GIáo trình interpertation and application of IFRS standars 2021 wiley

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contributions to the US GAAP comparisons, interpretations and application material This edition contains interpretations and application of the IFRS Standards, as approved by the International Accounting Standards Board (Board) for issue up to 30 June 2020, that are required to be applied for accounting periods beginning on January 2021 This book is printed on acid‐free paper Copyright © 2021 by John Wiley & Sons, Ltd All rights reserved This publication contains copyright material of the IFRS® Foundation in respect of which all rights are reserved Reproduced by John Wiley & Sons Ltd with the permission of the IFRS Foundation No permission granted to third parties to reproduce or distribute For full access to IFRS Standards and the work of the IFRS Foundation please visit http://eifrs.ifrs.org 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, 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books For more information about Wiley products, visit our website at www.wiley.com ISBN: 978‐1‐119‐81863‐2 (pbk) ISBN: 978‐1‐119‐981864‐9 (epdf) ISBN: 978‐1‐119‐81865‐6 (epub) ISBN: 978‐1‐119‐81866‐3 (obook) ‘IFRS®’ is a registered trade mark of the IFRS Foundation and is used by John Wiley & Sons Ltd under licence subject to the terms and conditions contained therein Please contact the IFRS Foundation for details of countries where its trade marks are in use and/or have been registered 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 permission 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 Table of Contents COVER TITLE PAGE COPYRIGHT ABOUT THE AUTHORS INTRODUCTION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS INTRODUCTION THE CURRENT STRUCTURE PROCESS OF IFRSSTANDARD‐SETTING APPENDIX A: CURRENT INTERNATIONAL FINANCIAL REPORTING STANDARDS (IAS/IFRS) AND INTERPRETATIONS (SIC/IFRIC) APPENDIX B: IFRS FOR SMEs CONCEPTUAL FRAMEWORK INTRODUCTION CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING 2018 HIERARCHY OF STANDARDS IFRS PRACTICE STATEMENT 1—MANAGEMENT COMMENTARY FUTURE DEVELOPMENTS US GAAP COMPARISON PRESENTATION OF FINANCIAL STATEMENTS INTRODUCTION SCOPE DEFINITIONS OF TERMS FINANCIAL STATEMENTS GENERAL FEATURES STRUCTURE AND CONTENT FUTURE DEVELOPMENTS ILLUSTRATIVE FINANCIAL STATEMENTS US GAAP COMPARISON STATEMENT OF FINANCIAL POSITION INTRODUCTION SCOPE DEFINITIONS OF TERMS GENERAL CONCEPTS, STRUCTURE AND CONTENT CLASSIFICATION OF ASSETS CLASSIFICATION OF LIABILITIES CLASSIFICATION OF SHAREHOLDERS’ EQUITY FUTURE DEVELOPMENTS US GAAP COMPARISON STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME, AND CHANGES IN EQUITY INTRODUCTION FUTURE DEVELOPMENTS SCOPE DEFINITIONS OF TERMS CONCEPTS OF INCOME RECOGNITION AND MEASUREMENT STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME PRESENTATION IN THE PROFIT OR LOSS SECTION OTHER COMPREHENSIVE INCOME STATEMENT OF CHANGES IN EQUITY US GAAP COMPARISON STATEMENT OF CASH FLOWS INTRODUCTION SCOPE DEFINITIONS OF TERMS BACKGROUND PRESENTATION OTHER REQUIREMENTS DISCLOSURE AND EXAMPLES CONSOLIDATED STATEMENT OF CASH FLOWS US GAAP COMPARISON NOTES ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS INTRODUCTION SCOPE DEFINITIONS OF TERMS IMPORTANCE OF COMPARABILITY AND CONSISTENCY IN FINANCIAL REPORTING ACCOUNTING POLICY SELECTING ACCOUNTING POLICIES CHANGES IN ACCOUNTING POLICIES CHANGES IN ACCOUNTING ESTIMATES CORRECTION OF ERRORS US GAAP COMPARISON INVENTORIES INTRODUCTION DEFINITIONS OF TERMS RECOGNITION AND MEASUREMENT METHODS OF INVENTORY EXAMPLES OF FINANCIAL STATEMENT DISCLOSURES US GAAP COMPARISON PROPERTY, PLANT AND EQUIPMENT INTRODUCTION FUTURE DEVELOPMENTS DEFINITIONS OF TERMS RECOGNITION AND MEASUREMENT DERECOGNITION DISCLOSURES EXAMPLES OF FINANCIAL STATEMENT DISCLOSURES US GAAP COMPARISON 10 BORROWING COSTS INTRODUCTION DEFINITIONS OF TERMS RECOGNITION AND MEASUREMENT US GAAP COMPARISON 11 INTANGIBLE ASSETS INTRODUCTION SCOPE DEFINITIONS OF TERMS RECOGNITION AND MEASUREMENT DISCLOSURES EXAMPLE OF FINANCIAL STATEMENT DISCLOSURE US GAAP COMPARISON 12 INVESTMENT PROPERTY INTRODUCTION DEFINITIONS OF TERMS IDENTIFICATION RECOGNITION AND MEASUREMENT PRESENTATION AND DISCLOSURE EXAMPLES OF FINANCIAL STATEMENT DISCLOSURES US GAAP COMPARISON 13 