAS 8: Accounting Policies, Changes in
Accounting Estimates and Errors
Overview
PAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors is applied in selecting and applying accounting policies,
accounting for changes in estimates and reflecting corrections of prior
period errors.
The standard requires compliance with any specific IFRS applying to
a transaction, event or condition, and provides guidance on developing
accounting policies for other items that result in relevant and reliable
information. Changes in accounting policies and corrections of errors are
generally retrospectively accounted for, whereas changes in accounting
estimates are generally accounted for on a prospective basis.
PAS 8 was reissued in December 2005 and applies to annual periods
beginning on or after 1 January 2005.
Key definitions [PAS 8.5]
 Accounting policies are the specific principles, bases, conventions,
rules and practices applied by an entity in preparing and presenting
financial statements.
 A change in accounting estimate is an adjustment of the carrying
amount of an asset or liability, or related expense, resulting from
reassessing the expected future benefits and obligations associated
with that asset or liability.
 International Financial Reporting Standards are standards and
interpretations adopted by the International Accounting Standards
Board (PASB). They comprise:
 International Financial Reporting Standards (PFRSs)
 International Accounting Standards (PASs)
 Interpretations developed by the International Financial
Reporting Interpretations Committee (PFRIC) or the former
Standing Interpretations Committee (SIC) and approved by
the PASB.
 Materiality. Information is material if omitting, misstating or
obscuring it could reasonably be expected to influence decisions that
the primary users of general purpose financial statements make on
the basis of those financial statements, which provide financial
information about a specific reporting entity.*
 Prior period errors are omissions from, and misstatements in, an
entity's financial statements for one or more prior periods arising
from a failure to use, or misuse of, reliable information that was
available and could reasonably be expected to have been obtained
and taken into account in preparing those statements. Such errors
result from mathematical mistakes, mistakes in applying accounting
policies, oversights or misinterpretations of facts, and fraud.
Disclosures relating to changes in accounting policies
Disclosures relating to changes in accounting policy caused by a new
standard or interpretation include: [PAS 8.28]
 the title of the standard or interpretation causing the change
 the nature of the change in accounting policy
 a description of the transitional provisions, including those that
might have an effect on future periods
 for the current period and each prior period presented, to the extent
practicable, the amount of the adjustment:
 for each financial statement line item affected, and
 for basic and diluted earnings per share (only if the entity is
applying PAS 33)
 the amount of the adjustment relating to periods before those
presented, to the extent practicable
 if retrospective application is impracticable, an explanation and
description of how the change in accounting policy was applied.
Financial statements of subsequent periods need not repeat these
disclosures.
 Disclosures relating to voluntary changes in accounting policy
include: [PAS 8.29]
 the nature of the change in accounting policy
 the reasons why applying the new accounting policy provides
reliable and more relevant information
 for the current period and each prior period presented, to the extent
practicable, the amount of the adjustment:
 for each financial statement line item affected, and
 for basic and diluted earnings per share (only if the entity is
applying PAS 33)
 the amount of the adjustment relating to periods before those
presented, to the extent practicable
 if retrospective application is impracticable, an explanation and
description of how the change in accounting policy was applied.
Financial statements of subsequent periods need not repeat these
disclosures.
If an entity has not applied a new standard or interpretation that has been
issued but is not yet effective, the entity must disclose that fact and any and
known or reasonably estimable information relevant to assessing the possible
impact that the new pronouncement will have in the year it is applied. [IAS
8.30]
Changes in accounting estimates
The effect of a change in an accounting estimate shall be recognised
prospectively by including it in profit or loss in: [PAS 8.36]
 the period of the change, if the change affects that period only, or
 the period of the change and future periods, if the change affects
both.
However, to the extent that a change in an accounting estimate gives rise
to changes in assets and liabilities, or relates to an item of equity, it is
recognised by adjusting the carrying amount of the related asset, liability, or
equity item in the period of the change. [PAS 8.37]
Disclosures relating to changes in accounting estimates
Disclose:
 the nature and amount of a change in an accounting estimate that has
an effect in the current period or is expected to have an effect in
future periods
 if the amount of the effect in future periods is not disclosed because
estimating it is impracticable, an entity shall disclose that fact. [PAS
8.39-40]
Errors
 The general principle in IAS 8 is that an entity must correct all
material prior period errors retrospectively in the first set of financial
statements authorised for issue after their discovery by: [PAS 8.42]
 restating the comparative amounts for the prior period(s) presented in
which the error occurred; or
 if the error occurred before the earliest prior period presented,
restating the opening balances of assets, liabilities and equity for the
earliest prior period presented
Disclosures relating to prior period errors
Disclosures relating to prior period errors include: [PAS 8.49]
 the nature of the prior period error
  for each prior period presented, to the extent practicable, the amount
of the correction:
 for each financial statement line item affected, and
 for basic and diluted earnings per share (only if the entity is
applying IAS 33)
 the amount of the correction at the beginning of the earliest prior
period presented
 if retrospective restatement is impracticable, an explanation and
description of how the error has been corrected.
Financial statements of subsequent periods need not repeat these disclosures.
including an event that indicates that the going concern assumption in
relation to the whole or part of the enterprise is not appropriate. [IAS 10.3]
Non-adjusting event: An event after the reporting period that is
indicative of a condition that arose after the end of the reporting period. [IAS
10.3]
Going concern issues arising after end of the reporting period
An entity shall not prepare its financial statements on a going
concern basis if management determines after the end of the reporting period
either that it intends to liquidate the entity or to cease trading, or that it has no
realistic alternative but to do so. [IAS 10.14]

IAS 10: Events After the Reporting Period

Overview
IAS 10 Events After The Reporting Period contains requirements for
when events after the end of the reporting period should be adjusted in the
financial statements. Adjusting events are those providing evidence of
conditions existing at the end of the reporting period, whereas non-adjusting
events are indicative of conditions arising after the reporting period (the latter
being disclosed where material).
IAS 10 was reissued in December 2003 and applies to annual periods
beginning on or after 1 January 2005.
Key definitions
Event after the reporting period: An event, which could be IAS 10: Events After the Reporting Period
favourable or unfavourable, that occurs between the end of the reporting
Overview
period and the date that the financial statements are authorised for issue. [IAS
IAS 10 Events After The Reporting Period contains requirements for
10.3]
when events after the end of the reporting period should be adjusted in the
Adjusting event: An event after the reporting period that provides
financial statements. Adjusting events are those providing evidence of
further evidence of conditions that existed at the end of the reporting period,
conditions existing at the end of the reporting period, whereas non-adjusting
events are indicative of conditions arising after the reporting period (the latter
being disclosed where material).
IAS 10 was reissued in December 2003 and applies to annual periods
beginning on or after 1 January 2005.
Key definitions
Event after the reporting period: An event, which could be
favourable or unfavourable, that occurs between the end of the reporting
period and the date that the financial statements are authorised for issue. [IAS
10.3]
Adjusting event: An event after the reporting period that provides
further evidence of conditions that existed at the end of the reporting period,
including an event that indicates that the going concern assumption in
relation to the whole or part of the enterprise is not appropriate. [IAS 10.3]
Non-adjusting event: An event after the reporting period that is
indicative of a condition that arose after the end of the reporting period. [IAS
10.3]
Going concern issues arising after end of the reporting peripr
An entity shall not prepare its financial statements on a going
concern basis if management determines after the end of the reporting period
either that it intends to liquidate the entity or to cease trading, or that it has no
realistic alternative but to do so. [IAS 10.14]
Disclosure
Non-adjusting events should be disclosed if they are of such
importance that non-disclosure would affect the ability of users to make
proper evaluations and decisions. The required disclosure is (a) the nature of
the event and (b) an estimate of its financial effect or a statement that a
reasonable estimate of the effect cannot be made. [IAS 10.21]
A company should update disclosures that relate to conditions that
existed at the end of the reporting period to reflect any new information that
it receives after the reporting period about those conditions. [IAS 10.19]Non-
adjusting events should be disclosed if they are of such importance that non-
disclosure would affect the ability of users to make proper evaluations and
decisions. The required disclosure is (a) the nature of the event and (b) an
estimate of its financial effect or a statement that a reasonable estimate of the
effect cannot be made. [IAS 10.21]
A company should update disclosures that relate to conditions that
existed at the end of the reporting period to reflect any new information that
it receives after the reporting period about those conditions. [IAS 10.19]
IAS 24 — Related Party Disclosures
Overview
IAS 24 Related Party Disclosures requires disclosures about
transactions and outstanding balances with an entity's related parties. The
standard defines various classes of entities and people as related parties and
sets out the disclosures required in respect of those parties, including the
compensation of key management personnel.
