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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
Quick answers to your IFRS questions Presented in a question and answer format, The Vest Pocket IFRS provides a brief explanation of each IFRS topic, the issues involved, and the solution. Coverage includes calculations, journal entries, flowcharts outlining various options, footnotes disclosures, and brief examples. * Provides quick answers to specific questions in a Q & A format * Focuses on the most common accounting problems arising from a particular IFRS topic * Calculations, footnotes disclosures, and brief examples are provided * Other titles by Bragg: The Vest Pocket Controller, Accounting Best Practies, Sixth Edition, and Just-in-Time Accounting, Third Edition The first book of its kind to answer IFRS issues on the spot, The Vest Pocket IFRS gives you the quick, specific IFRS answers you need right now.
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Seitenzahl: 541
Veröffentlichungsjahr: 2010
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Table of Contents
Title Page
Copyright Page
ABOUT THE AUTHOR
WHAT THIS BOOK WILL DO FOR YOU
PART I - THE FINANCIAL STATEMENTS
CHAPTER 1 - FINANCIAL STATEMENTS PRESENTATION
What Is Profit or Loss?
What Is Other Comprehensive Income?
What Information Is Included in a Complete Set of Financial Statements?
What Line Items Do I Include in the Statement of Financial Position?
What Information Should I Disclose in the Statement of Financial Position?
When Do I Present Information as Current or Noncurrent?
What Line Items Do I Include in the Statement of Comprehensive Income?
What Information Should I Disclose in the Statement of Comprehensive Income?
What Line Items Do I Include in the Statement of Changes in Equity?
What Are the Main Components of the Statement of Cash Flows?
What Are the Direct and Indirect Method Layouts for the Statement of Cash Flows?
What Line Items Should I Include in the Statement of Cash Flows?
What Additional Information Should I Disclose with the Financial Statements?
How Frequently Should I Issue Financial Statements?
What Comparative Information Should I Report?
How Consistent Should the Financial Statement Presentation Be?
How Do I Aggregate Information in the Financial Statements?
What Are International Financial Reporting Standards?
Do I Have to Affirm Compliance with International Financial Reporting Standards?
What Impact Does a Going Concern Issue Have on the Financial Statements?
Is the Accrual Basis of Accounting Required?
Can I Offset Assets and Liabilities or Revenue and Expenses?
Can I Present Any Income or Expense Items as Extraordinary Items?
How Do I Disclose a Financial Statement Reclassification?
What Is a Material Omission or Misstatement?
CHAPTER 2 - CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
What Are Consolidated Financial Statements?
Who Should Present Consolidated Financial Statements?
When Must a Parent Include Another Entity in Its Financial Statements?
Should a Special Purpose Entity Be Consolidated?
What Is the Process for Consolidating Financial Statements?
As of What Date Do I Include the Revenue and Expenses of an Acquired Subsidiary?
What Happens to a Consolidation If You Lose Control of a Subsidiary?
What Information Should I Disclose about Consolidated Financial Statements?
CHAPTER 3 - OPERATING SEGMENTS
What Is an Operating Segment?
What Type of Entity Must Report about Its Operating Segments?
When Can I Aggregate Operating Segments?
What Are the Quantitative Thresholds for Segment Reporting?
How Do I Report Segments That Are Not Separately Identifiable?
Is There a Limit to the Number of Reportable Segments?
What Controls Should I Use for Segment Reporting?
What Segment-Specific Information Do I Disclose?
What Additional Information Do I Disclose?
What Reconciling Information Do I Disclose?
When Do I Restate Segment Information?
What Information Do I Disclose about Products and Services?
What Information Do I Disclose about Geographical Areas?
What Information Do I Disclose about Major Customers?
CHAPTER 4 - EARNINGS PER SHARE
Which Entities Should Report Earnings per Share?
What Is Dilution and Anti-Dilution?
What Are Options and Warrants?
What Is an Ordinary Share?
How Do I Calculate Basic Earnings per Share?
How Do I Calculate Diluted Earnings per Share?
When Should I Make Retrospective Adjustments to Earnings per Share?
How Do I Present Earnings per Share?
What Earnings per Share Information Should I Disclose?
