International Accounting Standards IAS 1

Presentation of Financial Statements:

Definition:

General purpose financial statements (referred to as ‘financial statements’) are those

intended to meet the needs of users who are not in a position to require an entity to
prepare reports tailored to their particular information needs.

It deals with the disclosure of significant accounting policies followed in the

preparation of financial statements. The areas in which accounting policies need
disclosures include: method of depreciation, depletion and amortization, valuation of
inventories, calculation of fixed assets, treatment of contingent liabilities, etc.

Objectives:

This Standard prescribes the basis for presentation of general purpose financial
statements to ensure comparability both with the entity’s financial statements of
previous periods and with the financial statements of other entities. It sets out overall
requirements for the presentation of financial statements, guidelines for their structure
and minimum requirements for their content.

Scope:

1. An entity shall apply this Standard in preparing and presenting general purpose
financial statements in accordance with International Financial Reporting Standards
(IFRSs).

2. Other IFRSs set out the recognition, measurement and disclosure requirements for
specific transactions and other events.

3. ThisStandard uses terminology that is suitable for profit-oriented entities, including

public sector business entities. If entities with not-for-profit activities in the private
sector or the public sector apply this Standard, they may need to amend the
descriptions used for particular line items in the financial statements and for the
financial statements themselves.

Purpose of financial statements:

The purpose of this standard is to promote a better understanding of financial

statement by establishing the disclosure of significant accounting policies in the
financial statements and the manner of doing so.

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Complete set of financial statements

A complete set of financial statements comprises:

(a) a statement of financial position as at the end of the period;
(b) a statement of comprehensive income for the period;
(c) a statement of changes in equity for the period;
(d) a statement of cash flows for the period;
(e) notes, comprising a summary of significant accounting policies and other
explanatory information; and
(f) a statement of financial position as at the beginning of the earliest comparative
period 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.

International Accounting Standards IAS 2

Inventories:

Definition:

The following terms are used in this Standard with the meanings specified:
Inventories are assets:
(a) held for sale in the ordinary course of business;
(b) in the process of production for such sale; or
(c) in the form of materials or supplies to be consumed in the production process or in
the rendering of services.

Net realisable value is the estimated selling price in the ordinary course of business
less the estimated costs of completion and the estimated costs necessary to make the
sale.

Measurement of inventories: Inventories shall be measured at the lower of cost

and net realisable value.

Cost of inventories: The cost of inventories shall comprise all costs of purchase,
costs of conversion and other costs incurred in bringing the inventories to their
present location and condition.

Cost formulas: The cost of inventories of items that are not ordinarily
interchangeable and goods or services produced and segregated for specific projects
shall be assigned by using specific identification of their individual costs.

The cost of inventories, other than those dealt with in paragraph 23, shall be assigned
by using the first-in, first-out (FIFO) or weighted average cost formula.The formula
used should reflect the fairest possible approximation to the cost incurred in bringing
the items of inventory to their present location and condition.

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International Accounting Standards IAS 3
Consolidation Of Financial Statement

IAS 27 Consolidated Financial Statements and Accounting for Investments in

Subsidiaries was issued by the International Accounting Standards Committee in
April 1989. It replaced IAS 3 Consolidated Financial Statements (issued in June
1976) except in so far as IAS 3 dealt with accounting for investments in associates.
IAS 27 was reformatted in 1994, and limited amendments were made by IAS 39 in
1998 and 2000.

The objective of IAS 27 is to enhance the relevance, reliability and comparability of

the information that a parent entity provides in its separate financial statements and in
its consolidated financial statements for a group of entities under its control. The
Standard specifies:
 the circumstances in which an entity must consolidate the financial statements
of another entity (being a subsidiary);
 the accounting for changes in the level of ownership interest in a subsidiary;
 the accounting for the loss of control of a subsidiary; and
 the information that an entity must disclose to enable users of the financial
statements to evaluate the nature of the relationship between the entity and its
subsidiaries.

International Accounting Standards IAS 4

DEPRECIATION
Definition:
Depreciation is the allocation of the depreciable amount of an asset over its estimated
useful life. Depreciation for the accounting period is charged to net profit or loss for
the period either directly or indirectly.

