Tài liệu Wiley IFRS 2018 internation and application of IFRS standards

Tài liệu Wiley IFRS 2018 internation and application of IFRS standards Tài liệu Wiley IFRS 2018 internation and application of IFRS standards Tài liệu Wiley IFRS 2018 internation and application of IFRS standards Tài liệu Wiley IFRS 2018 internation and application of IFRS standards Tài liệu Wiley IFRS 2018 internation and application of IFRS standards Tài liệu Wiley IFRS 2018 internation and application of IFRS standards Tài liệu Wiley IFRS 2018 internation and application of IFRS standards Tài liệu Wiley IFRS 2018 internation and application of IFRS standards

FFIRS 03/06/2018 15:46:21 Page i 2018 Interpretation and Application of IFRS Standards FFIRS 03/06/2018 15:46:21 Page ii BECOME A SUBSCRIBER! Did you purchase this product from a bookstore? 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office nearest you: Professional & Reference Division John Wiley & Sons Canada, Ltd 22 Worcester Road Etobicoke, Ontario M9W 1L1 CANADA Phone: 416-236-4433 Phone: 1-800-567-4797 Fax: 416-236-4447 E-mail: canada@wiley.com John Wiley & Sons, Ltd The Atrium Southern Gate, Chichester West Sussex, PO19 8SQ ENGLAND Phone: 44-1243-779777 Fax: 44-1243-775878 E-mail: customer@wiley.co.uk John Wiley & Sons Australia, Ltd 33 Park Road P.O Box 1226 Milton, Queensland 4064 AUSTRALIA Phone: 61-7-3859-9755 Fax: 61-7-3859-9715 E-mail: brisbane@johnwiley.com.au John Wiley & Sons (Asia) Pte Ltd Clementi Loop #02-01 SINGAPORE 129809 Phone: 65-64632400 Fax: 65-64634604/5/6 Customer Service: 65-64604280 E-mail: enquiry@wiley.com.sg FFIRS 03/06/2018 15:46:21 Page iii 2018 Interpretation and Application of IFRS Standards Salim Alibhai Christopher Naidoo Erwin Bakker Edward Rands T V Balasubramanian Darshan Shah Kunal Bharadva Candice Unsworth Asif Chaudhry Minette van der Merwe Danie Coetsee Santosh Varughese Chris Johnstone Paul Yeung Patrick Kuria FFIRS 03/06/2018 15:46:21 Page iv www.downloadslide.net This edition contains interpretations and application of the IFRS Standards, as approved by the International Accounting Standards Board (Board) for issue up to 31 December 2017, that are required to be applied for accounting periods beginning on January 2018 This book is printed on acid-free paper Copyright  2018 by John Wiley & Sons, Ltd All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978)646-8600, or on the Web at www.copyright.com Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201)748-6011, fax (201)748-6008, or online at http://www.wiley.com/go/permission Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of mer­ chantability or fitness for a particular purpose No warranty may be created or extended by sales representatives or written sales materials The advice and strategies contained herein may not be suitable for your situation You should consult with a professional where appropriate Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages For general information on our other products and services, please contact our Customer Care Department within the United States at 800-762-2974, outside the United States at 317-572-3993 or fax 317-572-4002 Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books For more information about Wiley products, visit our website at www.wiley.com ISBN: 978-1-119-46150-0 (pbk) ISBN: 978-1-119-46151-7 (epub) ISBN: 978-1-119-46152-4 (epdf) ISBN: 978-1-119-46153-1 (obook) Printed in Great Britain by TJ International Ltd, Padstow, Cornwall, UK “IFRS ”and “International Financial Reporting Standards” are registered trademarks of The International Financial Reporting Standards Foundation Content provided by IFRS is copyright  IFRS Foundation, used under licence Trademarks: Wiley and the Wiley Publishing logo are trademarks of John Wiley and Sons, Inc and/or its affiliates in the United States and/or other countries, and may not be used without written per­ mission IFRS is a registered trademark of The International Accounting Standards Board All other trademarks are the property of their respective owners Wiley Publishing, Inc is not associated with any product or vendor mentioned in this book FTOC 03/21/2018 15:21:42 Page v www.downloadslide.net CONTENTS About the Authors vii Introduction to International Financial Reporting Standards Conceptual Framework 27 Presentation of Financial Statements 45 Statement of Financial Position 65 Statements of Profit or Loss and Other Comprehensive Income, and Changes in Equity 81 Statement of Cash Flows 101 Accounting Policies, Changes in Accounting Estimates, and Errors 119 Inventories 139 Property, Plant and Equipment 157 10 Borrowing Costs 185 11 Intangible Assets 193 12 Investment Property 221 13 Impairment of Assets and Non-Current Assets Held for Sale 235 14 Consolidations, Joint Arrangements, Associates and Separate Financial Statements 257 15 Business Combinations 309 16 Shareholders’ Equity 361 17 Share-Based Payment 383 18 Current Liabilities, Provisions, Contingencies and Events After the Reporting Period 417 19 Employee Benefits 449 20 Revenue from Contracts with Customer 475 21 Government Grants 515 22 Leases 527 23 Foreign Currency 583 24 Financial Instruments 615 25 Fair Value 737 v FTOC 03/21/2018 15:21:42 Page vi www.downloadslide.net Contents vi 26 Income Taxes 767 27 Earnings per Share 803 28 Operating Segments 821 29 Related Party Disclosures 839 30 Accounting and Reporting by Retirement Benefit Plans 853 31 Agriculture 861 32 Extractive Industries 877 33 Accounting for Insurance Contracts 887 34 Interim Financial Reporting 905 35 Hyperinflation 925 36 First-Time Adoption of International Financial Reporting Standards 935 Index 967 FLAST 03/06/2018 16:3:16 Page vii www.downloadslide.net ABOUT THE AUTHORS Salim Alibhai, FCCA, CPA (K), is an audit partner at PKF Kenya and heads the IT assurance including methodology function across the Eastern Africa PKF member firms Erwin Bakker, RA, is international audit partner of PKF Wallast in the Netherlands, and acts as audit partner, mainly for international (group) audits He serves as chairman of the IFRS working group of PKF Wallast and is a member of the Technical Bureau of PKF Wallast in the Netherlands T V