CHAPTER 5 - INTERIM FINANCIAL REPORTING
What Is an Interim Period?
Which Entities Must Issue Interim Financial Reports?
What Is Included in an Interim Financial Report?
What Explanatory Notes Should I Include with the Interim Financial Report?
For Which Periods Must I Present Interim Financial Statements?
What Information Should I Provide for a Highly Seasonal Business?
How Do I Assess Materiality in Interim Periods?
How Consistently Should I Apply Accounting Policies to Interim Periods?
What Controls Should I Use for Interim Reporting?
Do I Retrospectively Adjust Interim Financial Statements?
Do I Restate Interim Financial Statements?
Can I Anticipate or Defer Seasonal or Cyclical Revenue?
Can I Anticipate or Defer Expenses Having Uneven Timing?
Is it Acceptable to Use More Estimates When Preparing Interim Financial Statements?
CHAPTER 6 - RELATED PARTY DISCLOSURES
What Is a Related Party?
What Positions Are Considered to Be Key Management Personnel?
What Is a Related Party Transaction?
What Is Significant Influence?
What Related Party Information Should I Disclose?
CHAPTER 7 - EVENTS AFTER THE REPORTING PERIOD
What Is an Event after the Reporting Period?
How Do I Account for Adjusting Events after the Reporting Period?
How Do I Account for Nonadjusting Events after the Reporting Period?
How Do I Account for Dividends Declared after the Reporting Period?
How Do I Account for a Going Concern Issue That Arises after Period-End?
How Do I Disclose Events Arising after the Reporting Period?
CHAPTER 8 - FINANCIAL REPORTING IN HYPERINFLATIONARY ECONOMIES
When Do I Designate an Economy as Hyperinflationary?
How Do I Restate Financial Results in a Hyperinflationary Economy?
How Do I Restate Financial Statements That Use Historical Costs?
How Do I Restate Financial Statements That Use Current Costs?
How Do I Select a General Price Index?
What If There Is No General Price Index to Use for Restatements?
How Do I Consolidate the Results of Subsidiaries Operating in ...
What Happens When an Economy Stops Being Hyperinflationary?
What Information Should I Disclose About Hyperinflation?
PART II - ASSETS AND LIABILITIES
CHAPTER 9 - INVESTMENT PROPERTY
What Is Investment Property?
What Is Owner-Occupied Property?
How Do I Designate Property Leased within a Common Ownership Group?
When Can I Recognize Investment Property as an Asset?
What Can I Include in the Cost of an Investment Property?
What Is the Fair Value Model?
Should I Include Future Upgrades in a Property’s Fair Value?
What If I Cannot Determine an Investment Property’s Fair Value?
What Is the Cost Model?
Can I Use Either the Cost Model or the Fair Value Model?
How Do I Account for Under-Construction Investment Property?
Is It Necessary to Use an Independent Valuer to Determine Fair Values?
When Do I Transfer Properties to and from the Investment Property Classification?
How Do I Account for the Transfer of Properties to or from the Investment ...
How Do I Account for Investment Property Disposals?
How Do I Account for Third Party Compensation for Impaired or Damaged ...
What Information Do I Disclose about Investment Properties?
CHAPTER 10 - INTERESTS IN JOINT VENTURES
What Are the Types of Joint Venture?
What Is Significant Influence?
When Does a Venturer Not Have Joint Control?
When Is a Joint Venture Actually a Subsidiary?
Is a Contract Required for Joint Venture Accounting?
How Do I Account for a Jointly Controlled Operation?
How Do I Account for Jointly Controlled Assets?
How Do I Use Proportionate Consolidation to Account for a Jointly Controlled Entity?
How Do I Use the Equity Method to Account for a Jointly Controlled Entity?
How Do I Account for the Loss of Control in a Joint Venture?
How Do I Account for a Nonmonetary Contribution to a Joint Venture?
How Do I Account for Transactions between a Venturer and a Joint Venture?
How Does a Joint Venture Manager Account for Fees Billed to the Joint Venture?
What Information Should a Venturer Disclose about Jointly Controlled Operations?
What Information Should a Venturer Disclose about Jointly Controlled Assets?
What Information Should a Venturer Disclose about a Joint Venture?