Objective of IAS 24
The objective of IAS 24 is to ensure that an entity's financial
statements contain the disclosures necessary to draw attention to the
possibility that its financial position and profit or loss may have been
affected by the existence of related parties and by transactions and
outstanding balances with such parties.
Disclosure
Relationships between parents and subsidiaries. Regardless of
whether there have been transactions between a parent and a subsidiary, an
entity must disclose the name of its parent and, if different, the ultimate
controlling party. If neither the entity's parent nor the ultimate controlling
party produces financial statements available for public use, the name of the
next most senior parent that does so must also be disclosed. [IAS 24.16]
Management compensation. Disclose key management personnel
compensation in total and for each of the folowing categories: [IAS 24.17]
 short-term employee benefits
 post-employment benefits
 other long-term benefits
 termination benefits
 share-based payment benefits
IAS 29: Financial Reporting in
Hyperinflationary Economies
Overview
IAS 29 Financial Reporting in Hyperinflationary Economies applies
where an entity's functional currency is that of a hyperinflationary economy.
The standard does not prescribe when hyperinflation arises but requires the
financial statements (and corresponding figures for previous periods) of an
entity with a functional currency that is hyperinflationary to be restated for
the changes in the general pricing power of the functional currency.
IAS 29 was issued in July 1989 and is operative for periods
beginning on or after 1 January 1990.
Objective of IAS 29
The objective of IAS 29 is to establish specific standards for entities
reporting in the currency of a hyperinflationary economy, so that the
financial information provided is meaningful.
Disclosure
 Gain or loss on monetary items [IAS 29.9]
 The fact that financial statements and other prior period data have been
restated for changes in the general purchasing power of the reporting
currency [IAS 29.39]
 Whether the financial statements are based on an historical cost or
current cost approach [IAS 29.39]
 Identity and level of the price index at the balance sheet date and moves
during the current and previous reporting period
IAS 34 — Interim Financial Reporting
Overview
IAS 34 Interim Financial Reporting applies when an entity prepares
an interim financial report, without mandating when an entity should prepare
such a report. Permitting less information to be reported than in annual
financial statements (on the basis of providing an update to those financial
statements), the standard outlines the recognition, measurement and
disclosure requirements for interim reports.
IAS 34 was issued in June 1998 and is operative for periods beginning on or
after 1 January 1999
Objective of IAS 34
The objective of IAS 34 is to prescribe the minimum content of an interim
financial report and to prescribe the principles for recognition and
measurement in financial statements presented for an interim period.
Key definitions
Interim period: a financial reporting period shorter than a full
financial year (most typically a quarter or half-year). [IAS 34.4]
Interim financial report: a financial report that contains either a
complete or condensed set of financial statements for an interim period. [IAS
34.4]
Accounting policies
The same accounting policies should be applied for interim reporting
as are applied in the entity's annual financial statements, except for
accounting policy changes made after the date of the most recent annual
financial statements that are to be reflected in the next annual financial
statements. [IAS 34.28]
Measurement
Measurements for interim reporting purposes should be made on a
year-to-date basis, so that the frequency of the entity's reporting does not
affect the measurement of its annual results. [IAS 34.28]
Materiality
In deciding how to recognise, measure, classify, or disclose an item
for interim financial reporting purposes, materiality is to be assessed in
relation to the interim period financial data, not forecast annual data. [IAS
34.23]
Disclosure in annual financial statements
If an estimate of an amount reported in an interim period is changed
significantly during the financial interim period in the financial year but a
separate financial report is not published for that period, the nature and
amount of that change must be disclosed in the notes to the annual financial
statements. [IAS 34.26]
IAS 37: Provisions, Contingent Liabilities
and Contingent Assets
Overview
IAS 37 Provisions, Contingent Liabilities and Contingent Assets
outlines the accounting for provisions (liabilities of uncertain timing or
amount), together with contingent assets (possible assets) and contingent
liabilities (possible obligations and present obligations that are not probable
or not reliably measurable). Provisions are measured at the best estimate
(including risks and uncertainties) of the expenditure required to settle the
present obligation, and reflects the present value of expenditures required to
settle the obligation where the time value of money is material.
IAS 37 was issued in September 1998 and is operative for periods
beginning on or after 1 July 1999.
Objective
The objective of IAS 37 is to ensure that appropriate recognition
criteria and measurement bases are applied to provisions, contingent
liabilities and contingent assets and that sufficient information is disclosed in
the notes to the financial statements to enable users to understand their
nature, timing and amount. The key principle established by the Standard is
that a provision should be recognised only when there is a liability i.e. a
present obligation resulting from past events. The Standard thus aims to
ensure that only genuine obligations are dealt with in the financial statements
– planned future expenditure, even where authorised by the board of
directors or equivalent governing body, is excluded from recognition.
Scope
IAS 37 excludes obligations and contingencies arising from: [IAS 37.1-6]
 financial instruments that are in the scope of IAS 39 Financial
Instruments: Recognition and Measurement (or IFRS 9 Financial
Instruments)
 non-onerous executory contracts
 insurance contracts (see IFRS 4 Insurance Contracts), but IAS 37 does
apply to other provisions, contingent liabilities and contingent assets of
an insurer
 items covered by another IFRS. For example, IAS 11 Construction
Contracts applies to obligations arising under such contracts; IAS 12
Income Taxes applies to obligations for current or deferred income taxes;
IAS 17 Leases applies to lease obligations; and IAS 19 Employee
Benefits applies to pension and other employee benefit obligations.
Key definitions [IAS 37.10]
Provision: a liability of uncertain timing or amount.
Liability:
 present obligation as a result of past events settlement is expected to
result in an outflow of resources (payment)
 Contingent liability:
 a possible obligation depending on whether some uncertain future event
occurs, or a present obligation but payment is not probable or the amount
cannot be measured reliably
 Contingent asset:
 a possible asset that arises from past e
 The amendments are effective for annual periods beginning on or after 1
July 2014.
Modifications, cancellations, and settlements
The determination of whether a change in terms and conditions has
an effect on the amount recognised depends on whether the fair value of the
new instruments is greater than the fair value of the original instruments
(both determined at the modification date).
Modification of the terms on which equity instruments were granted
may have an effect on the expense that will be recorded. IFRS 2 clarifies that
the guidance on modifications also applies to instruments modified after their
vesting date. If the fair value of the new instruments is more than the fair
value of the old instruments (e.g. by reduction of the exercise price or
issuance of additional instruments), the incremental amount is recognised
over the remaining vesting period in a manner similar to the original amount.
If the modification occurs after the vesting period, the incremental amount is
recognised immediately. If the fair value of the new instruments is less than
the fair value of the old instruments, the original fair value of the equity
instruments granted should be expensed as if the modification never
occurred.
The cancellation or settlement of equity instruments is accounted for
as an acceleration of the vesting period and therefore any amount
unrecognised that would otherwise have been charged should be recognised
immediately. Any payments made with the cancellation or settlement (up to
the fair value of the equity instruments) should be accounted for as the
repurchase of an equity interest. Any payment in excess of the fair value of
the equity instruments granted is recognised as an expense.
New equity instruments granted may be identified as a replacement
of cancelled equity instruments. In those cases, the replacement equity
instruments are accounted for as a modification. The fair value of the
replacement equity instruments is determined at grant date, while the fair
value of the cancelled instruments is determined at the date of cancellation,
less any cash payments on cancellation that is accounted for as a deduction
from equity.
Disclosure
Required disclosures include:
 the nature and extent of share-based payment arrangements that existed
during the period
 how the fair value of the goods or services received, or the fair value of
the equity instruments granted, during the period was determined
 the effect of share-based payment transactions on the entity's profit or
loss for the period and on its financial position.
IFRS 5: Non-current Assets Held for Sale
and Discontinued Operations
Overview
IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations outlines how to account for non-current assets held for sale (or
for distribution to owners). In general terms, assets (or disposal groups) held
for sale are not depreciated, are measured at the lower of carrying amount
and fair value less costs to sell, and are presented separately in the statement
of financial position. Specific disclosures are also required for discontinued
operations and disposals of non-current assets.
IFRS 5 was issued in March 2004 and applies to annual periods beginning on
or after 1 January 2005.