Balasubramanian, FCA, CFE, CFIP, is a senior partner in PKF Sridhar & Santhanam LLP, Chartered Accountants, India, and previously served as a member of the Auditing and Assurance Standards Board of the ICAI, India He is a part of the technical team of the firm engaged in transition to Ind AS (the converged IFRS Standards) Kunal Bharadva, FCCA, CPA (K), ACA, is a senior manager at PKF Kenya and is responsible for technical training across the Eastern Africa PKF member firms Asif Chaudhry, FCCA, CPA (K), MBA, is an audit partner at PKF Kenya and heads the technical and quality control functions across the Eastern Africa PKF member firms He is also a member of the Kenyan Institute’s Professional Standards Committee and the PKF International Africa Professional Standards Committee Danie Coetsee, CA (SA), is Professor of Accounting at the University of Johannesburg, specializing in financial accounting He is the chair of the Financial Reporting Technical Committee of the Financial Reporting Standards Council of South Africa Chris Johnstone is a member of the ICAEW and also holds ICAEW’s Diploma in IFRS She is the Audit Senior Technical Manager at Johnston Carmichael She joined Johnston Carmichael in 2014 having previously worked at Baker Tilly and MacIntyre Hudson in London She is also a member of the Accounting and Auditing Technical Committee of the PKF firms in the United Kingdom and Republic of Ireland Patrick Kuria, CPA (K), is an audit partner at PKF Kenya and specializes in the audits of financial services and the not-for-profit sector Christopher Naidoo, CA (SA), member of the South African Institute of Chartered Accountants, serves as the international accounting and assurance technical specialist at PKF International Ltd He also serves on PKF’s International Professional Standards Committee (IPSC) and PKF’s Assurance Strategy Group (ASG) on accounting and assurance projects Edward Rands, FCA, is the Risk and Professional Standards partner at PKF Cooper Parry He leads the firm’s technical team, which is responsible for maintaining and updating accounting knowledge and for dealing with complex problems and queries as they arise He also chairs the Accounting and Auditing Technical Committee of the PKF firms in the United Kingdom and Republic of Ireland Darshan Shah, FCCA, CPA (K), CPA (U), ACA, is an audit partner at PKF Kenya and heads the technical training function across the Eastern Africa PKF member firms Candice Unsworth, CA (SA), is a technical manager at PKF International Ltd and serves on PKF’s International Professional Standards Committee (IPSC) She qualified at PKF Durban before moving to the technical division of PKF International in 2015 Minette van der Merwe, CA (SA), is PKF South Africa’s IFRS technical expert responsible for the interpretation and application of IFRS within the Southern African region vii FLAST 03/06/2018 16:3:16 Page viii www.downloadslide.net viii About the Authors Santosh Varughese, CA (Germany), Tax Advisor (Germany), CPA (US), is one of the senior partners at PKF Germany and is based in Frankfurt He is the head of the IFRS Center of Excellence of PKF in Germany One of his operative focuses is on audits for large listed companies Paul Yeung, CPA, served as the Technical Writer of the Education and Training Department of the Hong Kong Institute of Certified Public Accountants and is a Technical Director of PKF Hong Kong www.downloadslide.net Wiley 2018 Interpretation and Application of IFRS Standards Salim Alibhai et al  2018 John Wiley & Sons, Ltd Published 2018 by John Wiley & Sons, Ltd INTRODUCTION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS Introduction Origins and Early History of the IASB The Current Structure Process of IFRS Standard Setting Convergence: The IASB and Financial Reporting in the US The IASB and Europe Appendix A: Current International Financial Reporting Standards (IAS/IFRS) and Interpretations (SIC/IFRIC) Appendix B: Projects Completed Since Previous Issue (July 2016 to June 2017) Appendix C: IFRS for SMEs Definition of SMEs IFRS for SMEs is a Complete, SelfContained Set of Requirements Modifications of Full IFRS made in IFRS for SMEs Disclosure Requirements under IFRS for SMEs Maintenance of the IFRS for SMEs SME Implementation Group Implications of the IFRS for SMEs Application of the IFRS for SMEs 12 14 17 18 19 19 23 24 24 24 25 16 INTRODUCTION The mission of the IFRS Foundation and the International Accounting Standards Board (IASB) is to develop International Financial Reporting Standards (IFRS) that bring transpar­ ency, accountability and efficiency to financial markets around the world They seek to serve the public interest by fostering trust, growth and long-term stability in the global economy The motivation for the convergence of historically dissimilar financial reporting stan­ dards has been, in the main, to facilitate the free flow of capital so that, for example, investors in the US would become more willing to finance business in, say, China or the Czech Republic Access to financial statements which are written in the same “language” would help to eliminate a major impediment to induce investor confidence, sometimes referred to as “accounting risk,” which adds to the more tangible risks of making such cross-border investments Additionally, permission to list a company’s equity or debt securities on an exchange has generally been conditional on making filings with national regulatory authori­ ties These regulators tend to insist either on conformity with local Generally Accepted Accounting Practice (GAAP) or on a formal reconciliation to local GAAP These procedures are tedious and time-consuming, and the human resources and technical knowledge to carry them out are not always widely available, leading many would-be registrants to forgo the opportunity of broadening their investor bases and potentially lowering their costs of capital There were once scores of unique sets of financial reporting standards among the more developed nations (“national GAAP”) The year 2005 saw the beginning of a new era in the Wiley Interpretation and Application of IFRS Standards 2018 www.downloadslide.net global conduct of business, and