CHAPTER 11 - INVESTMENTS IN ASSOCIATES
What Is an Associate?
What Is Significant Influence?
What If a Controlled Group Has an Aggregate Share in an Associate?
How Do I Use the Equity Method?
What If the Investor’s Share of an Associate’s Losses Exceeds Its Investment?
What If the Associate’s Reporting Period Differs from That of the Investor?
What If the Associate’s Accounting Policies Differ from Those of the Investor?
How Do I Incorporate Preference Shares into the Equity Method?
When Can I Not Use the Equity Method?
What Happens When I Stop Using the Equity Method?
How Do I Account for an Impaired Investment in an Associate?
How Do I Account for Upstream and Downstream Transactions?
How Do I Disclose Investments in Associates?
CHAPTER 12 - INVENTORY
What Is the Definition of Inventory?
What Is Net Realizable Value?
How Is Fair Value Used in Relation to Inventory?
What Costs Can I Include in Inventory?
What Costs Can I Include in Service Inventory?
What Costs Can I Assign to Agricultural Inventory?
What Methods Are Acceptable for Measuring Inventory?
What Controls Do I Use for Inventory Valuation?
How Do I Allocate Overhead Costs to Inventory?
What Controls Do I Use for Overhead Allocation?
How Do I Write Down the Value of Inventory?
When Do I Write Down the Value of Inventory?
Can I Reverse an Inventory Write-Down?
What Controls Do I Use for Inventory Write-Downs?
When Do I Charge Inventory Costs to Expense?
How Do I Allocate Production Costs to By-Products?
What Happens to Inventory Included in Fixed Assets?
What Inventory Information Do I Disclose?
CHAPTER 13 - PROPERTY, PLANT, AND EQUIPMENT
What Is Property, Plant, and Equipment?
What Is a Class of PP&E?
What Costs Do I Include in PP&E?
What Costs Do I Not Include in PP&E?
When Do I Stop Accumulating Costs in PP&E?
When Can I Include Borrowing Costs in PP&E?
How Do I Calculate Borrowing Costs to Include in PP&E?
When Do I Recognize Spare Parts as PP&E?
What Is the Residual Value of an Asset?
Should I Aggregate Assets into a Single PP&E Asset?
How Do I Account for an Exchange of Assets?
How Do I Subsequently Measure PP&E?
How Do I Account for Revaluations?
What Controls Do I Use for Asset Valuation?
Which Assets Are Not Depreciated?
How Do I Aggregate and Disaggregate Items for Depreciation?
Over What Time Periods Do I Allocate Depreciation Expense?
What Amount of an Asset Do I Depreciate?
What Depreciation Method Should I Use?
How Do I Handle Depreciation for Revalued Items?
When Do I Derecognize an Asset?
What Is the Accounting for Asset Derecognition?
What Property, Plant, and Equipment Information Do I Disclose?
CHAPTER 14 - INTANGIBLE ASSETS
What Is an Intangible Item?
What Are the Criteria an Item Must Meet to Be an Intangible Asset?
How Do I Recognize an Intangible Asset?
How Do I Recognize Acquired Intangible Assets?
How Do I Recognize Intangible Assets Acquired through a Business Combination?
What Is a Class of Intangible Assets?
Are Web Site Development Costs an Intangible Asset?
How Do I Recognize Research and Development Expenditures?
Can I Recognize Past Expenses as Part of an Asset?
How Do I Recognize an Intangible Asset Acquired through a Government Grant?
How Do I Recognize an Intangible Asset Acquired through a Nonmonetary Exchange?
How Do I Measure Intangible Assets after Initial Recognition?
How Do I Recognize Changes in Intangible Asset Revaluations?
How Do I Account for Internally Generated Goodwill?
How Do I Determine the Useful Life of an Intangible Asset?
When Do I Review Intangible Assets with Indefinite Useful Lives?
How Do I Calculate Amortization for an Intangible Asset?
Where Do I Record the Amortization Expense?
What Is the Residual Value of an Intangible Asset?
How Frequently Should I Review the Amortization Period and Method?
How Do I Account for the Derecognition of an Intangible Asset?
What Controls Should I Install for Intangible Assets?
What Information Do I Disclose Regarding Intangible Assets?