Background
IFRS 5 achieves substantial convergence with the requirements of
US SFAS 144 Accounting for the Impairment or Disposal of Long-Lived
Assets with respect to the timing of the classification of operations as
discontinued operations and the presentation of such operations. With respect
to long-lived assets that are not being disposed of, the impairment
recognition and measurement standards in SFAS 144 are significantly
different from those in IAS 36 Impairment of Assets. However those
differences were not addressed in the short-term IASB-FASB convergence
project.
Key provisions of IFRS 5 relating to assets held for sale
Held-for-sale classification
In general, the following conditions must be met for an asset (or
'disposal group') to be classified as held for sale: [IFRS 5.6-8]
 management is committed to a plan to sell
 the asset is available for immediate sale
 an active programme to locate a buyer is initiated the sale is highly
probable, within 12 months of classification as held for sale (subject to
limited exceptions)
 the asset is being actively marketed for sale at a sales price reasonable in
relation to its fair value
 actions required to complete the plan indicate that it is unlikely that plan
will be significantly changed or withdrawn
The assets need to be disposed of through sale. Therefore, operations
that are expected to be wound down or abandoned would not meet the
definition (but may be classified as discontinued once abandoned). [IFRS
5.13]
An entity that is committed to a sale involving loss of control of a
subsidiary that qualifies for held-for-sale classification under IFRS 5
classifies all of the assets and liabilities of that subsidiary as held for sale,
even if the entity will retain a non-controlling interest in its former subsidiary
after the sale. [IFRS 5.8A]
Held for distribution to owners classification
The classification, presentation and measurement requirements of
IFRS 5 also apply to a non-current asset (or disposal group) that is classified
as held for distribution to owners. [IFRS 5.5A and IFRIC 17] The entity
must be committed to the distribution, the assets must be available for
immediate distribution and the distribution must be highly probable. [IFRS
5.12A]
Disposal group concept
A 'disposal group' is a group of assets, possibly with some associated
liabilities, which an entity intends to dispose of in a single transaction. The
measurement basis required for non-current assets classified as held for sale
is applied to the group as a whole, and any resulting impairment loss reduces
the carrying amount of the non-current assets in the disposal group in the
order of allocation required by IAS 36. [IFRS 5.4]
Measurement
The following principles apply:
 At the time of classification as held for sale. Immediately before the
initial classification of the asset as held for sale, the carrying amount of
the asset will be measured in accordance with applicable IFRSs.
Resulting adjustments are also recognised in accordance with applicable
IFRSs. [IFRS 5.18]
 After classification as held for sale. Non-current assets or disposal
groups that are classified as held for sale are measured at the lower of
carrying amount and fair value less costs to sell (fair value less costs to
distribute in the case of assets classified as held for distribution to
owners). [IFRS 5.15-15A]
 Impairment.Impairment must be considered both at the time of
classification as held for sale and subsequently:
 Assets carried at fair value prior to initial classification. For such assets,
the requirement to deduct costs to sell from fair value may result in an
immediate charge to profit or loss.
 Subsequent increases in fair value. A gain for any subsequent increase in
fair value less costs to sell of an asset can be recognised in the profit or
loss to the extent that it is not in excess of the cumulative impairment
loss that has been recognised in accordance with IFRS 5 or previously in
accordance with IAS 36. [IFRS 5.21-22]
 No depreciation. Non-current assets or disposal groups that are classified
as held for sale are not depreciated. [IFRS 5.25]
Presentation
Assets classified as held for sale, and the assets and liabilities
included within a disposal group classified as held for sale, must be presented
separately on the face of the statement of financial position. [IFRS 5.38]
Disclosures
IFRS 5 requires the following disclosures about assets (or disposal
groups) that are held for sale: [IFRS 5.41]
 description of the non-current asset or disposal group description of facts
and circumstances of the sale (disposal) and the expected timing
 impairment losses and reversals, if any, and where in the statement of
comprehensive income they are recognised
 if applicable, the reportable segment in which the non-current asset (or
disposal group) is presented in accordance with IFRS 8 Operating
Segments
Disclosure in the statement of comprehensive income
The sum of the post-tax profit or loss of the discontinued operation
and the post-tax gain or loss recognised on the measurement to fair value less
cost to sell or fair value adjustments on the disposal of the assets (or disposal
group) is presented as a single amount on the face of the statement of
comprehensive income. If the entity presents profit or loss in a separate
statement, a section identified as relating to discontinued operations is
presented in that separate statement. [IFRS 5.33-33A].
Detailed disclosure of revenue, expenses, pre-tax profit or loss and
related income taxes is required either in the notes or in the statement of
comprehensive income in a section distinct from continuing operations.
[IFRS 5.33] Such detailed disclosures must cover both the current and all
prior periods presented in the financial statements. [IFRS 5.34]
Cash flow information
The net cash flows attributable to the operating, investing, and
financing activities of a discontinued operation is separately presented on the
face of the cash flow statement or disclosed in the notes. [IFRS 5.33]
Disclosures
The following additional disclosures are required:
 adjustments made in the current period to amounts disclosed as a
discontinued operation in prior periods must be separately disclosed
[IFRS 5.35]
 if an entity ceases to classify a component as held for sale, the results of
that component previously presented in discontinued operations must be
reclassified and included in income from continuing operations for all
periods presented [IFRS 5.36]
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. Information is based on
internal management reports, both in the identification of operating segments
and measurement of disclosed segment information.
IFRS 8 was issued in November 2006 and applies to annual periods
beginning on or after 1 January 2009
Scope
FRS 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]
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 [IFRS 8.22(aa)]
 information about the profit or loss for each reportable segment,
including certain specified revenues* and expenses* such as revenue
from external customers and from transactions with other segments,
interest revenue and expense, depreciation and amortisation, income tax
expense or income and material non-cash items [IFRS 8.21(b) and 23]
 a measure of total assets* and total liabilities* for each reportable
segment, and the amount of investments in associates and joint ventures
 and the amounts of additions to certain non-current assets ('capital
expenditure') [IFRS 8.23-24]
 an explanation of the measurements of segment profit or loss, segment
assets and segment liabilities, including certain minimum disclosures,
e.g. how transactions between segments are measured, the nature of
measurement differences between segment information and other
information included in the financial statements, and asymmetrical
allocations to reportable segments [IFRS 8.27]
 reconciliations of the totals of segment revenues, reported segment profit
or loss, segment assets*, segment liabilities* and other material items to
corresponding items in the entity's financial statements [IFRS 8.21(b)
and 28]
 some entity-wide disclosures that are required even when an entity has
only one reportable segment, including information about each product
and service or groups of products and services [IFRS 8.32]
 analyses of revenues and certain non-current assets by geographical area
– with an expanded requirement to disclose revenues/assets by individual
foreign country (if material), irrespective of the identification of
operating segments [IFRS 8.33]
 information about transactions with major customers [IFRS 8.34]
PAS 1
Current and non-current classification
An entity must normally present a classified statement of financial
position, separating current and non-current assets and liabilities, unless
presentation based on liquidity provides information that is reliable. [PAS
1.60] In either case, if an asset (liability) category combines amounts that
will be received (settled) after 12 months with assets (liabilities) that will be
received (settled) within 12 months, note disclosure is required that separates
the longer-term amounts from the 12-month amounts. [PAS 1.61]
 Current assets are assets that are: [PAS 1.66]
 expected to be realised in the entity's normal operating cycle
 held primarily for the purpose of trading
 expected to be realised within 12 months after the reporting
period
 cash and cash equivalents (unless restricted).
 All other assets are non-current. [PAS 1.66]
Current liabilities are those: [PAS 1.69]
 expected to be settled within the entity's normal operating cycle 
 held for purpose of trading 
 due to be settled within 12 months 
 for which the entity does not have an unconditional right to defer
settlement beyond 12 months (settlement by the issue of equity
instruments does not impact classification).
Other liabilities
When a long-term debt is expected to be refinanced under an existing
loan facility, and the entity has the discretion to do so, the debt is classified
as non-current, even if the liability would otherwise be due within 12
months. [PAS 1.73]
If a liability has become payable on demand because an entity has
breached an undertaking under a long-term loan agreement on or before the
reporting date, the liability is current, even if the lender has agreed, after the
reporting date and before the authorisation of the financial statements for
issue, not to demand payment as a consequence of the breach. [PAS 1.74]
However, the liability is classified as non-current if the lender agreed by the
reporting date to provide a period of grace ending at least 12 months after the
end of the reporting period, within which the entity can rectify the breach and
during which the lender cannot demand immediate repayment. [PAS 1.75]
Format of statement
PAS 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.