the fulfilment of a 30-year effort to create the financial reporting rules for a worldwide capital market During that year’s financial reporting cycle, the 27 European Union (EU) member states plus many other countries, such as Australia, New Zealand and South Africa, adopted IFRS Since then, many countries, such as Argentina, Brazil, Korea, Canada, Mexico and Russia, have adopted IFRS Indeed, at the time of writing, more than 130 countries now require or permit the use of IFRS China has moved its national standards significantly towards IFRS All other major economies, such as Japan and the United States, have either moved towards IFRS in recent years or established time lines for convergence or adoption in the near future 2007 and 2008 proved to be watershed years for the growing acceptability of IFRS In 2007, one of the most important developments was that the US Securities and Exchange Commission (SEC) dropped the reconciliation (to US GAAP) requirement, which had formerly applied to foreign private registrants Since then, those reporting in a manner fully compliant with IFRS (i.e., without any exceptions to the complete set of standards imposed by IASB) have no longer been required to reconcile net income and shareholders’ equity to the amounts which would have been presented under US GAAP In effect, the SEC was acknowledging that IFRS was fully acceptable as a basis for accurate, transparent, meaningful financial reporting This easing of US registration requirements for foreign companies seeking to enjoy the benefits of listing their equity or debt securities in the US led understandably to a call by domestic companies to permit them also to choose freely between financial reporting under US GAAP and IFRS By late 2008 the SEC appeared to have begun the process of acceptance, first for the largest companies in those industries having (worldwide) the preponderance of IFRS adopters, and later for all publicly held companies However, a new SEC chair took office in 2009, expressing a concern that the move to IFRS, if it were to occur, should perhaps take place more slowly than had previously been indicated It had been highly probable that non-publicly held US entities would have remained restricted to US GAAP for the foreseeable future, both from habit and because no other set of standards would be viewed as being acceptable However, the American Institute of Certified Public Accountants (AICPA), which oversees the private-sector auditing profession’s stan­ dards in the US, amended its rules in 2008 to fully recognise IASB as an accounting standardsetting body (giving it equal status with the Financial Accounting Standards Board (FASB)), meaning that auditors and other service providers in the US could now issue opinions (or provide other levels of assurance, as specified under pertinent guidelines) which affirmed that IFRS-based financial statements conformed with “generally accepted accounting principles.” This change, coupled with the promulgation by IASB of a long-sought standard providing simplified financial reporting rules for privately held entities (described later in this chapter), might be seen as increasing the likelihood that a more broadly-based move to IFRS will occur in the US over the coming years The historic 2002 Norwalk Agreement—embodied in a Memorandum of Understanding (MoU) between the US standard setter, FASB, and the IASB—called for “convergence” of the respective sets of standards, and indeed a number of revisions of either US GAAP or IFRS have already taken place to implement this commitment The aim of the Boards was to complete the milestone projects of the MoU by the end of June 2011 Despite this commitment by the Boards, certain projects such as financial instruments (impairment and hedge accounting), revenue recognition, leases and insurance contracts were deferred due to their complexity and the difficulty in reaching consensus views The converged standard on revenue recognition, IFRS 15, was finally published in May 2014, BINDEX 03/21/2018 14:53:34 Page 994 www.downloadslide.net 994 losses (Continued ) remote contingent 437 share of loss exceeding interest 298–9 statement of changes in equity 87–8, 100 statement of profit or loss and OCI 87–8, 96, 100 tax 775, 917–18 unused tax 775 see also impairment losses; profit or loss major customers 832–3, 836, 838 management commentary 40–2 markdown 141 marketable equity instruments 625 market approaches 739, 757, 763–4 market conditions 385 market-corroborated inputs 740 marketing-related intangible assets 340–1 market participants 314, 740, 742, 744–7 market performance conditions 392 market risk 624, 707, 732–4 markets 739, 740, 746–7 market value 624 mark-up 141 master netting arrangements 712–13 matching principle 768 material, definition 122 material errors 133 materiality 50–1, 909 material omissions 47 measurement acquisition method 322–5, 331–3, 335–7 agriculture 865, 868–70 borrowing costs 186–91 business combinations 322–5, 331–3, 335–7 conceptual framework 36, 38 consolidated statements 268 credit losses 665–6 current liabilities 420–9 dates 362–3, 385, 452 deferred tax 770–1 employee benefits 457–8 fair value 722–4, 737–8, 741–59 financial instruments 626–41, 648–50, 665–6, 694–6, 722–4 first-time adoption 944 Index goodwill 331–3 IFRS for SMEs 21–3 income 86–7 insurance contracts 890–5 intangible assets 196–216, 322 inventories 141–50 investment property 224–30 leases 534–55 models 207–10 non-current assets held for sale 250–1 performance obligations 496 post-employment benefit plans 457–8 PPE 161–77 share-based payments 389–90, 398 shareholders’ equity 363 statement of changes in equity 86–8 statement of profit or loss and OCI 86–8 see also fair value measurement; initial measurement Meikles Group case study 963–5 Memorandum of Understanding (MoU) 2–3 Merton see Black–Scholes–Merton model mineral resources 878–80 minimum comparative information 85 minimum funding requirement 460–3 minimum lease payments (MLP) 530, 540–1 minority interests 961 misstatements 47 mixed attribute model 82 MLP see minimum lease payments MNCs see multinational corporations modification gains/losses 624 modifications contracts 480–2, 650 