CHAPTER 15 - ASSET IMPAIRMENT
Why Test Assets for Impairment?
What Is an Asset’s Recoverable Amount?
What Is an Asset’s Value in Use?
What Is the Carrying Amount of an Asset?
To What Assets Should Impairment Testing Be Applied?
How Frequently Should I Conduct Impairment Testing?
How Do I Determine Fair Value Less Costs to Sell?
What Factors Do I Use in an Impairment Assessment?
How Do I Measure an Asset’s Recoverable Amount?
Can I Roll Forward Impairment Assessment Calculations?
What Other Changes Can Arise from an Impairment Assessment?
What Source Information Do I Use in a Cash Flow Projection?
How Does a Corporate Restructuring Alter Cash Flow Projections?
What Is a Cash-Generating Unit?
How Do I Recognize Impairment Losses for Assets Other Than Goodwill?
What Is Goodwill?
How Do I Allocate Goodwill to Cash-Generating Units?
How Do I Allocate Corporate Assets to Cash-Generating Units?
What Happens to Allocated Goodwill If a Cash-Generating Unit Is Disposed of?
How Frequently Do I Test for Goodwill Impairment?
How Do I Calculate Impairment Losses for Goodwill?
How Do I Recognize Impairment Losses for Goodwill?
Can I Reuse Prior-Period Impairment Calculations?
When and How Do I Reverse an Impairment Loss?
How Do I Account for an Impairment Loss Reversal for a Cash-Generating Unit?
Can I Reverse a Goodwill Impairment Loss?
What Controls Should I Install for Asset Impairment?
What Impairment Information Do I Disclose for Asset Classes?
What Impairment Information Do I Disclose for Reportable Segments?
What Information Do I Disclose for Impairment Losses Recognized or Reversed?
What Information Do I Disclose for Estimations of Recoverable Amounts?
What Information Do I Disclose for Allocated Goodwill or Intangible Assets?
CHAPTER 16 - PROVISIONS AND CONTINGENCIES
What Is the Difference Between Provisions, Payables, and Accruals?
What Is a Contingent Liability?
When Do I Recognize a Provision?
How Do I Measure a Provision?
How Do I Factor Future Events into a Provision?
Can I Include a Gain from an Expected Asset Disposal in a Provision?
Do I Create a Provision for a Future Operating Loss?
Do I Create a Provision for an Onerous Contract?
Do I Create a Provision for a Restructuring?
Do I Record the Present Value of a Provision?
When Do I Adjust Provisions?
How Do I Record an Obligation That Is Jointly and Severally Liable?
How Do I Record a Provision That Will Be Reimbursed?
What Is a Contingent Asset?
What Provision and Contingency Information Should I Disclose?
PART III - REVENUE AND EXPENSES
CHAPTER 17 - REVENUE RECOGNITION
How Do I Measure Revenue for Goods Sold?
How Do I Measure Revenue When There Are Deferred Payments?
How Do I Recognize Revenue under a Barter Exchange of Goods?
What Controls Should I Use for Barter Transactions?
When Can I Recognize the Sale of Goods?
What If I Retain Ownership Risk in Sold Goods?
What Controls Should I Use for Rights of Return?
When Can I Recognize Revenue in a Cash on Delivery Transaction?
How Do I Recognize Revenue from Subscription Sales?
When Do I Recognize Advance Payments?
How Do I Recognize Installment Sales?
How Do I Recognize Layaway Sales?
When Do I Recognize Bill and Hold Transactions?
What Controls Should I Use for Bill and Hold Transactions?
How Do I Handle Sale and Repurchase Transactions?
What General Controls Should I Use for the Sale of Goods?
When Can I Recognize the Sale of Services?
How Do I Calculate Revenue from the Sale of Services?
What Controls Do I Use for Service Revenue?
When Do I Recognize Admission Fees?
When Do I Recognize Professional Service Commissions?
When Do I Recognize Franchise Fees?
What Controls Do I Use for Franchise Sales?
How Do I Recognize Initiation Fees?
When Do I Recognize Installation Fees?
When Do I Recognize Servicing Fees?
When Do I Recognize Tuition Fees?
When Are Construction Contracts Separated or Aggregated?