The long-term financing approach used in UK and elsewhere – fixed assets +
current assets - short term payables = long-term debt plus equity – is also
acceptable.
Share capital and reserves
Regarding issued share capital and reserves, the following
disclosures are required: [PAS 1.79]
 numbers of shares authorised, issued and fully paid, and issued but not
fully paid  comprehensive income.
 par value (or that shares do not have a par value) 
 a reconciliation of the number of shares outstanding at the beginning and
the end of the period 
 description of rights, preferences, and restrictions 
 treasury shares, including shares held by subsidiaries and associates 
 shares reserved for issuance under options and contracts 
 a description of the nature and purpose of each reserve within equity.
Additional disclosures are required in respect of entities without
share capital and where an entity has reclassified puttable financial
instruments.  [PAS 1.80-80A]
Statement of profit or loss and other comprehensive income
Concepts of profit or loss and comprehensive income
Profit or loss is defined as "the total of income less expenses, excluding the
components of other comprehensive income".  Other comprehensive income
is defined as comprising "items of income and expense (including
reclassification adjustments) that are not recognised in profit or loss as
required or permitted by other IFRSs".  Total comprehensive income is
defined as "the change in equity during a period resulting from transactions
and other events, other than those changes resulting from transactions with
owners in their capacity as owners". [PAS 1.7]
COMPREHENSIVE INCOME FOR THE PERIOD = 
PROFITOR LOSS + OTHER COMPREHENSIVE INCOME
All items of income and expense recognized in a period must be
included in profit or loss unless a Standard or an Interpretation requires
otherwise. [IAS 1.88] Some IFRSs require or permit that some components
to be excluded from profit or loss and instead to be included in other
PAS 12: Income Taxes
Overview
PAS 12 Income Taxes implements a so-called 'comprehensive
balance sheet method' of accounting for income taxes which recognizes both
the current tax consequences of transactions and events and the future tax
consequences of the future recovery or settlement of the carrying amount of
an entity's assets and liabilities. Differences between the carrying amount and
tax base of assets and liabilities, and carried forward tax losses and credits,
are recognized, with limited exceptions, as deferred tax liabilities or deferred
tax assets, with the latter also being subject to a 'probable profits' test.
Objective of PAS 12
The objective of PAS 12 (1996) is to prescribe the accounting
treatment for income taxes.
In meeting this objective, PAS 12 notes the following: Current tax
 It is inherent in the recognition of an asset or liability that that asset Current tax for the current and prior periods is recognized as a liability to the
or liability will be recovered or settled, and this recovery or extent that it has not yet been settled, and as an asset to the extent that the
settlement may give rise to future tax consequences which should be amounts already paid exceeds the amount due. [PAS 12.12] The benefit of a
recognized at the same time as the asset or liability  tax loss which can be carried back to recover current tax of a prior period is
 An entity should account for the tax consequences of transactions recognized as an asset. [PAS 12.13]
and other events in the same way it accounts for the transactions or Current tax assets and liabilities are measured at the amount expected to be
other events themselves. paid to (recovered from) taxation authorities, using the rates/laws that have
Key definitions been enacted or substantively enacted by the balance sheet date. [PAS 12.46]
[IAS 12.5]
Tax base- The tax base of an asset or liability is the amount attributed to that Calculation of deferred taxes
asset or liability for tax purposes Formulae
Temporary differences- Differences between the carrying amount of an Deferred tax assets and deferred tax liabilities can be calculated using the
asset or liability in the statement of financial position and its tax bases following formulae:
Taxable temporary differences- Temporary differences that will result in Temporary difference = Carrying amount -
taxable amounts in determining taxable profit (tax loss) of future periods Tax base
when the carrying amount of the asset or liability is recovered or settled Deferred tax asset or liability = Temporary difference x
Deductible temporary differences- Temporary differences that will result Tax rate
in amounts that are deductible in determining taxable profit (tax loss) of The following formula can be used in the calculation of deferred taxes
future periods when the carrying amount of the asset or liability is recovered arising from unused tax losses or unused tax credits:
or settled Deferred tax asset = Unused tax loss or unused tax
Deferred tax liabilities- The amounts of income taxes payable in future credits x Tax rate
periods in respect of taxable temporary differences Tax bases
Deferred tax assets- The amounts of income taxes recoverable in future The tax base of an item is crucial in determining the amount of any
periods in respect of: temporary difference, and effectively represents the amount at which the
 deductible temporary differences asset or liability would be recorded in a tax-based balance sheet. PAS 12
 the carryforward of unused tax losses, and provides the following guidance on determining tax bases:
 the carryforward of unused tax credits
  Assets. The tax base of an asset is the amount that will be deductible  Property, plant and equipment. The tax base of property, plant and
against taxable economic benefits from recovering the carrying equipment that is depreciable for tax purposes that is used in the
amount of the asset. Where recovery of an asset will have no tax entity's operations is the unclaimed tax depreciation permitted as
consequences, the tax base is equal to the carrying amount. [PAS deduction in future periods 
12.7]   Receivables. If receiving payment of the receivable has no tax
 Revenue received in advance. The tax base of the recognized consequences, its tax base is equal to its carrying amount 
liability is its carrying amount, less revenue that will not be taxable  Goodwill. If goodwill is not recognized for tax purposes, its tax base
in future periods [PAS 12.8]  is nil (no deductions are available) 
 Other liabilities. The tax base of a liability is its carrying amount,  Revenue in advance. If the revenue is taxed on receipt but deferred
less any amount that will be deductible for tax purposes in respect of for accounting purposes, the tax base of the liability is equal to its
that liability in future periods [PAS 12.8]  carrying amount (as there are no future taxable amounts).
 Unrecognized items. If items have a tax base but are not recognized Conversely, if the revenue is recognized for tax purposes when the
in the statement of financial position, the carrying amount is nil goods or services are received, the tax base will be equal to nil 
[PAS 12.9]   Loans. If there are no tax consequences from repayment of the loan,
 Tax bases not immediately apparent. If the tax base of an item is the tax base of the loan is equal to its carrying amount. If the
not immediately apparent, the tax base should effectively be repayment has tax consequences (e.g. taxable amounts or deductions
determined in such as manner to ensure the future tax consequences on repayments of foreign currency loans recognized for tax purposes
of recovery or settlement of the item is recognized as a deferred tax at the exchange rate on the date the loan was drawn down), the tax
amount [PAS 12.10]  consequence of repayment at carrying amount is adjusted against the
 Consolidated financial statements. In consolidated financial carrying amount to determine the tax base (which in the case of the
statements, the carrying amounts in the consolidated financial aforementioned foreign currency loan would result in the tax base of
statements are used, and the tax bases determined by reference to any the loan being determined by reference to the exchange rate on the
consolidated tax return (or otherwise from the tax returns of each draw down date).
entity in the group). [PAS 12.11] Recognition and measurement of deferred taxes
Examples Recognition of deferred tax liabilities
The determination of the tax base will depend on the applicable tax laws The general principle in IAS 12 is that a deferred tax liability is
and the entity's expectations as to recovery and settlement of its assets and recognized for all taxable temporary differences. There are three exceptions
liabilities. The following are some basic examples: to the requirement to recognize a deferred tax liability, as follows:
  liabilities arising from initial recognition of goodwill [PAS 12.15(a)]  all of that deferred tax asset to be utilized. Any such reduction is
 liabilities arising from the initial recognition of an asset/liability
other than in a business combination which, at the time of the
transaction, does not affect either the accounting or the taxable profit
[PAS 12.15(b)]  carryforward or unused tax credit if, and only if, it is considered probable
 liabilities arising from temporary differences associated with
investments in subsidiaries, branches, and associates, and interests in
joint arrangements, but only to the extent that the entity is able to
control the timing of the reversal of the differences and it is probable
that the reversal will not occur in the foreseeable future. [PAS 12.39]
Recognition of deferred tax assets
A deferred tax asset is recognized for deductible temporary
differences, unused tax losses and unused tax credits to the extent that it is
probable that taxable profit will be available against which the deductible
temporary differences can be utilized, unless the deferred tax asset arises
from: [PAS 12.24]
 the initial recognition of an asset or liability other than in a business
combination which, at the time of the transaction, does not affect
accounting profit or taxable profit.