contractual cash flows 650 equity-settled share-based payments 394–7 financial assets 663 IFRS for SMEs 19–20 share-based payments 394–7 modified indirect method 108–9 monetary assets 160, 195, 625 monetary items definition 585 BINDEX 03/21/2018 14:53:34 Page 995 www.downloadslide.net Index foreign currency 585, 587–8, 611–12 hyperinflation 932–3 monetary liabilities 625 money-over-money lease transactions 574 Monitoring Board, IFRS Foundation 6–7 mortality rate 452 mortgages, CMOs 755 most advantageous market 740, 742, 743–4 MoU see Memorandum of Understanding multi-employer benefit plans 452, 463–5 multinational corporations (MNCs) 583 multiperiod options 412–15 multiple pension plans 463–5 mutual entities 314 Napoleonic Commercial Code national GAAP 1, 5, 14, 17, 21 extractive industries 878 fair value measurement 737 first-time adoption 938–9, 947 statement of cash flows 101 statement of financial position 65 see also Generally Accepted Accounting Practice net assets 86, 854, 855–8 net interest on net defined benefit liability 452 net investments foreign operations 585, 595, 608–12, 687, 717, 719–20 hedge accounting 673, 719–20 leases 530 net realisable value (NRV) definitions 141, 625 interim financial reporting 919 inventories 141, 153 net reporting 110, 111 net selling price 195 net settlement 398–9 netting arrangements 711–13 “netting” method 210 nil net positions 692 nominal amounts 676, 691–2 non-adjusting events after reporting period 419, 443–5 non-cancellable leases 530 non-cash consideration 487 995 non-cash financing/investing 106 non-cash transactions 104 non-controlling discounts 764 non-controlling interests acquisition method 327–9 business combinations 327–9 changes in proportion 267 consolidated statements 259, 266–7 definitions 259, 314 first-time adoption 947 foreign currency 603 retained earnings 78 non-current assets 74–5, 76, 160, 249 non-current assets held for sale 235, 248–55 changes of plans 251–2 definitions of terms 248–9 disclosures 252–3 discontinued operations 248, 253–5 held for distribution to owners 251 held-for-sale classification 249–50 measurement 250–1 PPE 182 presentation 252–3 non-current debt 79 non-current liabilities 76 non-depreciable assets 520 non-financial items 628–9 non-market performance conditions 392–3 non-monetary assets 160, 294 non-monetary grants 521 non-monetary items definition 585 foreign currency 585, 587–8, 590–1 hyperinflation 932–3 non-monetary transactions 160, 179–80, 195 non-performance risk 740, 750, 752 non-reciprocal transfers 160, 180–1, 196 non-recourse financing 573–4 non-recurring fair value measurements 759–61 non-refundable upfront fees 506–11 non-vesting conditions 398 notes 47, 54, 55, 61 notes payable 422 NRV see net realisable value BINDEX 03/21/2018 14:53:34 Page 996 www.downloadslide.net 996 obligating events 419 obligations constructive 418–19 current liabilities 422–4, 425–6 estimate of 426 performance 476, 482–4, 490, 491–6 present 425–6 projected benefits 453 observable inputs 740, 753–4 occasional revenues 916 OCI see other comprehensive income offsetting assets 77, 704–5, 711–13 current liabilities 421 deferred taxes 780 financial instruments 704–5, 711–13, 718 liabilities 77, 704–5, 711–13 presentation of financial statements 51 revenue and expense items 96–7 statement of financial position 77 statement of profit or loss and OCI 96–7 onerous contracts 419, 428, 432 opening IFRS statement of financial position 936, 941, 943–5 operating activities 102, 105–10, 822 operating costs 215–16 operating cycles 419 operating expenses 92–3 operating leases accounting for 535–6, 541–3 assets subject to 339 definition 531 investment property 224 lessee disclosures 556 lessor disclosures 557 operating profit or loss 428, 822, 836–7 operating revenues 526 operating segments 821–38 definitions of 86, 823, 824, 825 definitions of terms 822–3 disclosures 829–38 entity-wide disclosures 832–3 examples of disclosures 833–8 identification 823–4 IFRS requirements 824–9 scope of standards 821–2 US GAAP comparisons 838 Index options call options 508 definition 671 EPS 804, 811–12 forward options 508 put options 508–9, 804, 815 share-based payments 406–15 statement of cash flows 111 time value of 687–90 orderly transactions 740, 745, 747 ordinary shares 363–4, 804, 813–14, 818 other comprehensive income (OCI) 97–9 components 89 definitions 47, 84–5 hedge accounting 690 presentation of financial statements 60–1 see also fair value through OCI; statement of profit or loss and OCI other equity 367–8 other long-term employee benefits 452, 456, 472 other post-retirement benefits 472 other price risk 625, 707 output methods 495 overlay approach 899–902 owner-occupied property 222–4, 228 owners, definition 47, 315 ownership of goods 142 ownership interest changes in 270–2, 294–7 consolidated statements 268–9, 270–2 equity method 294–7 loss of significant influence 294–5 ownership transfers 270–2, 540–1 parent companies consolidated statements 259, 260–1, 270–2 definitions 259, 315 investment property 224 related party disclosures 847 subsidiary relationships 260–1, 270–2, 847 partial-year depreciation 168–9 participants 854 party to joint arrangements 259 par value per share 365 BINDEX 03/21/2018 14:53:34 Page 997 www.downloadslide.net Index past due 625 past events 426 past service costs 452, 454, 459–60 patents 212 pay-as-you-go 452 payments 694–5 see also share-based payments PCFRC see Private Company Financial Reporting Committee penalties 531 pensions accrued pension cost 450 applicability 455–6 business combinations 465 contributions to 465–6 cost recognition 457 funding practices 457 importance of accounting for 454 multi-employer plans 452, 463–5 multiple plans 463–5 need for accounting rules 455 objectives of accounting 455 plans 452, 463–5 prepaid pension costs 453 percentage-of-sales method 625 performance conditions 385–6 financial assets 631 hedging instruments 719–20 measures 764 obligations 476, 482–4, 490, 491–6 periodic inventory system 141, 147 period-specific effects 128 perpetual inventory system 141, 147 physically possible, definition 748 plan amendments 452 plan assets 451, 452–3, 459 plant see property, plant and