Depreciable assets are assets which:

(a) Are expected to be used during more than one accounting period;
(b) Have a limited useful life; and

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(c) Are held by an enterprise for use in the production or supply of goods and
services, for rental to others, or for administrative purposes.
Depreciable amount of a depreciable asset is the historical cost or otheramount
substituted for historical cost1 in the financial statements, less the estimated residual
value.
The depreciation method selected should be applied consistently fromperiod to period
unless altered circumstances justify a change. In an accounting period in which the
method is changed, the effect should be quantified and disclosed and the reason for
the change should be stated.

International Accounting Standards IAS 6

Accounting responses to changing prices:

IAS 6 is replaced by IAS15.

Objective of IAS 6:
The objective of IAS 6 is to specify disclosures reflecting the effects of changing
prices on the measurements used in the determination of an enterprise's results of
operations and its financial position.

Applicability:
IAS 6 applies to enterprises whose levels of revenue, profit, assets or employment are
significant in the economic environment in which they operate. When both parent and
consolidated financial statements are presented, the information specified by IAS 6
need be presented only on a consolidated basis.
Method for reflecting changing prices:
The enterprise must select one of two broad accounting methods for reflecting the
effects of changing prices:
 General purchasing power approach. Restate financial statements for
changes in the general price level.
 Current cost approach. Measure balance sheet items at replacement cost.
IAS 6 allows a variety of methods of adjusting income under the current cost
approach.

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What should be disclosed:
The following items should be disclosed, at a minimum, based on the chosen method
for reflecting the effects of changing prices:
 Adjustment to depreciation
 Adjustment to cost of sales
 Adjustments relating to monetary items
 The overall effect on net income of the above three items
 Current cost of property, plant and equipment and of inventories, if the current
cost approach is used
 Description of the methods used to compute the above adjustments

IAS7-Cash Flow Statement

Information about the cash flows of an entity is useful in providing users of financial
statements with a basis to assess the ability of the entity to generate cash and cash
equivalents and the needs of the entity to utilize those cash flows. The economic
decisions that are taken by users require an evaluation of the ability of an entity to
generate cash and cash equivalents and the timing and certainty of their generation.
The objective of this Standard is to require the provision of information about the
historical changes in cash and cash equivalents of an entity by means of a statement
of cash flow which classifies cash flows during the period from operating, investing
and financing activities.

Operating activities
The amount of cash flows arising from operating activities is a key indicator of the
extent to which the operations of the entity have generated sufficient cash flows to
repay loans, maintain the operating capability of the entity, pay dividends and make
new investments without recourse to external sources of financing. Information about
the specific components of historical operating cash flows is useful, in conjunction
with other information, in forecasting future operating cash flows.
Cash flows from operating activities are primarily derived from the principal revenue-
producing activities of the entity. Therefore, they generally result from the

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transactions and other events that enter into the determination of profit or loss.
Examples of cash flows from operating activities are:
(a) Cash receipts from the sale of goods and the rendering of services;
(b) Cash receipts from royalties, fees, commissions and other revenue;
(c) Cash payments to suppliers for goods and services;
(d) Cash payments to and on behalf of employees;
(e) Cash receipts and cash payments of an insurance entity for premiums and claims,
annuities and other policy benefits;
(f) Cash payments or refunds of income taxes unless they can be specifically
identified with financing and investing activities; and
(g) Cash receipts and payments from contracts held for dealing or trading purposes.

Investing activities
The separate disclosure of cash flows arising from investing activities is important
because the cash flows represent the extent to which expenditures have been made for
resources intended to generate future income and cash flows. Only expenditures that
result in a recognized asset in the statement of financial position are eligible for
classification as investing activities. Examples of cash flows arising from investing
activities are:
(a) Cash payments to acquire property, plant and equipment, intangibles and other
long-term assets.
(b) Cash receipts from sales of property, plant and equipment, intangibles and other
long-term assets;
(c) Cash payments to acquire equity or debt instruments of other entities and interests
in joint ventures
(d) Cash receipts from sales of equity or debt instruments of other entities and
interests in joint ventures
(e) Cash advances and loans made to other parties
(f) Cash receipts from the repayment of advances and loans made to other parties

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(g) Cash payments for futures contracts, forward contracts, option contracts and swap
contracts except when the contracts are held for dealing or trading purposes, or the
payments are classified as financing activities; and
(h) Cash receipts from futures contracts, forward contracts, option contracts and swap
contracts except when the contracts are held for dealing or trading purposes, or the
receipts are classified as financing activities.