When Do I Recognize Revenue under a Construction Contract?
When Do I Recognize Losses under a Construction Contract?
What Controls Do I Use for Construction Contracts?
When Do I Recognize Royalty Revenue?
How Do I Value Agricultural Assets?
When Do I Recognize a Gain or Loss on Agricultural Assets?
When Do I Recognize an Agriculture-Related Government Grant?
How Do I Record Barter Transactions for Advertising Services?
When Do I Record Revenue for a Customer Loyalty Program?
How Do I Record a Bad Debt?
How Do I Record Revenue Collected for a Third Party?
What General Revenue Recognition Controls Should I Use?
What General Revenue Information Do I Disclose?
What Agricultural Revenue Information Do I Disclose?
What Construction Contract Revenue Information Do I Disclose?
CHAPTER 18 - EMPLOYEE BENEFITS
What Types of Employee Benefits Are There?
What Are Vested Employee Benefits?
What Is a Qualifying Insurance Policy?
What Are Actuarial Gains and Losses?
What Is Past Service Cost?
What Are Short-Term Employee Benefits?
How Do I Account for Short-Term Employee Benefits?
How Do I Account for a Short-Term Compensated Absence?
How Do I Account for a Profit-Sharing or Bonus Plan?
What Types of Employee Benefit Plans Are There?
What Is a Group Administration Plan?
How Do I Account for a Multi-Employer Plan?
How Do I Account for a Plan under the Control of a Single Entity?
How Do I Account for Insured Benefits?
How Do I Account for a Defined Contribution Plan?
How Do I Account for a Defined Benefit Plan?
How Do I Account for Actuarial Gains and Losses?
How Do I Account for Actuarial Gains and Losses If I Have a Surplus?
How Do I Account for the Return on Plan Assets?
How Do I Account for Past Service Cost?
How Do I Account for Plan Assets?
How Do I Account for Reimbursements?
How Do I Account for Benefits Arising from a Business Combination?
How Do I Account for Curtailments and Settlements?
What Defined Benefit Plan Amounts Appear in Profit or Loss?
How Frequently Should I Review Plan Assets and Obligations?
When Can I Recognize an Asset under a Defined Benefit Plan?
What Characteristics Should Actuarial Assumptions Have?
Do I Need an Actuary to Measure Benefit Obligations?
What Are Demographic and Financial Actuarial Assumptions?
What Are the Actuarial Assumptions for Salaries, Benefits, and Medical Costs?
What Discount Rate Should I Use for Actuarial Assumptions?
How Do I Calculate the Interest Cost Associated with a Defined Benefit Obligation?
What Present Value Method Should I Use for a Defined Benefit Plan?
How Do I Attribute Benefit to Periods of Service?
Do I Recognize an Expense prior to Employee Vesting?
Should I Account for a Constructive Obligation under a Defined Benefit Plan?
How Do I Account for Other Long-Term Employee Benefits?
How Do I Account for Termination Benefits?
Can I Offset the Assets and Liabilities of Different Plans?
What Information Do I Disclose about a Multi-Employer Plan?
What Information Do I Disclose for a Plan under the Control of a Single Entity?
What Information Do I Disclose for a Defined Benefit Plan?
CHAPTER 19 - SHARE-BASED PAYMENTS
When Do I Recognize a Share-Based Payment?
How Do I Account for an Equity-Settled, Share-Based Payment Transaction?
How Do I Determine the Fair Value of a Granted Equity Instrument?
What If I Cannot Determine the Fair Value of a Granted Equity Instrument?
How Does Vesting Impact the Recognition of Services?
How Do I Account for a Reload Feature?
What Happens to Equity Instruments That Are Forfeited or Not Exercised?
What Happens If I Modify the Terms of an Equity Instrument?
How Do I Account for the Repurchase of a Vested Equity Instrument?
How Do I Account for a Cash-Settled, Share-Based Payment Transaction?
How Do I Account for a Share-Based Payment Transaction with Cash Alternatives?
How Do I Disclose Share-Based Payments?
CHAPTER 20 - INCOME TAXES
What Is an Accounting Profit?
What Is Taxable Profit and Can It Vary?
What Is the Tax Base?
What Is a Temporary Difference?