equipment pledging 625 policies see accounting policies policyholder, definition 888 post-combination accounting 337–9 post-employment benefit plans 457–60, 466–71 actuarial gains/losses 459 cost measurement 457–8 current service cost 458 997 definition 453 disclosures 466–71 examples of disclosures 467–71 expected return on plan assets 459 interest on accrued benefit obligation 458–9 past service costs 459–60 transition adjustments 460 see also employee benefits; pensions; retirement benefit plans potential ordinary shares 804, 818 power 259, 261–2, 264–5 PPE see property, plant and equipment preference share capital 77 preferred shares 298, 364 premiums 435 prepaid expenses 74 prepaid pension costs 453 presentation agriculture 870–1 conceptual framework 36–7, 38–9 discontinued operations 253–5 earnings per share 816 financial instruments 696–705 first-time adoption 955–65 government grants 521–2 IFRS Practice Statement 41 income taxes 796–7 interim financial reporting 909–14 investment property 230 management commentary 41 mixed attribute model 82 non-current assets held for sale 252–3 profit or loss 90–7 revenue recognition 499 share capital 364–7 shareholders’ equity 363–8 statement of cash flows 54, 105–10 presentation currency 585, 593–4, 596–602 presentation of financial statements 45–63 accounting policies 55–6 accrual accounting basis 50 aggregation 50–1 comparative information 52–3 complete set of statements 54 compliance 49–50, 55 consistency 53–4 BINDEX 03/21/2018 14:53:34 Page 998 www.downloadslide.net 998 presentation of financial statements (Continued ) content 54–7 definitions of terms 47 disclosures 57 fairness exception 56–7 fair presentation 49–50 future developments 57 going concerns 50 illustrative statements 57–62 materiality 50–1 notes 47, 54, 55, 61 offsetting 51 reporting frequency 51–2 scope of standards 46 statement of compliance with IFRS 55 structure 54–7 see also financial statements present obligations 425–6 previous GAAP 937 see also Generally Accepted Accounting Practice prices/pricing arm’s length transactions 848 bid and ask prices 756 concessions 491 entry/exit prices 739 equity price risk 733, 734 “farm gate” prices 866 net selling price 195 other price risk 625, 707 stand-alone selling prices 477, 488–9 transaction prices 477, 484–91 transfer pricing 823 principal markets 740, 742, 743–4 principals 504 prior period errors 122 prior periods 122, 128, 137 Private Company Financial Reporting Committee (PCFRC) 24 probabilities 665–6 probable, definition 160, 249 products 202–3, 832, 836 product warranties 435–6 profit or loss 54 accounting 768 current tax 771 Index deferred tax 771 definitions 47, 85 operating 822, 836 presentation 90–7 taxable 769 see also fair value through profit or loss; gains; losses; statement of profit or loss projected benefits 453 projects completed July 2016 to June 2017 16 property see buildings; investment property; leases; real estate property, plant and equipment (PPE) 157–84 decommissioning costs 159, 162–4 definition of 160 definitions of terms 158–61 derecognition 177–8 disclosures 178–84 examples of disclosures 181–4 first-time adoption 954, 964 initial measurement 162–3 initial recognition 164–5 intercompany transactions 293–4 measurement 161–77 Meikles Group case study 964 recognition 161–77 revaluation 171–7 US GAAP comparisons 184 prospective application 122 prospective recognition 131 protective rights 259 provisions 425–41 best estimates 426–7 BP disclosure example 440–1 changes in 428 current liabilities 425–41 DaimlerChrysler case study 962 definitions 161, 420 disclosures 429–30, 440–1 examples of disclosures 440–1 future aspects 427, 446–7 practical examples 431–41 premiums 435 provision matrices 664 restructuring 428 BINDEX 03/21/2018 14:53:34 Page 999 www.downloadslide.net Index use of provision 428 US GAAP comparison 447–8 prudence 892 public markets 259 purchased or originated credit-impaired financial assets 625, 663 purchases firm commitments 160, 248–9, 623 non-financial items 628–9 regular way 625, 629 right to return 146, 503 see also repurchase agreements put options 508–9, 804, 815 puttable instruments definitions 363, 386, 625 financial instruments 625, 697–8 shareholders’ equity 369 put-together transactions 315 qualifying assets 161, 185–7, 190–1 qualitative disclosures 724, 726–8 quantitative disclosures 725, 726–8 R&D see research and development assets rate implicit in lease 531 raw materials 141 reacquired rights 323–4 real estate 564, 566, 569 realisation, definition 86 realised gains or losses 625 reasonable measure of progress 496 reasonable and supportable information 662–3 rebuttable presumption, IFRS 893 receivables current assets 74 impairment of financial instruments 663–4 Meikles Group case study 964 trade receivables 663–4, 731, 837 reclassifications adjustments 47, 85, 97–9 business models 636–8 dates 625 financial assets 636–8 financial instruments 625, 636–8, 644–6, 711 financial liabilities 644–6 999 first-time adoption 944, 964 Meikles Group case study 964 overlay approach 899–902 recognition acquisition method 331–3 agriculture 865, 868–70 borrowing costs 186–91 business combinations 322–3 conceptual framework 35–6, 38 contingent liabilities 322–3 current liabilities 420–9 current tax 770 deferred tax 770–1 definition 86 exceptions to 322–3 financial instruments 626–44, 651–3 financial liabilities 642–4 first-time adoption 944 foreign exchange 651–3 goodwill 331–3 government grants 517–21 IFRS for SMEs 21–3 income 86–7 insurance contracts 890, 894 intangible assets 196–216 interim financial reporting 914–24 inventories 141–50 investment property 224–30 leases 534–55 PPE 161–77 prospective recognition 131 recovery of losses 153 share-based payments 389–90 shareholders’ equity 363 specific costs 519 statement of changes in equity 86–8 statement of profit or loss and OCI 86–8 see also initial recognition; revenue recognition reconciliation (indirect) method 102, 107–10 reconciliations cash/cash equivalents 112 DaimlerChrysler case study 960–1 first-time adoption 956–7, 960–1, 964 Meikles Group case study 964 PPE 179 BINDEX 03/21/2018 14:53:34 Page 1000 www.downloadslide.net 1000 recourse, definition 