Deferred tax assets for deductible temporary differences arising from
investments in subsidiaries, branches and associates, and interests in joint
arrangements, are only recognized to the extent that it is probable that the
temporary difference will reverse in the foreseeable future and that taxable
profit will be available against which the temporary difference will be
utilized. [PAS 12.44]
The carrying amount of deferred tax assets are reviewed at the end of
each reporting period and reduced to the extent that it is no longer probable
that sufficient taxable profit will be available to allow the benefit of part or
subsequently reversed to the extent that it becomes probable that sufficient
taxable profit will be available. [PAS 12.37]
A deferred tax asset is recognized for an unused tax loss
that there will be sufficient future taxable profit against which the loss or
credit carryforward can be utilized. [PAS 12.34]
Measurement of deferred tax
Deferred tax assets and liabilities are 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/laws that have been enacted or substantively
enacted by the end of the reporting period. [PAS 12.47] The measurement
reflects the entity's expectations, at the end of the reporting period, as to the
manner in which the carrying amount of its assets and liabilities will be
recovered or settled. [PAS 12.51]
PAS 12 provides the following guidance on measuring deferred taxes:
 Where the tax rate or tax base is impacted by the manner in which
the entity recovers its assets or settles its liabilities (e.g. whether an
asset is sold or used), the measurement of deferred taxes is consistent
with the way in which an asset is recovered or liability settled [PAS
12.51A] 
 Where deferred taxes arise from revalued non-depreciable assets
(e.g. revalued land), deferred taxes reflect the tax consequences of
selling the asset [PAS 12.51B] 
 Deferred taxes arising from investment property measured at fair
value under PAS 40 Investment Property reflect the rebuttable
presumption that the investment property will be recovered through
sale [PAS 12.51C-51D] 
  If dividends are paid to shareholders, and this causes income taxes to
be payable at a higher or lower rate, or the entity pays additional
taxes or receives a refund, deferred taxes are measured using the tax
rate applicable to undistributed profits [PAS 12.52A]
Deferred tax assets and liabilities cannot be discounted. [IAS 12.53]
Recognition of tax amounts for the period
Amount of income tax to recognize
The following formula summarises the amount of tax to be recognised in an
accounting period:
Tax to recognise for the period = Current tax for the period +
Movement in deferred tax balances for the period
PAS 12 provides the following additional guidance on the recognition of
income tax for the period:
 Where it is difficult to determine the amount of current and deferred
tax relating to items recognized outside of profit or loss (e.g. where
there are graduated rates or tax), the amount of income tax
recognized outside of profit or loss is determined on a reasonable
pro-rata allocation, or using another more appropriate method [PAS
12.63]  current tax amounts on a net basis and the deferred tax amounts are levied by
 In the circumstances where the payment of dividends impacts the tax
rate or results in taxable amounts or refunds, the income tax
consequences of dividends are considered to be more directly linked
to past transactions or events and so are recognized in profit or loss
unless the past transactions or events were recognized outside of
profit or loss [PAS 12.52B] 
 The impact of business combinations on the recognition of pre-
combination deferred tax assets are not included in the determination
of goodwill as part of the business combination, but are separately
recognized [AS 12.68] 
 The recognition of acquired deferred tax benefits subsequent to a
business combination are treated as 'measurement period'
adjustments (see PFRS 3 Business Combinations) if they qualify for
that treatment, or otherwise are recognized in profit or loss [PAS
12.68] 
 Tax benefits of equity settled share based payment transactions that
exceed the tax effected cumulative remuneration expense are
considered to relate to an equity item and are recognized directly in
equity. [PAS 12.68C]
Presentation
Current tax assets and current tax liabilities can only be offset in the
statement of financial position if the entity has the legal right and the
intention to settle on a net basis. [PAS 12.71]
Deferred tax assets and deferred tax liabilities can only be offset in
the statement of financial position if the entity has the legal right to settle
the same taxing authority on the same entity or different entities that intend
to realize the asset and settle the liability at the same time. [PAS 12.74]
The amount of tax expense (or income) related to profit or loss is
required to be presented in the statement(s) of profit or loss and other
comprehensive income. [PAS 12.77]
 The tax effects of items included in other comprehensive income can accounting profit or loss (this can be presented as a reconciliation of
either be shown net for each item, or the items can be shown before tax amounts of tax or a reconciliation of the rate of tax) 
effects with an aggregate amount of income tax for groups of items  changes in tax rates 
(allocated between items that will and will not be reclassified to profit or loss  amounts and other details of deductible temporary differences,
in subsequent periods). [PAS 1.91] unused tax losses, and unused tax credits 
Disclosure  temporary differences associated with investments in subsidiaries,
PAS 12.80 requires the following disclosures: branches and associates, and interests in joint arrangements 
 major components of tax expense (tax income) [PAS 12.79]  for each type of temporary difference and unused tax loss and credit,
Examples include: the amount of deferred tax assets or liabilities recognized in the
 current tax expense (income)  statement of financial position and the amount of deferred tax
 any adjustments of taxes of prior periods  income or expense recognized in profit or loss 
 amount of deferred tax expense (income) relating to the  tax relating to discontinued operations 
origination and reversal of temporary differences   tax consequences of dividends declared after the end of the reporting
 amount of deferred tax expense (income) relating to changes period 
in tax rates or the imposition of new taxes   information about the impacts of business combinations on an
 amount of the benefit arising from a previously acquirer's deferred tax assets 
unrecognized tax loss, tax credit or temporary difference of a  recognition of deferred tax assets of an acquires after the acquisition
prior period  date.
 write down, or reversal of a previous write down, of a Other required disclosures:
deferred tax asset   details of deferred tax assets [PAS 12.82] 
 amount of tax expense (income) relating to changes in  tax consequences of future dividend payments. [PAS 12.82A]
accounting policies and corrections of errors. In addition to the disclosures required by PAS 12, some disclosures
PAS 12.81 requires the following disclosures: relating to income taxes are required by PAS 1 Presentation of Financial
 aggregate current and deferred tax relating to items recognized Statements, as follows:
directly in equity   Disclosure on the face of the statement of financial position about
 tax relating to each component of other comprehensive income  current tax assets, current tax liabilities, deferred tax assets, and
 explanation of the relationship between tax expense (income) and the deferred tax liabilities [PAS 1.54(n) and (o)]
tax that would be expected by applying the current tax rate to
  Disclosure of tax expense (tax income) in the profit or loss section of  medical and life insurance benefits during employment
the statement of profit or loss and other comprehensive income (or  non-monetary benefits such as houses, cars, and free or subsidised
separate statement if presented). [PAS 1.82(d)] goods or services
 retirement benefits, including pensions and lump sum payments
 Post-employment medical and life insurance benefits
IAS 19 Employee Benefits
 long-service or sabbatical leave
Overview
 'jubilee' benefits
IAS 19 Employee Benefits (amended 2011) outlines the accounting
 deferred compensation programmes
requirements for employee benefits, including short-term benefits (e.g. wages
 termination benefits.
and salaries, annual leave), post-employment benefits such as retirement
Short-term employee benefits
benefits, other long-term benefits (e.g. long service leave) and termination
Short-term employee benefits are those expected to be settled wholly
benefits. The standard establishes the principle that the cost of providing
before twelve months after the end of the annual reporting period during
employee benefits should be recognised in the period in which the benefit is
which employee services are rendered, but do not include termination
earned by the employee, rather than when it is paid or payable, and outlines
benefits.[IAS 19(2011).8] Examples include wages, salaries, profit-sharing
how each category of employee benefits are measured, providing detailed
and bonuses and non-monetary benefits paid to current employees.
guidance in particular about post-employment benefits.
The undiscounted amount of the benefits expected to be paid in
IAS 19 (2011) was issued in 2011, supersedes IAS 19 Employee
respect of service rendered by employees in an accounting period is
Benefits (1998), and is applicable to annual periods beginning on or after 1
recognised in that period. [IAS 19(2011).11] The expected cost of short-term
January 2013.
compensated absences is recognised as the employees render service that
Objective of IAS 19 (2011)
increases their entitlement or, in the case of non-accumulating absences,
The objective of IAS 19 is to prescribe the accounting and disclosure
when the absences occur, and includes any additional amounts an entity
for employee benefits, requiring an entity to recognise a liability where an
expects to pay as a result of unused entitlements at the end of the period.
employee has provided service and an expense when the entity consumes the
[IAS 19(2011).13-16]
econzomic benefits of employee service. [IAS 19(2011).2]
Profit-sharing and bonus payments
Scope
An entity recognises the expected cost of profit-sharing and bonus
 IAS 19 applies to (among other kinds of employee benefits):
payments when, and only when, it has a legal or constructive obligation to
 wages and salaries
make such payments as a result of past events and a reliable estimate of the
 compensated absences (paid vacation and sick leave)
expected obligation can be made. [IAS 19.19]
 profit sharing and bonuses
Types of post-employment benefit plans
Post-employment benefit plans are informal or formal arrangements
where an entity provides post-employment benefits to one or more
employees, e.g. retirement benefits (pensions or lump sum payments), life
insurance and medical care.