Financing activities
The separate disclosure of cash flows arising from financing activities is important
because it is useful in predicting claims on future cash flows by providers of capital to
the entity. Examples of cash flows arising from financing activities are:
(a) Cash proceeds from issuing shares or other equity instruments;
(b) Cash payments to owners to acquire or redeem the entity’s shares;
(c) Cash proceeds from issuing debentures, loans, notes, bonds, mortgages and other
short or long-term borrowings;
(d) Cash repayments of amounts borrowed; and
(e) Cash payments by a lessee for the reduction of the outstanding liability relating to
a finance lease.

IAS9- Research & Development Costs

The objective of this Standard is to prescribe the accounting treatment for research
and development costs. The primary issue in accounting for the costs of research and
development activities is whether such costs should be recognised as an asset or as an
expense. This Standard uses the recognition criteria established in the MASB's A
Proposed Framework for the Preparation and Presentation of Financial Statements to
determine when research and development costs should be recognised as an expense
and when they should be recognised as an asset. It also provides practical guidance on
the application of these criteria.
The allocation of research and development costs to different periods is determined
by the relationship between the costs and the economic benefits that the enterprise
expects to derive from the research and development activities. When it is probable
that the costs will give rise to future economic benefits and the costs can be measured
reliably, the costs qualify for recognition as an asset. The nature of research is such

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 that there is insufficient certainty that future economic benefits will be realised as a
result of specific research expenditures. Therefore, research costs are recognised as an
expense in the period in which they are incurred. The nature of development activities
is such that, because the project is further advanced than the research phase of the
activities, the enterprise can, in some instances, determine the probability of receiving
future economic benefits. Therefore, development costs are recognised as an asset
when they meet certain criteria that indicate that it is probable that the costs will give
rise to future economic benefits.

Research Costs
Research costs should be recognised as an expense in the period in which they are
incurred and should not be recognised as an asset in a subsequent period.

Development Costs
The development costs of a project should be recognised as an expense in the period
in which they are incurred unless the criteria for asset recognition identified in
paragraph 17 are met. Development costs initially recognised as an expense should
not be recognised as an asset in a subsequent period.
IAS10 Events after the balance sheet date
Key definitions
Event after the reporting period: An event, which could be favorable or
unfavorable, that occurs between the end of the reporting period and the date that the
financial statements are authorized for issue.
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.
Non-adjusting event: An event after the reporting period that is indicative of a
condition that arose after the end of the reporting period.

Accounting
o Adjust financial statements for adjusting events - events after the balance
sheet date that provide further evidence of conditions that existed at the end of

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 the reporting period, including events that indicate that the going concern
assumption in relation to the whole or part of the enterprise is not appropriate.
o Do not adjust for non-adjusting events - events or conditions that arose after
the end of the reporting period.
o If an entity declares dividends after the reporting period, the entity shall not
recognise those dividends as a liability at the end of the reporting period. That is
a non-adjusting event.

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.

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.
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.
Companies must disclose the date when the financial statements were authorised for
issue and who gave that authorization. If the enterprise's owners or others have the
power to amend the financial statements after issuance, the enterprise must disclose
that fact

IAS11- Construction Costs

The objective of IAS 11 is to prescribe the accounting treatment of revenue and costs
associated with construction contracts.

What is a construction contract?

A construction contract is a contract specifically negotiated for the construction of an
asset or a group of interrelated assets.

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Under IAS 11, if a contract covers two or more assets, the construction of each asset
should be accounted for separately if (a) separate proposals were submitted for each
asset, (b) portions of the contract relating to each asset were negotiated separately,
and (c) costs and revenues of each asset can be measured. Otherwise, the contract
should be accounted for in its entirety.
Two or more contracts should be accounted for as a single contract if they were
negotiated together and the work is interrelated.
If a contract gives the customer an option to order one or more additional assets,
construction of each additional asset should be accounted for as a separate contract if
either (a) the additional asset differs significantly from the original asset(s) or (b) the
price of the additional asset is separately negotiated.

What is included in contract revenue and costs?