625 recovery impairment of assets 236, 238, 243–5 losses 153 recoverable amounts 161, 196, 236, 238, 249 recurring fair value measurements 759–61 refinancing 423–4 refunds 461–2 regular way purchase/sale 625, 629 reimbursements 428 reinsurance 888, 891 reinsurers 888 related parties 531, 572, 840–1 related party disclosures 839–51 applicability of standards 843 definitions of terms 840–1 disclosures 846–51 examples of disclosures 850–1 identification 841–5 nature of disclosures 847–9 need for 841–2 scope of standards 842–3 significant influence 845 substance over form 843–4 US GAAP comparisons 851 relevant activities 259 reload feature 386 reload option 386 remote contingent losses 437 removal rights 260 renewable licence rights 212–13 renewals of leases 531, 571–2 repayments 365, 424–5, 523–4 replacement awards 348 replacement costs 173 reportable segments 823–30, 833–5 reporting date/periods consolidated statements 268 credit risk 659 first-time adoption 937, 939 foreign currency 603 statement of profit or loss and OCI 90–1 reporting entities 33–4, 38, 315, 585, 590 reporting frequency 51–2 repurchase agreements 508, 625 research, definition 196 Index research and development (R&D) assets 343 reserves 367 residual value acquisitions 574 definitions 161, 196 intangible assets 196, 213–14 leases 529, 531, 574 PPE 161, 170 restatements current cost approach 929–30 error correction 133–5 guidance 931–2 historical cost approach 927–9 hyperinflation 927–30, 931–2 interim periods 922–4 restructuring acquisition method 325 business combinations 325 definition 420 financial liabilities 645–6 provisions 428 retail method 141, 153–4 retained earnings 78, 134–6, 367–8, 375–6 see also statement of comprehensive income and retained earnings retirement benefit plans 853–9 accounting 853–9 defined benefit plans 451, 853, 856–9 defined contribution plans 451, 853–5, 858–9 definitions of 453, 854 definition of terms 853–4 disclosures 858–9 reporting 853–9 scope of standards 854–5 US GAAP comparisons 859 retirement of investment property 229–30 retroactive benefits 453 retrospective application 122, 125–7, 128 retrospective restatement 122 returnable deposits 422 returns 264–5, 453 revaluation method 241, 244–5 revaluation model 208–9, 880 revaluations adjustments 173–5 BINDEX 03/21/2018 14:53:34 Page 1001 www.downloadslide.net Index all assets in class 173 deferred tax 176–7 depreciation 172–3, 175–6 development costs 209–10 fair value 172 initial revaluation 174 intangible assets 208–10 PPE 171–7 revaluation reserves 367 subsequent 174–5 temporary differences 774 revenue model 477–97 combined contracts 480 consideration payable to customer 487–8 contract identification 478–82 contract modifications 480–2 core principle/steps 477–92 customer acceptance 496–7 discounts 489–90 financing components 486–7 identifying the contract 478–82 input methods 495 measurement 496 non-cash consideration 487 output methods 495 performance obligations 482–4, 491–6 stand-alone selling price 488–9 transaction prices 484–91 variable consideration 484–5, 491 revenue recognition 475–513 additional goods/services 505 agent vs principal 504 bill-and-hold 509–10 call options 508 consignments 509 contract cost 497–9 customers’ unexercised rights 505–6 definitions of terms 476–7 disclosures 499–503, 512 donated capital 511 examples of disclosures 512 forward options 508 identification 478–82 intellectual property 506–8 licensing 506–8 modifications 480–2 non-refundable upfront fees 506–11 1001 performance obligations 476, 482–4, 490, 491–6 presentation 499 principal vs agent 504 put options 508–9 repurchase agreements 508 revenue model 477–97 royalties 507–8 sale with right of return 503 scope of standards 477 service concessions 510–11 specific transactions 503–11 statement of financial position 499 unexercised rights of customers 505–6 US GAAP comparison 512–13 warranties 503–4 revenues as basis for amortisation 206–7, 211 definition 476 offsetting items 96–7 operating 526 segment 823 statement of profit or loss and OCI 92–7 temporary differences 773 reversals of impairments of assets 244–5 reverse acquisitions 315 reverse spin-offs 315 rights consolidated statements 262–5 customers’ unexercised rights 505–6 reacquired 323–4 removal 260 renewable licence 212–13 to return purchases 146, 503 right of setoff 77 see also offsetting risk currency 707, 733–4 equity price 733, 734 financial 888 financial instrument disclosures 724 insurance 888, 889–90 interest rate 707 liquidity 624, 707, 731–2 market 624, 707, 732–4 non-performance 740, 750, 752 other price 625, 707 BINDEX 03/21/2018 14:53:34 Page 1002 www.downloadslide.net 1002 risk (Continued ) provisions 427 see also credit risk risk assumptions 742, 749–50 risk management 673, 718 risk premiums 740 roll-up or put-together transactions 315 royalties 507–8 sale-leaseback transactions 531, 551–2, 562–6, 564 sales biological assets 869–70 consignments 144–6 inter/intrasegment 822 of lease to third party 573–4 non-financial items 628–9 percentage method 625 regular way 625, 629 revenue 92 with right of return 503 stand-alone selling prices 477, 488–9 sales-based royalties 507–8 sales-type leases 543–7 Scholes see Black–Scholes–Merton model seasonal revenues 916 Securities and Exchange Commission (SEC) 2–6, 9–11, 24 securitisation 625 segment accounting policies 823 segment assets 823, 830–1, 834 segment expenses 823 segment revenues 823 segments, operating 821–38 self-constructed assets 164–6 selling prices, stand-alone 477, 488–9 sensitivity analysis 732–4 separate financial statements 257–60, 299–301 accounting for 286 associates 257–60, 298 definitions of 260, 315 definitions of terms 259–60 disclosures 300–3 IAS 28 requirements 298, 301 investment entities 300 US GAAP comparisons 305–7 Index separate vehicles 260 service concessions 510–11, 525–6, 954 service conditions 386, 390–2, 396–7 service costs 454, 458, 459–60 services customer options 505 definition 453–4 distinct 483–4 operating segments 832 revenue recognition 505 share capital 371 setoff right of 77 see also offsetting settlement contingent provisions 703–4 contracts 814–15 definition 454 derivatives 670 entity’s own equity