The accounting treatment for a post-employment benefit plan
depends on the economic substance of the plan and results in the plan being
classified as either a defined contribution plan or a defined benefit plan
 Defined contribution plans. Under a defined contribution plan, the
entity pays fixed contributions into a fund but has no legal or
constructive obligation to make further payments if the fund does not
have sufficient assets to pay all of the employees' entitlements to
post-employment benefits. The entity's obligation is therefore
effectively limited to the amount it agrees to contribute to the fund
and effectively place actuarial and investment risk on the employee
 Defined benefit plans These are post-employment benefit plans other
than a defined contribution plans. These plans create an obligation on
the entity to provide agreed benefits to current and past employees
and effectively places actuarial and investment risk on the entity.
PAS 26: Accounting and Reporting by
Retirement Benefit Plans
Overview
IAS 26 Accounting and Reporting by Retirement Benefit Plans
outlines the requirements for the preparation of financial statements of
retirement benefit plans. It outlines the financial statements required and
discusses the measurement of various line items, particularly the actuarial
present value of promised retirement benefits for defined benefit plans.
IAS 26 was issued in January 1987 and applies to annual periods
beginning on or after 1 January 1988.
Objective of IAS 26
The objective of IAS 26 is to specify measurement and disclosure
principles for the reports of retirement benefit plans. All plans should include
in their reports a statement of changes in net assets available for benefits, a
summary of significant accounting policies and a description of the plan and
the effect of any changes in the plan during the period.
Key definitions
Retirement benefit plan: An arrangement by which an entity provides
benefits (annual income or lump sum) to employees after they terminate from
service. [IAS 26.8]
Defined contribution plan: A retirement benefit plan by which
benefits to employees are based on the amount of funds contributed to the
plan plus investment earnings thereon. [IAS 26.8]
Defined benefit plan: A retirement benefit plan by which employees
receive benefits based on a formula usually linked to employee earnings.
[IAS 26.8]
Defined contribution plans
The report of a defined contribution plan should contain a statement of net
assets available for benefits and a description of the funding policy. [IAS
26.13]
Defined benefit plans
The report of a defined benefit plan should contain either: [IAS 26.17]
 a statement that shows the net assets available for benefits, the
actuarial present value of promised retirement benefits
 (distinguishing between vested benefits and non-vested benefits) and  Other details about the plan [IAS 26.36]
the resulting excess or deficit; or  Summary of significant accounting policies [IAS 26.34(b)]
 a statement of net assets available for benefits, including either a  Description of the plan and of the effect of any changes in
note disclosing the actuarial present value of promised retirement the plan during the period [IAS 26.34(c)]
benefits (distinguishing between vested benefits and non-vested  Disclosures for defined benefit plans: [IAS 26.35(d) and (e)]
benefits) or a reference to this information in an accompanying  actuarial present value of promised benefit obligations
actuarial report.  description of actuarial assumptions
Disclosure  description of the method used to calculate the actuarial present
 Statement of net assets available for benefit, showing: [IAS 26.35(a)] value of promised benefit obligations
 assets at the end of the period PAS 32
 basis of valuation Financial liability: any liability that is:
 details of any single investment exceeding 5% of net assets or  a contractual obligation
5% of any category of investment  to deliver cash or another financial asset to another entity; or
 details of investment in the employer  to exchange financial assets or financial liabilities with
 liabilities other than the actuarial present value of plan benefits another entity under conditions that are potentially
 Statement of changes in net assets available for benefits, showing: unfavourable to the entity; or:
[IAS 26.35(b)]  a contract that will or may be settled in the entity's own equity
 employee contributions instruments and is
 investment income  a non-derivative for which the entity is or may be obliged to
 other income deliver a variable number of the entity's own equity
 benefits paid instruments or
 administrative expenses  a derivative that will or may be settled other than by the
 other expenses exchange of a fixed amount of cash or another financial asset
 income taxes for a fixed number of the entity's own equity instruments.
 profit or loss on disposal of investments For this purpose the entity's own equity instruments do not
 changes in fair value of investments include: instruments that are themselves contracts for the
 transfers to/from other plans future receipt or delivery of the entity's own equity
 Description of funding policy [IAS 26.35(c)] instruments; puttable instruments classified as equity or
 certain liabilities arising on liquidation classified by IAS 32
as equity instruments
Equity instrument: Any contract that evidences a residual interest in the
assets of an entity after deducting all of its liabilities.
Fair value: the amount for which an asset could be exchanged, or a liability
settled, between knowledgeable, willing parties in an arm's length
transaction.
The definition of financial instrument used in IAS 32 is the same as that in
IAS 39.
Puttable instrument: a financial instrument that gives the holder the right to
put the instrument back to the issuer for cash or another financial asset or is
automatically put back to the issuer on occurrence of an uncertain future
event or the death or retirement of the instrument holder.
Classification as liability or equity
The fundamental principle of IAS 32 is that a financial instrument
should be classified as either a financial liability or an equity instrument
according to the substance of the contract, not its legal form, and the
definitions of financial liability and equity instrument. Two exceptions from
this principle are certain puttable instruments meeting specific criteria and
certain obligations arising on liquidation (see below). The entity must make
the decision at the time the instrument is initially recognised. The
classification is not subsequently changed based on changed circumstances.
[IAS 32.15]
A financial instrument is an equity instrument only if (a) the instrument
includes no contractual obligation to deliver cash or another financial asset to
another entity and (b) if the instrument will or may be settled in the issuer's
own equity instruments, it is either:
 a non-derivative that includes no contractual obligation for the issuer
to deliver a variable number of its own equity instruments; or
 a derivative that will be settled only by the issuer exchanging a fixed
amount of cash or another financial asset for a fixed number of its
own equity instruments. [IAS 32.16]
Contingent settlement provisions
If, as a result of contingent settlement provisions, the issuer does not have an
unconditional right to avoid settlement by delivery of cash or other financial
instrument (or otherwise to settle in a way that it would be a financial
liability) the instrument is a financial liability of the issuer, unless:
 the contingent settlement provision is not genuine or
 the issuer can only be required to settle the obligation in the event of
the issuer's liquidation or
 the instrument has all the features and meets the conditions of IAS
32.16A and 16B for puttable instruments [IAS 32.25]
Puttable instruments and obligations arising on liquidation
In February 2008, the IASB amended IAS 32 and IAS 1 Presentation
of Financial Statements with respect to the balance sheet classification of
puttable financial instruments and obligations arising only on liquidation. As
a result of the amendments, some financial instruments that currently meet
the definition of a financial liability will be classified as equity because they
represent the residual interest in the net assets of the entity. [IAS 32.16A-D]
Classifications of rights issues
In October 2009, the IASB issued an amendment to IAS 32 on the
classification of rights issues. For rights issues offered for a fixed amount of
foreign currency current practice appears to require such issues to be
accounted for as derivative liabilities. The amendment states that if such
rights are issued pro rata to an entity's all existing shareholders in the same
class for a fixed amount of currency, they should be classified as equity
regardless of the currency in which the exercise price is denominated.
Compound financial instruments
Some financial instruments – sometimes called compound instruments –
have both a liability and an equity component from the issuer's perspective.
In that case, IAS 32 requires that the component parts be accounted for and
presented separately according to their substance based on the definitions of
liability and equity. The split is made at issuance and not revised for
subsequent changes in market interest rates, share prices, or other event that
changes the likelihood that the conversion option will be exercised. [IAS
32.29-30]
Treasury shares
The cost of an entity's own equity instruments that it has reacquired ('treasury
shares') is deducted from equity. Gain or loss is not recognised on the
purchase, sale, issue, or cancellation of treasury shares. Treasury shares may
be acquired and held by the entity or by other members of the consolidated
group. Consideration paid or received is recognised directly in equity. [IAS
32.33]
Offsetting
IAS 32 also prescribes rules for the offsetting of financial assets and
financial liabilities. It specifies that a financial asset and a financial liability
should be offset and the net amount reported when, and only when, an entity:
[IAS 32.42]
 has a legally enforceable right to set off the amounts; and
 intends either to settle on a net basis, or to realise the asset and settle
the liability simultaneously. [IAS 32.48]
Costs of issuing or reacquiring equity instruments
Costs of issuing or reacquiring equity instruments are accounted for as a
deduction from equity, net of any related income tax benefit. [IAS 32.35]
Disclosures
Financial instruments disclosures are in IFRS 7 Financial
Instruments: Disclosures, and no longer in IAS 32.