Contract revenue should include the amount agreed in the initial contract, plus
revenue from alternations in the original contract work, plus claims and incentive
payments that (a) are expected to be collected and (b) that can be measured reliably.
Contract costs should include costs that relate directly to the specific contract, plus
costs that are attributable to the contractor's general contracting activity to the extent
that they can be reasonably allocated to the contract, plus such other costs that can be
specifically charged to the customer under the terms of the contract.
Accounting
If the outcome of a construction contract can be estimated reliably, revenue and costs
should be recognized in proportion to the stage of completion of contract activity.
This is known as the percentage of completion method of accounting.
To be able to estimate the outcome of a contract reliably, the entity must be able to
make a reliable estimate of total contract revenue, the stage of completion, and the
costs to complete the contract.
If the outcome cannot be estimated reliably, no profit should be recognized. Instead,
contract revenue should be recognized only to the extent that contract costs incurred
are expected to be recoverable and contract costs should be expensed as incurred.
The stage of completion of a contract can be determined in a variety of ways -
including the proportion that contract costs incurred for work performed to date bear

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 to the estimated total contract costs, surveys of work performed, or completion of a
physical proportion of the contract work.
An expected loss on a construction contract should be recognized as an expense as
soon as such loss is probable.

Disclosure
o amount of contract revenue recognised;
o method used to determine revenue;
o method used to determine stage of completion; and
o for contracts in progress at balance sheet date:
o aggregate costs incurred and recognised profit
o amount of advances received
o amount of retentions

Presentation

The gross amount due from customers for contract work should be shown as an asset.
The gross amount due to customers for contract work should be shown as a liability

IAS- 14, Segment reporting:

The objective of IAS 14 (Revised 1997) is to establish principles for reporting

financial information by line of business and by geographical area. It applies to
enterprises whose equity or debt securities are publicly traded and to enterprises in
the process of issuing securities to the public. In addition, any enterprise voluntarily
providing segment information should comply with the requirements of the Standard.

 IAS 14 must be applied by enterprises whose debt or equity securities are publicly
traded and those in the process of issuing such securities in public securities markets.

 If an enterprise that is not publicly traded chooses to report segment information and
claims that its financial statements conform to IAS, then it must follow IAS 14 in
full.

 Segment information need not be presented in the separate financial statements of a

(a) parent, (b) subsidiary, (c) equity method associate, or (d) equity method joint
venture that are presented in the same report as the consolidated statements.

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What Accounting Policies Should a Segment Follow:

Segment accounting policies must be the same as those used in the consolidated
financial statements.
If assets used jointly by two or more segments are allocated to segments, the related
revenue and expenses must also be allocated.

What Must be Disclosed

sales revenue; capital additions;

result; depreciation;
assets; equity method income ;
the basis of inter segment non cash expenses other than
pricing; depreciation;
liabilities

IAS- 16. PROPERTY, PLANT AND EQUIPMENT:

IAS 16 prescribes the treatment of initial recognition and subsequent measurement of
property, plant, and equipment. Property, plant, and equipment should be recognized when
(a) it is probable that future benefits will flow from it, and (b) its cost can be measured
reliably. Initial measurement should be at cost. Subsequently, the benchmark treatment is to
use depreciated (amortized) cost but the allowed alternative is to use the revaluation model
(similar to fair market value).

Main principles Depreciation:

• Long-lived assets other than land are depreciated on a systematic basis over their useful
lives
• Depreciation base is cost less the estimated residual value
• The depreciation method should reflect the pattern in which the asset's economic benefits
are consumed by the enterprise
• If assets are revalued, depreciation is based on the revalued amount
• The useful life, residual value and amortization method should be reviewed on an annual
basis and any change should be reflected prospectively.
• Significant costs to be incurred at the end of an asset's useful life should either be reflected
by reducing the estimated residual value or by charging the amount as an expense over the
life of the asset
• If the cost model is used, each part of an item of property, plant and equipment with a cost
that is significant in relation to the total cost of the item must be depreciated separately

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IAS -17. LEASES:
A lease is a legally enforceable contract which defines the relationship between an
owner, the lessor, and a renter, the lessee. An agreement protects both the lessor and
the lessee. The lessor knows that a legally binding contract obligates the renter to
make regular payments throughout the life of the lease. The lessee knows that he or
she has full rights to the property without fear of sudden seizure or eviction. A lease
also guarantees that the original rental terms will not change until the contract has
expired.