instruments 697–8 net settlement 398–9 see also cash-settled share-based payments; equity-settled share-based payments shadow accounting 893 share agreements 804 share-based payments 383–415 awards 324, 348 cash alternatives 400–1 cash-settled 384, 397–400 definition 386 definitions of terms 384–7 disclosures 403–5 employee share options 396–7, 406–15 equity-settled 362, 385, 391–7 examples of disclosures 404–5 fair value 393–6, 410–12 among group entities 401–2 IFRS for SMEs 23 income taxes 796 measurement 389–90, 398 modifications 394–7 multiperiod options 412–15 overview 387–9 recognition 389–90 scope of standards 384 share options 387, 396–7, 406–15 BINDEX 03/21/2018 14:53:34 Page 1003 www.downloadslide.net Index transactions 386 US GAAP comparison 405–6 vesting conditions 387, 390, 396–7, 398 see also cash-settled share-based payments; equity-settled share-based payments share capital disclosures 78, 364–7 dividends 365–6 movements in accounts during year 365 par value per share 365 preference 77 presentation 364–7 repayment of capital 365 retained earnings 78 issued for services 371 shareholders’ equity 77, 78, 364–7 shares reserved for future issuance 366–7 statement of changes in equity 77–8, 100 treasury shares 366 unpaid capital 365 shareholders’ equity 361–81 classification 368–70 compound financial instruments 370, 374–5 convertible instruments 374–5 co-operative entities 379 definitions of terms 362–3 disclosures 363–8, 380–1 dividends 376–8 examples of disclosures 380–1 fair value measurement 752 measurement 363 other equity 367–8 presentation 363–8 puttable shares 369 recognition 363 reserves 367 retained earnings 367–8, 375–6 share capital 77, 78, 364–7 share issuance 364–5, 366–7, 370–9 statement of financial position 77–8 treasury shares 366, 378–9 types of shares 363–4 US GAAP comparison 381 share issuance 370–9 accounting for 370–1 1003 additional contributed capital 373–4 additional guidance 370–4 compound instruments 374–5 convertible instruments 374–5 co-operative entities 379 dividends 376–8 donated capital 374 retained earnings 375–6 share capital issued for services 371 shareholders’ equity 364–5, 366–7, 370–9 shares reserved for future issuance 366–7 share subscriptions 371–3 share unit issuance 371 treasury shares 378–9 share options 387, 396–7, 406–15 shares contracts settled in 814–15 ordinary 363–4, 804, 813–14, 818 preferred 298, 364 treasury 366, 378–9, 704 see also earnings per share; share share subscriptions 371–3 share warrants 700, 703 short-term employee benefits 454, 456, 471 short-term investments 625 short-term obligations 423–4 SIC see Standards Interpretations Committee significant influence 260, 294–5, 845 significant judgements/assumptions 302 significant transactions 911–12 similar productive assets 161 simple capital structure, EPS 805–9 small and medium-sized entities (SMEs) 18–19 see also IFRS for SMEs SME Implementation Group (SMEIG) 24 SMEs see small and medium-sized entities special-purpose entities (SPEs) 312, 315, 946 specific borrowings 187 specific costs 519 specific identification 141, 150–1 specific transactions 503–11, 789–96 SPEs see special-purpose entities spin-offs 315 sponsors of SPEs 312 BINDEX 03/21/2018 14:53:34 Page 1004 www.downloadslide.net 1004 spot exchange rate 585 stand-alone selling prices 477, 488–9 standard costs 141, 154 standard-setting process 7–9 Standards Interpretations Committee (SIC) current standards 14–16 SIC 18 120 SIC 21 176–7 SIC 27 552–3 SIC 32 215 stapling arrangements 315 statement of cash flows 101–18 background 102–5 benefits of 102–4 cash/cash equivalents 104–5 classification 105–7 consolidated 117–18 DaimlerChrysler case study 963 definitions of terms 102 disclosures 112–13 interim financial reporting 913–14 non-cash transactions 104 operating activities 102, 105–10 presentation 54, 105–10 requirements 110–12 scope of standards 102 US GAAP comparisons 118 worksheet approach examples 114–17 see also cash flows statement of changes in equity 81–8, 99–100 components 99 concepts of income 86 definition of 85 definitions of terms 84–6 disclosures 100 future developments 84 interim financial reporting 913–14 measurement 86–8 presentation 54, 62 recognition 86–8 scope of standards 84 share capital 77–8, 100 US GAAP comparisons 100 see also equity statement of compliance with IFRS 55 Index statement of comprehensive income 829 and changes in equity 714–15 and retained earnings 134–6 see also comprehensive income; other comprehensive income statement of financial position 65–79 agriculture 870 assets 73–5 consolidated statements 72 content 70–2 DaimlerChrysler case study 960 deferred tax 797 definitions of terms 67–8 elements in heading 70 error correction 134 fair valuation gains/losses 653 future developments 79 general concepts 68–70 government grants 521–2 hyperinflation 927–8 interim financial reporting 913–14 liabilities 67–9, 75–7 liability method 768, 769, 771 Meikles Group case study 964 minimum line items 71 opening IFRS statement 936, 941, 943–5 presentation 54, 58–9 revenue recognition 499 scope of standards 67 shareholders’ equity 77–8 statement of cash flows 114 structure 70–2 US GAAP comparisons 79 statement of profit or loss 59–60 statement of profit or loss and OCI 81–99, 100 agriculture 871 concepts of income 86 definition of 85 definitions of terms 84–6 disclosures 89–90, 93 future developments 84 income taxes 93, 797–9 interim financial reporting 913–14 measurement 86–8 presentation 54, 60, 90–7 recognition 86–8 BINDEX 03/21/2018 14:53:34 Page 1005 www.downloadslide.net Index scope of standards 84 statement of cash flows 114–15 statement title 90 US GAAP comparisons 100 see also other comprehensive income step acquisitions 355–6 straight-line depreciation 167–9 straight line method 535–6, 542–3 stripping costs 882–4 structured entities 260, 265, 303 structure of financial statements 54–7 structuring techniques 319 subleases 574–5 subsequent costs 207 subsequent expenditures 225–6 subsequent measurement 635, 642–6 subsequent revaluations 174–5 subsidiaries acquisitions 270 consolidated statements 260, 261, 270–2 definitions 260, 315 disclosure of interests in 302 disposals 270 first-time adoption 