What Are Deferred Tax Assets and Liabilities?
How Do I Account for the Tax Effects of Research and Development?
How Do I Recognize a Tax Liability?
How Do I Recognize a Carryback Tax Loss?
How Do I Recognize Taxable Temporary Differences?
What Temporary Differences Arise in a Business Combination?
How Does a Business Combination Affect Existing Deferred Tax Assets?
How Does a Business Combination Affect Acquired Deferred Tax Assets?
Can I Recognize Temporary Differences Related to Goodwill?
What Is the Tax Treatment of Goodwill That Is Less Than Its Tax Base?
Does Fair Value Accounting Create Temporary Differences?
Does a Temporary Difference Arise from the Initial Recognition of an Asset or ...
How Do I Recognize Deductible Temporary Differences?
When Is It Probable That There Will Be Sufficient Taxable Profit to Utilize ...
What Is Tax Planning?
When Do I Recognize Unused Tax Losses and Unused Tax Credits?
When Do I Reassess Unrecognized Deferred Tax Assets?
How Do I Account for the Tax Impact of Investments in Other Entities?
How Do I Measure Tax Liabilities and Assets?
How Do I Account for Tax Withholdings on Dividends?
How Do I Measure Taxes on the Revaluation of Nondepreciable Assets?
Should I Discount Deferred Tax Assets and Liabilities?
When Should I Review the Carrying Amount of Deferred Tax Assets?
What Events Alter the Carrying Amount of Deferred Tax Assets and Liabilities?
How Do I Recognize Current and Deferred Taxes in Profit or Loss?
What Situations Result in Tax Asset or Liability Recognition outside of ...
How Do Tax Status Changes Alter Income Tax Recognition?
How Do I Account for the Taxes Related to an Asset Revaluation?
How Do I Account for Taxes Arising from Share-Based Payments?
Can I Offset Current Tax Assets and Liabilities?
Can I Offset Deferred Tax Assets and Liabilities?
Where Do I Present Tax Income or Expense?
What Tax Income or Expense Information Should I Disclose?
PART IV - SPECIAL TRANSACTIONS
CHAPTER 21 - BUSINESS COMBINATIONS
What Is a Business Combination?
What Is Goodwill?
How Do I Account for a Business Combination?
How Do I Account for Contingent Consideration?
Do I Include Expected Costs in Assumed Liabilities?
How Do I Account for an Acquiree’s Contingent Liabilities?
What If an Acquisition Occurs in Stages?
What Is the Measurement Period?
What If the Initial Measurement Is Not Completed in the Initial Reporting Period?
How Do I Adjust for a Provisional Measurement?
How Do I Account for Acquisition-Related Costs?
How Do I Subsequently Measure a Business Combination?
What Information Do I Disclose about a Business Combination?
CHAPTER 22 - CHANGES IN ACCOUNTING POLICIES, ESTIMATES, AND ERRORS
What Is a Change in Accounting Estimate?
What Is a Material Omission or Misstatement?
What Is a Prior-Period Error?
What Is a Retrospective Application?
What Is a Retrospective Restatement?
When Is a Retrospective Policy Change Impractical?
What Is a Prospective Application?
Can I Avoid Implementing an International Financial Reporting Standard (IFRS) ...
What Controls Should I Use for IFRS Implementations Having an Immaterial Impact?
When Can I Change an Accounting Policy?
What Controls Should I Use for Changing an Accounting Policy?
How Do I Account for a Change in Accounting Policy?
What Activities Involve Accounting Estimates?
Does a Change in Accounting Estimate Require a Retrospective Application?
How Do I Account for a Change in Accounting Estimate?
What Controls Do I Use for a Change in Estimate?
How Do I Account for the Correction of an Accounting Error?
What Information Do I Need for a Retrospective Application?
How Do I Disclose the Application of a Policy Mandated by an IFRS?
How Do I Disclose a Voluntary Change in Accounting Policy?
How Do I Disclose an Issued But Not Yet Effective IFRS?
How Do I Disclose a Change in Accounting Estimate?
How Do I Disclose a Prior-Period Error?
CHAPTER 23 - DISCONTINUED OPERATIONS AND NONCURRENT ASSETS HELD FOR SALE
What Is a Discontinued Operation?