Two classes of leases are considered:

• A lease is classified as a finance lease

• All other leases are classified as operating leases

Operating leases: The lease payments should be recognized as an expense in the

income statement over the lease term on a straight-line basis, unless another
systematic basis is more representative of the time pattern for the user's benefit.
. Financial Leases Accounting for the lessee:
• The lessee should capitalize a finance lease at the lower end of the fair value and the
present value of the minimum lease payments
• Rental payments should be split into (i) a reduction of liability, and (ii) a finance
charge designed to reduce in line with the liability
• The lessee should calculate depreciation on leased assets using useful life, unless
there is no reasonable certainty of eventual ownership. In the latter case, the shorter of
the useful life and the lease term should be used
• The lessee must include disclosure of rental expenses, sublease rentals, and a
description of the leasing arrangements
• The lessee should expense the operating lease payments

Financial Leases Accounting for the lessor:

• For lessors, finance leases should be recorded as receivables and the lease income
should be recognized on the basis of a constant periodic rate of return
• Lessors must disclosure information about future minimum rentals and amounts of
contingent rentals included in net profit or loss
• Lessors should use the net investment method to allocate finance income, the net
cash investment method is no longer permitted.

IAS -18. REVENUE:

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The objective of IAS 18 is to prescribe the accounting treatment for revenue arising from
certain types of transactions and events, such as sales of goods, rendering of services,
interests, royalties, and dividends.

Revenue: The gross inflow of economic benefits (cash, receivables, and other assets) arising
from the ordinary operating activities of an enterprise (such as sales of goods, sales of
services, interest, royalties, and dividends).

Measurement of Revenue: Revenue should be measured at the fair value of the

consideration received. An exchange for goods or services of a similar nature and
value is not regarded as a transaction that generates revenue.
The seller is providing interest-free credit to the buyer or is charging a below-market rate of
interest. Interest must be imputed based on market rates. IAS 18 prescribes the following
disclosures:

• The accounting policy for recognizing revenue

• The amount of each of the following types of revenue:
Sale of goods o rendering of services o interest o royalties o dividends • within each of the
above categories, the amount of revenue from exchanges of goods or services It is important
for IAS 18 compliance that the criteria for revenue recognition for each category of revenue
be met.

IAS 22, Business Combinations:

Business Combinations, became effective for annual financial statements for periods
beginning on or after 1 January 1995.

Two types of business combinations

I. Acquisitions
II. Uniting of Interests

Acquisition:
A business combination in which one of the enterprises obtains control over the net
assets and operations of another enterprises in exchange for the transfer of assets,
incurrence of a liability, or issue of equity. For an acquisition, assets and liabilities
should be recognized if it is probable that an economic benefit will flow and if there
is a reliable measure of cost or fair value.
Assets and liabilities of the acquired company are included in the consolidated
financial statements at fair value.
Uniting of Interests:
A business combination in which the shareholders of the combining enterprises
combine control over the whole of their net assets and operations, to achieve a
continuing mutual sharing in the risks and benefits attaching to the combined entity
such that neither party can be identified as the acquirer.
Criteria:
The substantial majority of voting common shares of the combining enterprises are
exchanged or pooled;

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The fair value of one enterprise is not significantly different from that of the other
enterprise;
The shareholders of each enterprise maintain substantially the same voting rights and
interests in the combined entity, relative to each other, after the combination as
before. Carrying amounts on the books of the combining companies are carried
forward.

IAS 23: Borrowing Costs

Borrowing Costs requires that borrowing costs directly attributable to the acquisition,
construction or production of a 'qualifying asset' (one that necessarily takes a
substantial period of time to get ready for its intended use or sale) are included in the
cost of the asset. Other borrowing costs are recognised as an expense.

Objective of IAS 23

The objective of IAS 23 is to prescribe the accounting treatment for borrowing costs.
Borrowing costs include interest on bank overdrafts and borrowings, amortisation of
discounts or premiums on borrowings, finance charges on finance leases and
exchange differences on foreign currency borrowings where they are regarded as an
adjustment to interest costs.

Scope of IAS 23

Two types of assets that would otherwise be qualifying assets are excluded from the
scope of IAS 23:
 Qualifying assets measured at fair value, such as biological assets accounted
for under IAS 41 Agriculture
 Inventories that are manufactured, or otherwise produced, in large quantities
on a repetitive basis and that take a substantial period to get ready for sale

Disclosure IAS 23

Borrowing costs should be recognized as an asset when they meet certain criteria
which will be developed as part of the improvements project. An entity shall
capitalize borrowing costs that are directly attributable to the acquisition, construction

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or production of a qualifying asset as part of the cost of that asset. An entity shall
recognize other borrowing costs as an expense in the period in which it incurs them.