IMPAIRMENT OF ASSETS AND NON‐CURRENT ASSETS HELD FOR SALE INTRODUCTION DEFINITIONS OF TERMS: IMPAIRMENT OF ASSETS IMPAIRMENT OF ASSETS (IAS 36) EXAMPLES OF FINANCIAL STATEMENT DISCLOSURES FUTURE DEVELOPMENTS DEFINITIONS OF TERMS: NON‐CURRENT ASSETS HELD FOR SALE NON‐CURRENT ASSETS HELD FOR SALE DISCONTINUED OPERATIONS EXAMPLES OF FINANCIAL STATEMENT DISCLOSURES US GAAP COMPARISON 14 CONSOLIDATIONS, JOINT ARRANGEMENTS, ASSOCIATES AND SEPARATE FINANCIAL STATEMENTS INTRODUCTION DEFINITIONS OF TERMS CONSOLIDATED FINANCIAL STATEMENTS EXAMPLES OF FINANCIAL STATEMENT DISCLOSURES JOINT ARRANGEMENTS ASSOCIATES EQUITY METHOD OF ACCOUNTING EXAMPLES OF FINANCIAL STATEMENT DISCLOSURES SEPARATE FINANCIAL STATEMENTS DISCLOSURE REQUIREMENTS US GAAP COMPARISON 15 BUSINESS COMBINATIONS INTRODUCTION DEFINITIONS OF TERMS BUSINESS COMBINATIONS AND CONSOLIDATIONS BUSINESS COMBINATIONS DISCLOSURE REQUIREMENTS EXAMPLES OF FINANCIAL STATEMENT DISCLOSURES FUTURE DEVELOPMENTS US GAAP COMPARISON NOTE 16 SHAREHOLDERS' EQUITY INTRODUCTION DEFINITIONS OF TERMS RECOGNITION AND MEASUREMENT PRESENTATION AND DISCLOSURE CLASSIFICATION BETWEEN LIABILITIES AND EQUITY SHARE ISSUANCES AND RELATED MATTERS FUTURE DEVELOPMENTS EXAMPLES OF FINANCIAL STATEMENT DISCLOSURES US GAAP COMPARISON 17 SHARE‐BASED PAYMENT INTRODUCTION SCOPE DEFINITIONS OF TERMS OVERVIEW RECOGNITION AND MEASUREMENT EQUITY‐SETTLED SHARE‐BASED PAYMENTS CASH‐SETTLED SHARE‐BASED PAYMENTS SHARE‐BASED PAYMENT TRANSACTIONS WITH CASH ALTERNATIVES SHARE‐BASED TRANSACTIONS AMONG GROUP ENTITIES DISCLOSURE EXAMPLES OF FINANCIAL STATEMENT DISCLOSURES US GAAP COMPARISON APPENDIX: EMPLOYEE SHARE OPTIONS VALUATION EXAMPLE UNDER IFRS 18 CURRENT LIABILITIES, PROVISIONS, CONTINGENCIES AND EVENTS AFTER THE REPORTING PERIOD Black‐Scholes‐Merton model 412–414 business combinations 327 with cash alternatives 404–405 cash‐settled 386, 400–403 definitions 386–389 disclosure requirements 407–409 employee share options 393, 400–403, 409–418 equity‐settled 387, 393–400 income taxes 781 measurement 391–392 overview 389–391 recognition 391–392 small and medium‐sized entities 13 transactions 389 US GAAP comparisons 409 vesting conditions 389, 392–393, 393–394, 400–401, 402 share capital disclosure requirements 75–76 statement of financial position 74–75 shareholders' equity 363–384 additional contributed capital 369–370, 375–376 classification 74–76, 365–366, 370–372 convertible instruments 377 definitions 364–365 disclosures 365–370, 382–384 dividends 367, 379–381 donated capital 376–377 fair value 738 future developments 382 future reserved issuances 368–369 issuances 372–377 measurement 365 members' shares 381–382, 680 movements during year 367 par value per share 367 presentation 365–370 puttable shares 371–372 recognition 365 reserves 369 retained earnings 370, 377–379 revaluation reserves 369 subscriptions 374–375 treasury shares 368, 381, 686 unit issuances 373–374 unpaid capital 366–367 US GAAP comparisons 384 share of losses exceeding the interest 303 share options binomial model 414–418 Black‐Scholes‐Merton model 412–414 definition 389 valuation 409–418 shares capital presentation and disclosure 366–369 cash flow per 109 issuances 372–377 par value 367 treasury 686 types of 365–366 see also earnings per share; share‐based payment share subscriptions 374–375 share unit issuances 373–374 short‐term employee benefits definition 454 IAS 19 applicability 456 other 473 short‐term investments, definition 604 short‐term obligations expected to be refinanced 425–426 SIC 29 527–529 see also service concession arrangements SIC‐31 478 significant financing components, contracts 488–489 significant increases, credit risk 636–642 significant influence 289–290, 298, 832–833 simple capital structures, earnings per share 791–795 small and medium‐sized entities (SMEs) application of IFRS 14 associates and joint ventures 13 deferred taxes 13 definition 8–9 derecognition 12 disclosure requirements 13 finance leases 13 goodwill impairment 12–13 hedge accounting 12 implications of IFRS 13–14 measurement 11–13 modifications 9–13 omitted topics 10 overview 8–14 recognition 11–12 research and development 13 share‐based payment 13 specific borrowings 188 specific costs, government grants 521–522 specific identification 141, 150–151 spot exchange rates, definition 563 