When Should I Classify a Noncurrent Asset as Held for Sale?
When Should I Classify a Subsidiary as Held for Sale?
When Should I Classify a Noncurrent Asset as Held for Distribution to Owners?
What If I Cannot Meet the Held-for-Sale Criteria until after the Reporting Period?
What If a Sale Transaction Takes Longer Than One Year?
How Should I Classify an Asset to Be Abandoned?
How Do I Classify an Asset Acquired with the Intent of Disposal?
How Do I Account for Assets Classified as Held for Sale?
How Do I Depreciate Held-for-Sale Assets and Discontinued Operations?
What If an Asset No Longer Meets the Held-for-Sale Criteria?
What Controls Should I Use for the Classification of Held-for-Sale Items?
How Do I Disclose the Results of Discontinued Operations and Held-for-Sale Items?
CHAPTER 24 - EFFECTS OF FOREIGN EXCHANGE RATE CHANGES
What Is a Functional Currency?
What Is an Exchange Rate?
If There Are Several Possible Exchange Rates, Which Do I Use?
How Do I Initially Account for a Foreign Currency Transaction?
Is It Acceptable to Apply an Average Exchange Rate Instead of the Spot ...
How Does an Entity Incorporate Exchange Rates into Its Financial Statements?
What Happens If I Change the Functional Currency?
Can I Record Foreign Exchange Rate Changes in Revenue?
How Do I Translate a Foreign Entity’s Goodwill?
What Is a Monetary Item?
How Do I Account for Foreign Currency Items in Subsequent Periods?
How Do I Account for Exchange Differences between Periods?
What Items Are Considered a Net Investment in a Foreign Operation?
How Do I Account for a Cumulative Exchange Difference after Disposing of a ...
How Do I Translate from a Functional Currency to a Presentation Currency?
How Do I Translate from the Functional Currency of a Hyperinflationary ...
What Information Do I Disclose about the Effects of Foreign Exchange Rate Changes?
CHAPTER 25 - FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT
What Is a Derivative?
What Is a Held-to-Maturity Investment?
What Is an Available-for-Sale Investment?
What Is a Financial Asset or Liability at Fair Value through Profit or Loss?
What Is a Financial Guarantee Contract?
What Is the Effective Interest Method?
What Is Derecognition?
What Is a Hedging Instrument?
What Is an Embedded Derivative?
When Do I Separate an Embedded Derivative from the Host Contract?
How Do I Initially Recognize a Financial Asset or Liability?
How Do I Subsequently Recognize a Financial Asset?
How Do I Subsequently Recognize a Financial Liability?
What Methods Are Available for Measuring Fair Value?
How Do I Derecognize a Financial Asset or Liability?
How Do I Account for Noncash Collateral Related to a Financial Asset Transfer?
Should I Offset Assets and Liabilities, or Income and Expenses, for ...
When Can I Reclassify a Derivative or Other Financial Instrument?
How Do I Account for a Change in Carrying Cost Away from Fair Value?
How Do I Account for a Gain or Loss Caused by a Financial Asset Fair Value Change?
What Events Lead to the Impairment or Uncollectibility of Financial Assets?
How Do I Account for Impaired or Uncollectible Financial Assets?
Can I Reverse a Financial Asset Impairment Loss?
What Is Hedging?
When Does a Hedging Relationship Qualify for Hedge Accounting?
How Do I Account for a Fair Value Hedge?
How Do I Account for an Unrecognized Firm Commitment Hedge?
How Do I Account for a Cash Flow Hedge?
How Do I Account for a Net Investment Hedge?
Can I Designate a Nonderivative Instrument as a Hedging Instrument?
How Do I Designate a Nonfinancial Item as a Hedged Item?
Can I Hedge a Held-to-Maturity Investment?
How Do I Account for Intra-Entity Hedging Instruments?
Can I Assign a Portion of a Hedging Instrument to a Hedging Relationship?
Can I Designate a Portion of a Financial Item as a Hedged Item?
Can I Cluster Similar Assets and Liabilities into Groups of Hedged Items?
Can a Hedging Instrument Hedge More Than One Type of Risk?
What Information Should I Disclose about Financial Instruments in the ...