IAS 24: Related Party Disclosures

A related party is a person or entity that is related to the entity that is preparing its
financial statements. The accounting standard IAS 24 ensures that financial
statements contain the necessary disclosures to draw attention to the possibility that a
reporting entity's 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.

Objective of IAS 24

The objective of this Standard 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, including commitments, with such parties.

Related Parties of IAS 24

A related-party transaction comprises a transfer of resources or obligations between
related parties, regardless of whether a price is charged; this transfer of resources
includes transactions concluded on an arm’s-length basis. The related parties are-
1. Its subsidiaries
2. Its associates
3. Directors of the board
4. The husband of the chairman of the board
5. People who are part of the executive management team.

IAS 30: Disclosures in the Financial Statements of Banks and Similar

Financial Institutions
Disclosures require 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.

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Objective of IAS 30

The objective of IAS 30 is to prescribe appropriate presentation and disclosure

standards for banks and similar financial institutions (hereafter called 'banks'), which
supplement the requirements of other Standards. The intention is to provide users
with appropriate information to assist them in evaluating the financial position and
performance of banks, and to enable them to obtain a better understanding of the
special characteristics of the operations of banks.

Disclosures of IAS 30
Specific contingencies and commitments (including off-balance sheet items)
requiring disclosure
 Specified disclosures for the maturity of assets and liabilities.
 Concentrations of assets, liabilities and off-balance sheet items.
 Losses on loans and advances.
 General banking risks.
 Assets pledged as security.

IAS 33: Earnings Per Share

Earnings Per Share sets out how to calculate both basic earnings per share (EPS) and
diluted EPS. The calculation of Basic EPS is based on the weighted average number
of ordinary shares outstanding during the period, whereas diluted EPS also includes
dilutive potential ordinary shares (such as options and convertible instruments) if they
meet certain criteria.

Objective of IAS 33

The objective of IAS 33 is to prescribe principles for determining and presenting

earnings per share (EPS) amounts to improve performance comparisons between
different entities in the same reporting period and between different reporting periods
for the same entity

Scope of IAS 33

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IAS 33 applies to entities whose securities are publicly traded or that are in the
process of issuing securities to the public. [IAS 33.2] Other entities that choose to
present EPS information must also comply with IAS 33.

Disclosure of IAS 33
 The amounts used as the numerators in calculating basic and diluted EPS, and

a reconciliation of those amounts to profit or loss attributable to the parent

entity for the period
 The weighted average number of ordinary shares used as the denominator in
calculating basic and diluted EPS, and a reconciliation of these denominators
to each other
 Instruments (including contingently issuable shares) that could potentially
dilute basic EPS in the future, but were not included in the calculation of
diluted EPS because they are antidilutive for the period(s) presented
 A description of those ordinary share transactions or potential ordinary share
transactions that occur after the balance sheet date and that would have changed
significantly the number of ordinary shares or potential ordinary shares outstanding
at the end of the period if those transactions had occurred before the end of the
reporting period. Examples include issues and redemptions of ordinary shares
issued for cash, warrants and options, conversions, and exercises.

IAS 37: Provisions, Contingent Liabilities and Contingent Assets

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.

Objective of IAS 37
The objective to ensure that appropriate recognition criteria and measurement bases
are applied to provisions, contingent liabilities and contingent assets and that

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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 recognized only when there is a liability i.e.
a present obligation resulting from past events.

Provision of IAS 37
A provision is a liability where there is uncertainty over the timing of its settlement
on the amount at which it will be settled. A provision is recognized in the financial
statements when-
a) An entity has a present obligation as a result of a past event;
b) It is probable that an outflow of economic resources will be required to settle the
obligation;
c) The amount of the obligation can be reliably estimated.

Contingent liability of IAS 37

A contingent liability is a possible obligation 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. Contingent
liabilities are not recognized in the financial statements, but they must be disclosed
unless the possibility of an outflow of economic resources is remote. Contingent
liabilities should be continually monitored, and if the outflow of resources becomes
probable, they should be recognized as provisions.

Contingent asset of IAS 37

A contingent asset is 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. IAS 37 prohibits the
recognition of contingent assets, based on the perspective that including a contingent
asset on the balance sheet might result in the recognition of income that is never
realized. However, if an inflow of economic benefits is probable (that is, more likely
than not), the contingent asset should be disclosed. Note that if an inflow of economic
benefits is virtually certain, then the related asset is not “contingent” on an event
occurring and, therefore, it should be recognized in the financial statements.

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