staged acquisitions 300 stand‐alone selling price contract modifications 483–484 definition 479 transaction pricing 491 standard costs 141, 154 standards current, list of 6–8 hierarchy of 36–37 inventories 139–140 setting, process of 4–5 small and medium‐sized entities 8–14 standstill agreements 341–342 statement of cash flows 99–116 acquisitions and disposals 110 background 100–103 benefits of 100–102 cash and cash equivalents 102–103, 110 cash flow per share 109 classification 103–105 consolidated 115–116 definitions 100 direct method 105–106, 108 extraordinary items 110 financial institutions 109–110 financing activities liabilities 111 foreign currencies 109 futures, forward contracts, options and swaps 110 government grants 524–525 gross vs net 109 illustration 112–115 indirect method 106–108 net reporting 109 non‐cash transactions 102 other disclosures 110–115 other requirements 109–110 presentation 103–108 reporting basis 105–108 scope of IAS 100 US GAAP comparisons 116 statement of changes in equity 95–96 definition 81 financial instruments 698–699 US GAAP comparisons 96–97 statement of financial position 63–76 agriculture 858 concepts 67 definitions 65–66 elements 65–66 first‐time adoption 937–939 foreign currency financial assets 633 future developments 76 government grants 524 income taxes 782 inventories 70 offsetting 74 opening 937–939 receivables 71 revenue contracts 501 shareholders' equity 74–76 structure and content 67–69 US GAAP comparison 76 statement of profit or loss and other comprehensive income 77–95 agriculture 858–859 definitions 81–82 financial instruments 698–699 future developments 80 income concepts 82–83 income taxes 782–783 measurement 83–84 other comprehensive income 93–95 overview 84–86 profit or loss section 86–93 recognition 83–84 US GAAP comparisons 96–97 statements of compliance, financial statements 52–53 status, of conceptual framework 16 step acquisitions, business combinations 356–357 straight‐line depreciation 166 stripping costs, surface mining 870–872 structures business combinations 319 conceptual framework 15–16 financial statements 51–54 of IFRS 3–4 statement of financial position 67–69 subscriptions, share issuances 374–375 subsequent measurement financial assets 614 financial liabilities 621–623 subsidiaries acquisitions and disposals, statement of cash flows 110 control 263–267 disclosure requirements 306–307 disposals 272–274 first‐time adoption 947 identification 262–263 indirect interest 271–272 intercompany transactions and balances 268 investment entities 274–282 investment property leases 226 investments and income taxes 778–779 measurement 270 non‐controlling interests 268–269 ownership interest 270–271, 273–274 power 263–267 related party disclosures 835 reporting dates 270 share‐based payments 405–406 uniformity of accounting 270 US GAAP comparisons 308–309 voting rights 264–266 substance over form, related parties 831–832 sum‐of‐the years digits (SYD) depreciation 167 supply contracts, business combinations 342 surface mining, stripping costs 870–872 surplus, definition 452 suspension of borrowing cost capitalisation 190–191 swaps 110, 649–650, 651 SYD see sum‐of‐the years digits tangible assets business combinations 325 decommissioning costs 161–163 definition 158 depreciation 165–171 qualifying 186 research and development 343 revaluations 171–176 tax dividend impacts 381 foreign currency 574 see also income taxes tax credits deferred income taxes 760 interim financial reports 910–911 tax loss/credit carrybacks/carryforwards 911 tax methods, depreciation 170 tax obligations withheld, cash‐settled share‐based payments 402–403 tax‐planning 765–766 tax status changes 771–772 technological feasibility 203 technology‐based intangible assets 203–205, 342–343 temporary differences consolidated financial statements 777 deferred income taxes 756–758, 765 future 765 term, of lease 537–538 termination benefits 474 definition 454 IAS 19 applicability 457 third‐party contributions, post‐employment benefit plans 468 third‐party credit agreements, liabilities inseparable 738 timeliness, concept 19 time value of money 488–489 of options 668–670 total comprehensive income, definition 44, 82 trade date 604 trade dress, business combinations 341 trademarks, business combinations 340–341 trade names, business