The disclosures relating to treasury shares are in IAS 1 Presentation of
Financial Statements and IAS 24 Related Parties for share repurchases from
related parties. [IAS 32.34 and 39]
PAS 37: Provisions, Contingent Liabilities
and Contingent Assets
Overview
IAS 37 outlines the accounting for provisions (liabilities of uncertain
timing or amount), together with contingent assets (possible assets) and
contingent liabilities (possible obligations and present obligations that are not
probable or not reliably measurable). Provisions are measured at the best
estimate (including risks and uncertainties) of the expenditure required to
settle the present obligation, and reflects the present value of expenditures
required to settle the obligation where the time value of money is material.
IAS 37 was issued in September 1998 and is operative for periods beginning
on or after 1 July 1999.
Objective
The objective of IAS 37 is to ensure that appropriate recognition
criteria and measurement bases are applied to provisions, contingent
liabilities and contingent assets and that sufficient information is disclosed in
the notes to the financial statements to enable users to understand their
nature, timing and amount. The key principle established by the Standard is
that a provision should be recognised only when there is a liability i.e. a
present obligation resulting from past events. The Standard thus aims to
ensure that only genuine obligations are dealt with in the financial statements
– planned future expenditure, even where authorised by the board of
directors or equivalent governing body, is excluded from recognition.
Scope
 IAS 37 excludes obligations and contingencies arising from: [IAS
37.1-6]
 financial instruments that are in the scope of IAS 39 Financial
Instruments: Recognition and Measurement (or IFRS 9 Financial
Instruments)
 non-onerous executory contracts insurance contracts (see IFRS 4
Insurance Contracts), but IAS 37 does apply to other provisions,
contingent liabilities and contingent assets of an insurer
 items covered by another IFRS. For example, IAS 11 Construction
Contracts applies to obligations arising under such contracts; IAS 12
Income Taxes applies to obligations for current or deferred income
taxes; IAS 17 Leases applies to lease obligations; and IAS 19
Employee Benefits applies to pension and other employee benefit
obligations.
Key definitions [IAS 37.10]
Provision: a liability of uncertain timing or amount.
Liability:
 present obligation as a result of past events
 settlement is expected to result in an outflow of resources (payment)
Contingent liability:
 a possible obligation depending on whether some uncertain future
event occurs, or
 a present obligation but payment is not probable or the amount
cannot be measured reliably
Contingent asset:
 a possible asset that arises from past events, and
 whose existence will be confirmed only by the occurrence or
non-occurrence of one or more uncertain future events not
wholly within the control of the entity.
Recognition of a provision
An entity must recognise a provision if, and only if: [IAS 37.14]
 a present obligation (legal or constructive) has arisen as a result of a
past event (the obligating event),
 payment is probable ('more likely than not'), and
 the amount can be estimated reliably.
What is the debit entry?
When a provision (liability) is recognised, the debit entry for a provision is
not always an expense. Sometimes the provision may form part of the cost of
the asset. Examples: included in the cost of inventories, or an obligation for
environmental cleanup when a new mine is opened or an offshore oil rig is
installed. [IAS 37.8]
Use of provisions
Provisions should only be used for the purpose for which they were
originally recognised. They should be reviewed at each balance sheet date
and adjusted to reflect the current best estimate. If it is no longer probable
that an outflow of resources will be required to settle the obligation, the
provision should be reversed. [IAS 37.61]
Contingent liabilities
Since there is common ground as regards liabilities that are uncertain, IAS 37
also deals with contingencies. It requires that entities should not recognise
contingent liabilities – but should disclose them, unless the possibility of an
outflow of economic resources is remote. [IAS 37.86]
Contingent assets
Contingent assets should not be recognised – but should be disclosed where
an inflow of economic benefits is probable. When the realisation of income is
virtually certain, then the related asset is not a contingent asset and its
recognition is appropriate. [IAS 37.31-35]
Disclosures
 Reconciliation for each class of provision: [IAS 37.84
 opening balance
 additions
 used (amounts charged against the provision)
 unused amounts reversed
 unwinding of the discount, or changes in discount rate
 closing ba
PFRS 2
Overview
IFRS 2 Share-based Payment requires an entity to recognise share-based
payment transactions (such as granted shares, share options, or share
appreciation rights) in its financial statements, including transactions with
employees or other parties to be settled in cash, other assets, or equity
instruments of the entity. Specific requirements are included for equity-
settled and cash-settled share-based payment transactions, as well as those
where the entity or supplier has a choice of cash or equity instruments.
IFRS 2 was originally issued in February 2004 and first applied to annual
periods beginning on or after 1 January 2005.
Summary of IFRS 2
In June 2007, the Deloitte IFRS Global Office published an updated version
of our IAS Plus Guide to IFRS 2 Share-based Payment 2007 (PDF 748k, 128
pages). The guide not only explains the detailed provisions of IFRS 2 but
also deals with its application in many practical situations. Because of the
complexity and variety of share-based payment awards in practice, it is not
always possible to be definitive as to what is the 'right' answer. However, in
this guide Deloitte shares with you our approach to finding solutions that we
believe are in accordance with the objective of the Standard.
Definition of share-based payment
A share-based payment is a transaction in which the entity receives goods or
services either as consideration for its equity instruments or by incurring
liabilities for amounts based on the price of the entity's shares or other equity
instruments of the entity. The accounting requirements for the share-based
payment depend on how the transaction will be settled, that is, by the
issuance of (a) equity, (b) cash, or (c) equity or cash.
Scope
The concept of share-based payments is broader than employee share
options. IFRS 2 encompasses the issuance of shares, or rights to shares, in
return for services and goods. Examples of items included in the scope of
IFRS 2 are share appreciation rights, employee share purchase plans,
employee share ownership plans, share option plans and plans where the
issuance of shares (or rights to shares) may depend on market or non-market
related conditions.
IFRS 2 applies to all entities. There is no exemption for private or smaller
entities. Furthermore, subsidiaries using their parent's or fellow subsidiary's
equity as consideration for goods or services are within the scope of the
Standard.
There are two exemptions to the general scope principle:
 First, the issuance of shares in a business combination should be
accounted for under IFRS 3 Business Combinations. However, care
should be taken to distinguish share-based payments related to the
acquisition from those related to continuing employee services
Second, IFRS 2 does not address share-based payments within the
scope of paragraphs 8-10 of IAS 32 Financial Instruments:
Presentation, or paragraphs 5-7 of IAS 39 Financial Instruments:
Recognition and Measurement. Therefore, IAS 32 and IAS 39 should
be applied for commodity-based derivative contracts that may be
settled in shares or rights to shares.
IFRS 2 does not apply to share-based payment transactions other than for the
acquisition of goods and services. Share dividends, the purchase of treasury
shares, and the issuance of additional shares are therefore outside its scope.
Recognition and measurement
The issuance of shares or rights to shares requires an increase in a component
of equity. IFRS 2 requires the offsetting debit entry to be expensed when the
payment for goods or services does not represent an asset. The expense
should be recognised as the goods or services are consumed. For example,
the issuance of shares or rights to shares to purchase inventory would be
presented as an increase in inventory and would be expensed only once the
inventory is sold or impaired.
The issuance of fully vested shares, or rights to shares, is presumed to relate
to past service, requiring the full amount of the grant-date fair value to be
expensed immediately. The issuance of shares to employees with, say, a
three-year vesting period is considered to relate to services over the vesting
period. Therefore, the fair value of the share-based payment, determined at
the grant date, should be expensed over the vesting period.
As a general principle, the total expense related to equity-settled share-based
payments will equal the multiple of the total instruments that vest and the
grant-date fair value of those instruments. In short, there is truing up to
reflect what happens during the vesting period. However, if the equity-settled
share-based payment has a market related performance condition, the
expense would still be recognised if all other vesting conditions are met. The
following example provides an illustration of a typical equity-settled share-
based payment.
Disclosure
Required disclosures include:
 the nature and extent of share-based payment arrangements that
existed during the period
 how the fair value of the goods or services received, or the fair value
of the equity instruments granted, during the period was determined
the effect of share-based payment transactions on the entity's profit
or loss for the period and on its financial position.