952–3 income taxes 793–5 investment property 224 parent losing control of 270–2 parent relationships 260–1, 270–2, 847 related party disclosures 845, 847 subsidies 112 sum-of-the-years’ digits (SYD) 168 swaps 111, 669–71 SYD see sum-of-the-years’ digits tangible assets 157, 161, 322, 881 taxable profit or loss 769 taxable temporary differences 769 taxation depreciation 170 interim financial reporting 916–18 inventories 150 share-based payments 398–9 see also income taxes tax base 769, 772 tax benefit recoverability 792 tax credits carrybacks/carryforwards 917–18 1005 income taxes 773, 775, 788 interim financial reporting 917 tax expense/income 769, 799–800 tax jurisdictions 916 tax law 785–6 tax losses 775, 917–18 tax rates 785, 787–9 tax status 786–9 technical feasibility of product 202–3 technology-based intangible assets 342–3 temporary differences business acquisitions 791 consolidated statements 792 deferred tax 772–4, 776, 777–81 definitions 768–9 identification 772–4 terminal funding 454 termination benefits 454, 456, 472 termination of lease 538–9, 571 third parties contributing to pension plans 465–6 fair value measurement 750–2 sale/assignment of lease 573–4 time value of options 687–90 total cash flows 676–7 total comprehensive income 47, 85, 88–9 trade dates 625 trade discounts 489–90 trade receivables 663–4, 731, 837 traders 140 trading assets 74 transaction costs definition 625 fair value 740, 758–9 financial instruments 625, 627 transaction dates 585 transaction prices 477, 484–91 transactions involving derivatives 669–70 transfer pricing 823 transfers assets 639–41 equity instrument restrictions 752 financial assets 638–41 investment property 227–9 ownership 270–2, 540–1 BINDEX 03/21/2018 14:53:34 Page 1006 www.downloadslide.net 1006 transition accounting policies 130 consolidated statements 303–4 employee benefits 460 financial instruments 692–6 hedge accounting 695–6 insurance contracts 902 investment entities 305 joint operations 305 joint ventures 304–5 revenue recognition 502–3 transition to IFRS see first-time adoption translation adjustments 921–2 cumulative differences 952 in detail 605–7 example 596–602 financial statements 592–602 first-time adoption 952 foreign currency 584, 592–602, 605–7, 652–3 interim financial reporting 921–2 transport costs 740, 759 treasury shares 366, 378–9, 704 treasury share/stock method 811, 818 twelve-month expected credit loss 621, 655, 729–30 unbundling 888, 893–4 uncertainties 339, 427, 783–5 unconsolidated structured entities 303 unearned finance income 531 unearned revenues 422 unexercised rights 505–6 unfavourable contracts 315, 344 unguaranteed residual value 531 United Kingdom (UK) 17 United States (US) 9–11, 150 see also US GAAP units of account 740, 741, 742, 751 units of production depreciation 169 unobservable inputs 740, 753–4, 761–2 unpaid share capital 365 unquoted equity instruments 695 unrealised gains 97 unrealised intercompany profit 316 unused tax losses 775 Index usage-based royalties 507–8 useful life amortisation period 210–11 definitions 161, 196, 236, 531 intangible assets 196, 210–11, 213–14 PPE 161, 170, 182 residual value 213–14 US GAAP accounting policies 124–5 fair value measurement 738 IASB and Europe 13–14 IASB and financial reporting 9–11 IFRS for SMEs 18–19, 21 introduction to IFRSs 2, 9–11, 13–14, 18–19, 21 leveraged leases 576–81 special leasing situations 562–75 transition to IFRS 959–65 see also Generally Accepted Accounting Practice US GAAP comparisons accounting estimates 138 accounting policies 138 agriculture 875 associates 305–7 borrowing costs 191–2 business combinations 360 conceptual framework 42–3 consolidated statements 305–7 contingencies 447 discontinued operations 255 earnings per share 818–19 employee benefits 473 errors 138 extractive industries 885–6 fair value 765–6 foreign currency 613 government grants 526 hyperinflation 932 impairment of assets 255 income taxes 801–2 insurance contracts 903 intangible assets 220 interim financial reporting 924 inventories 155–6 investment property 233 joint arrangements 305–7 BINDEX 03/21/2018 14:53:34 Page 1007 www.downloadslide.net Index leases 561 operating segments 838 PPE 184 presentation of financial statements 63 provisions 447–8 related party disclosures 851 retirement benefit plans 859 revenue recognition 512–13 separate financial statements 305–7 share-based payments 405–6 shareholders’ equity 381 statement of cash flows 118 statement of changes in equity 100 statement of financial position 79 statement of profit or loss and OCI 100 see also Generally Accepted Accounting Practice valuation accrued benefit 450 actuarial 451 allowances 339 employee share options 408–15 fair value 742, 747–9, 756–8, 761–2 FIFO method 127, 129 inventories 147–50 projected benefits 453 see also revaluation 1007 value in use 161, 196, 236, 238–9, 249 variable consideration 484–5, 491 variable (direct) costing 140, 149–50 variable interest entities (VIEs) 306–7 variances 919–20 vest, definition 387 vested benefits 454, 854 vesting conditions 387, 390, 396–7, 398 vesting periods 387 VIEs see variable interest entities volume discounts 486 volume rebates 918 voting rights 262–4 WA see weighted averages warranties 435–6, 503–4 warrants 700, 703, 804, 811–12 Waste Electrical and Electronic Equipment (WE&EE) 432 website development 215–16 weighted-averages (WA) accounting policies 127–9 definition 141 earnings per share 805–9 inventories 141–2, 151–2, 154, 155 work in progress 141 write-offs 650 written put options 815 BINDEX 03/21/2018 14:53:34 Page 1008 www.downloadslide.net ... Interpretation and Application of IFRS Standards Salim Alibhai et al  2018 John Wiley & Sons, Ltd Published 2018 by John Wiley & Sons, Ltd INTRODUCTION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS. .. standard-setting process and it has duly become a member of ASAF APPENDIX A: CURRENT INTERNATIONAL FINANCIAL REPORTING STANDARDS (IAS /IFRS) AND INTERPRETATIONS (SIC/IFRIC) IFRS IFRS IFRS IFRS IFRS. .. little as possible and left a large degree of Wiley Interpretation and Application of IFRS Standards 2018 www.downloadslide.net interpretation to practice and for the sanction of the courts This