combinations 340–341 trade payables 73 trade receivables, loss allowances 643–644 trade secrets 342 trading financial assets 71 transaction costs definition 726 fair vale 746 financial instruments 605 transaction dates, foreign currency 563, 567 transaction price allocation 490–493 changes in 490 consideration payable to customer 490 definition 479 determination 486–490 discounts 491–493 non‐cash 489 significant financing components 488–489 stand‐alone selling 491 variable consideration 486–488, 493 transactions derivative 648–653 foreign currencies 562, 566–570, 588–590 hedging 588–590 not orderly 731–733 orderly 728 transfer pricing, definition 809 transfers customer assets 181 financial assets 617–619 investment property 230–231 non‐reciprocal 180–181 see also exchange transactions transiting goods 140, 142–144 transition adjustments, post‐employment benefit plans 462 transitional provisions, insurance contracts 891 transition dates 933–934 transition to IFRS financial instruments 673–677 hedge accounting 677 key dates 933–934 steps in 934 see also first‐time adoption translation 562, 564–566, 571–581 consolidation of operations 574 first‐time adoption 946 functional into presentation currency 571–573 interim financial reports 915 net investment in a foreign operation 574 presentation into functional currency 573 taxation effects 574 transport costs, fair vale 746 treasury shares 368, 381, 686 treasury stock 75 types of shares 365–366 unbundling 877, 882 uncertainty accounting policy changes 126–129 estimates 429 of measurement 31 tax treatments 768–769 unconsolidated structured entities 307 understandability concept 19 measurement 31 unearned revenues or advances 424 unevenly incurred annual costs 909 unexercised rights of customers 509 uniformity, consolidated financial statements 270 unit of account definition 23, 726 fair value 728 units of production depreciation 168–169 unlawful environmental damage 434–435 unobservable inputs 726, 739, 741–742 unorderly transactions 731–733 unpaid capital 366–367 unpatented technology, business combinations 342 unquoted equity instruments 677 unrelated investors 279 unused losses, deferred income taxes 760 upfront fees, non‐refundable 509 usage‐based royalties 511 useful financial information, qualitative characteristics 18–19 useful life 170 definition 159, 196, 238 intangible assets 214 use of provisions recognised 430 use rights, business combinations 342 valuation binomial model 414–418 Black‐Scholes‐Merton model 412–414 fair value techniques 728, 742–745 inventories 147–150 premises, fair value 727, 733–735 share options 410–417 see also measurement valuation allowances, business combinations 339 value in use (of assets) 29, 32 definition 196, 238, 251 impairment of assets 240–241 variable consideration constraining estimates 487–488 contracts 486–488, 493 variable costing 140, 150 variable returns, exposure 266 verifiability concept 19 measurement 31 vest, definition 389 vested benefits, definition 842 vesting conditions cash‐settled share‐based payments 402 cash‐settled share‐based payments 402 definition 389 equity‐settled share‐based payments 393–394, 400–401 share‐based payment 392–393 vesting periods 389 volume rebates, interim financial reports 911–912 voting rights 264–266 warranties, provisions 438–439, 506–507 warrants, earnings per share 797–798 website development and operating costs 216–217 weighted‐average (WA) costing 141, 142, 152–153 weighted‐average (WA) inventory costing 123, 127–128 weighted‐average (WA) number of ordinary share outstanding 792–795 work in progress, definition 141 write‐offs, financial assets 630 year‐end bonuses, interim 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Maintenance of the IFRS for SMEs Implications of the IFRS for SMEs Application of the IFRS for SMEs INTRODUCTION The mission of the IFRS Foundation and the International Accounting Standards Board... chairman of the IFRS working group of PKF Wallast and has been a member of the Technical Bureau of PKF Wallast in the Netherlands T V Balasubramanian, FCA, CFE, Registered Valuer and Insolvency Professional,... and previously served as a member of the Auditing and Assurance Standards Board of the ICAI, India and Committee on Accounting Standards for Local Bodies of the ICAI, India He has been part of