PFRS 7
IFRS 7 — Financial Instruments: Disclosures
Overview
IFRS 7 Financial Instruments: Disclosures requires disclosure of information
about the significance of financial instruments to an entity, and the nature
and extent of risks arising from those financial instruments, both in
qualitative and quantitative terms. Specific disclosures are required in
relation to transferred financial assets and a number of other matters.
IFRS 7 was originally issued in August 2005 and applies to annual periods
beginning on or after 1 January 2007.
Summary of IFRS 7
Overview of IFRS 7
 adds certain new disclosures about financial instruments to those
previously required by IAS 32 Financial Instruments: Disclosure and
Presentation (as it was then cited)
 replaces the disclosures previously required by IAS 30 Disclosures
in the Financial Statements of Banks and Similar Financial
Institutions
 puts all of those financial instruments disclosures together in a new
standard on Financial Instruments: Disclosures. The remaining parts
of IAS 32 deal only with financial instruments presentation matters.
Disclosure requirements of IFRS 7
IFRS requires certain disclosures to be presented by category of instrument
based on the IAS 39 measurement categories. Certain other disclosures are
required by class of financial instrument. For those disclosures an entity must
group its financial instruments into classes of similar instruments as
appropriate to the nature of the information presented. [IFRS 7.6]
The two main categories of disclosures required by IFRS 7 are:
 information about the significance of financial instruments.
 information about the nature and extent of risks arising from
financial instruments.
PFRS 9
Subsequent measurement of financial liabilities
IFRS 9 doesn't change the basic accounting model for financial liabilities
under IAS 39. Two measurement categories continue to exist: FVTPL and
amortised cost. Financial liabilities held for trading are measured at FVTPL,
and all other financial liabilities are measured at amortised cost unless the
fair value option is applied. [IFRS 9, paragraph 4.2.1]
Fair value option
IFRS 9 contains an option to designate a financial liability as measured at
FVTPL if [IFRS 9, paragraph 4.2.2]:
 doing so eliminates or significantly reduces a measurement or
recognition inconsistency (sometimes referred to as an 'accounting
mismatch') that would otherwise arise from measuring assets or
liabilities or recognising the gains and losses on them on different
bases, or
 the liability is part or a group of financial liabilities or financial
assets and financial liabilities that is managed and its performance is
evaluated on a fair value basis, in accordance with a documented risk
management or investment strategy, and information about the group
is provided internally on that basis to the entity's key management
personnel.
Derecognition of financial liabilities
A financial liability should be removed from the balance sheet when, and
only when, it is extinguished, that is, when the obligation specified in the
contract is either discharged or cancelled or expires. [IFRS 9, paragraph
3.3.1] Where there has been an exchange between an existing borrower and
lender of debt instruments with substantially different terms, or there has
been a substantial modification of the terms of an existing financial
liability, this transaction is accounted for as an extinguishment of the original
financial liability and the recognition of a new financial liability. A gain or
loss from extinguishment of the original financial liability is recognised in
profit or loss. [IFRS 9, paragraphs 3.3.2-3.3.3]
Derivatives
All derivatives in scope of IFRS 9, including those linked to unquoted equity
investments, are measured at fair value. Value changes are recognised in
profit or loss unless the entity has elected to apply hedge accounting by
designating the derivative as a hedging instrument in an eligible hedging
relationship.
Embedded derivatives
An embedded derivative is a component of a hybrid contract that also
includes a non-derivative host, with the effect that some of the cash flows of
the combined instrument vary in a way similar to a stand-alone derivative. A
derivative that is attached to a financial instrument but is contractually
transferable independently of that instrument, or has a different counterparty,
is not an embedded derivative, but a separate financial instrument. [IFRS 9,
paragraph 4.3.1]
The embedded derivative concept that existed in IAS 39 has been included in
IFRS 9 to apply only to hosts that are not financial assets within the scope of
the Standard. Consequently, embedded derivatives that under IAS 39 would
have been separately accounted for at FVTPL because they were not closely
related to the host financial asset will no longer be separated. Instead, the
contractual cash flows of the financial asset are assessed in their entirety, and
the asset as a whole is measured at FVTPL if the contractual cash flow
characteristics test is not passed (see above).
The embedded derivative guidance that existed in IAS 39 is included in IFRS
9 to help preparers identify when an embedded derivative is closely related to
a financial liability host contract or a host contract not within the scope of the
Standard (e.g. leasing contracts, insurance contracts, contracts for the
purchase or sale of a non-financial items).
Reclassification
For financial assets, reclassification is required between FVTPL, FVTOCI
and amortised cost, if and only if the entity's business model objective for its
financial assets changes so its previous model assessment would no longer
apply. [IFRS 9, paragraph 4.4.1]
If reclassification is appropriate, it must be done prospectively from the
reclassification date which is defined as the first day of the first reporting
period following the change in business model. An entity does not restate any
previously recognised gains, losses, or interest.
IFRS 9 does not allow reclassification:
 for equity investments measured at FVTOCI, or
 where the fair value option has been exercised in any circumstance
for a financial assets or financial liability.
IFRS 16- LEASE
Overview
IFRS 16 specifies how an IFRS reporter will recognise, measure, present and
disclose leases. The standard provides a single lessee accounting model,
requiring lessees to recognise assets and liabilities for all leases unless the
lease term is 12 months or less or the underlying asset has a low value.
Lessors continue to classify leases as operating or finance, with IFRS 16’s
approach to lessor accounting substantially unchanged from its predecessor,
IAS 17.
IFRS 16 was issued in January 2016 and applies to annual reporting periods
beginning on or after 1 January 2019.
Summary of IFRS 16
Objective
IFRS 16 establishes principles for the recognition, measurement, presentation
and disclosure of leases, with the objective of ensuring that lessees and
lessors provide relevant information that faithfully represents those
transactions. [IFRS 16:1]
Scope
IFRS 16 Leases applies to all leases, including subleases, except for: [IFRS
16:3]
 leases to explore for or use minerals, oil, natural gas and similar non-
regenerative resources;
 leases of biological assets held by a lessee (see IAS 41 Agriculture);
 service concession arrangements (see IFRIC 12 Service Concession
Arrangements);
 licences of intellectual property granted by a lessor (see IFRS 15
Revenue from Contracts with Customers); and
 rights held by a lessee under licensing agreements for items such as
films, videos, plays, manuscripts, patents and copyrights within the
scope of IAS 38 Intangible Assets
A lessee can elect to apply IFRS 16 to leases of intangible assets, other than
those items listed above. [IFRS 16:4]
Recognition exemptions
Instead of applying the recognition requirements of IFRS 16 described
below, a lessee may elect to account for lease payments as an expense on a
straight-line basis over the lease term or another systematic basis for the
following two types of leases:
i) leases with a lease term of 12 months or less and containing no purchase
options – this election is made by class of underlying asset; and
ii) leases where the underlying asset has a low value when new (such as
personal computers or small items of office furniture) – this election can be
made on a lease-by-lease basis.
Key definitions
Interest rate implicit in the lease
The interest rate that yields a present value of (a) the lease payments and (b)
the unguaranteed residual value equal to the sum of (i) the fair value of the
underlying asset and (ii) any initial direct costs of the lessor.
Lease term
The non-cancellable period for which a lessee has the right to use an
underlying asset, plus:
a) periods covered by an extension option if exercise of that option by the
lessee is reasonably certain; and
b) periods covered by a termination option if the lessee is reasonably certain
not to exercise that option
Lessee’s incremental borrowing rate
The rate of interest that a lessee would have to pay to borrow over a similar
term, and with a similar security, the funds necessary to obtain an asset of a
similar value to the right-of-use asset in a similar economic environment.
Disclosure
The objective of IFRS 16’s disclosures is for information to be provided in
the notes that, together with information provided in the statement of
financial position, statement of profit or loss and statement of cash flows,
gives a basis for users to assess the effect that leases have. Paragraphs 52 to
60 of IFRS 16 set out detailed requirements for lessees to meet this objective
and paragraphs 90 to 97 set out the detailed requirements for lessors. [IFRS
16:51, 89]
Effective date and transition
An entity applies IFRS 16 for annual reporting periods beginning on or after
1 January 2019. Earlier application is permitted if IFRS 15 Revenue from
Contracts with Customers has also been applied. [IFRS 16:C1]
As a practical expedient, an entity is not required to reassess whether a
contract is, or contains, a lease at the date of initial application. [IFRS 16:C3]
A lessee shall either apply IFRS 16 with full retrospective effect or
alternatively not restate comparative information but recognise the
cumulative effect of initially applying IFRS 16 as an adjustment to opening
equity at the date of initial application. [IFRS 16:C5, C7]