What Information Should I Disclose about Financial Instruments in the ...
What Information Should I Disclose about Hedging?
What Information Should I Disclose about Fair Value?
What Information Should I Disclose about Financial Instrument Risks?
CHAPTER 26 - FINANCIAL INSTRUMENTS: PRESENTATION
What Is a Financial Asset?
What Is a Financial Liability?
What Assets and Liabilities Are Not Financial Instruments?
When Do I Classify a Financial Instrument as an Equity Instrument?
When Do I Classify a Puttable Instrument as an Equity Instrument?
How Do I Classify a Puttable Instrument Requiring a Cash Payment?
Do I Classify an Instrument Having Liquidation Rights as an Equity Instrument?
How Do I Classify a Preference Share?
How Do I Classify an Instrument that Settles in a Variable Number of Shares?
How Do I Account for an Equity Instrument?
How Do I Account for a Financial Liability?
How Do I Classify a Contingent Settlement Provision?
How Do I Classify a Derivative Containing a Choice of Settlement Options?
How Do I Classify Compound Financial Instruments?
How Do I Classify Treasury Shares?
How Do I Account for Financial Instrument Dividends, Gains, Losses, and ...
When Can I Offset a Financial Asset and a Financial Liability?
CHAPTER 27 - GOVERNMENT GRANTS
What Is a Government Grant or Government Assistance?
How Do I Account for a Government Grant?
How Do I Account for a Grant Repayment?
How Do I Present Grants Related to Assets?
How Do I Present Grants Related to Income?
What Government Grant Information Should I Disclose?
CHAPTER 28 - INSURANCE CONTRACTS
What Is an Insurance Contract?
How Do I Account for a New Insurance Policy?
How Do I Assess the Adequacy of My Insurance Liabilities?
What Is a Reinsurance Contract?
How Do I Account for the Impairment of Reinsurance Assets?
When Can I Change Accounting Policies Related to Insurance Contracts?
How Do I Account for Insurance Contracts Acquired in a Business Combination?
How Do I Account for Discretionary Participation Features?
How Do I Disclose Insurance Contracts?
CHAPTER 29 - LEASES
What Is a Lease?
Can I Change a Lease Classification Later?
Can I Classify an Operating Lease as an Investment Property?
What Is the Difference between Economic Life and Useful Life?
When Does an Arrangement Contain a Lease?
How Do I Break out the Lease Elements from an Arrangement?
When Do I Assess Whether an Arrangement Contains a Lease?
What Are Minimum Lease Payments?
How Do I Classify a Lease That Includes Buildings and Land?
What Types of Residual Value Are Used in a Lease?
What Are the Gross and Net Investments in a Lease?
What Is Contingent Rent and How Do I Record It?
How Does a Lessee Recognize a Financial Lease?
How Does the Lessee Record Subsequent Financial Lease Payments?
How Does a Lessee Recognize an Operating Lease?
How Does a Lessor Recognize a Financial Lease?
How Does a Manufacturer or Dealer Lessor Recognize a Financial Lease?
How Does a Lessor Account for Unguaranteed Residual Value?
How Does a Lessor Recognize an Operating Lease?
Can a Manufacturer or Dealer Lessor Recognize a Selling Profit on an ...
How Do I Account for Incentives Associated with an Operating Lease?
How Does a Seller-Lessee Account for a Sale and Leaseback Transaction?
When Do I Merge Multiple Transactions into a Single Lease?
What Controls Should I Use for Leases?
What Information Should a Lessee Disclose for a Financial Lease?
What Information Should a Lessee Disclose for an Operating Lease?
What Information Should a Lessor Disclose for a Financial Lease?
What Information Should a Lessor Disclose for an Operating Lease?
What Information Should I Disclose for Multiple Transactions Involving the ...
CHAPTER 30 - MINERAL RESOURCES EXPLORATION AND EVALUATION
How Do I Initially Measure Mineral Exploration and Evaluation Assets?
How Do I Subsequently Measure Mineral Exploration and Evaluation Assets?
When Do I Stop Classifying Assets as Exploration and Evaluation Assets?
How Do I Determine Whether Exploration and Evaluation Assets Are Impaired?
How Do I Account for Removal and Restoration Obligations?
What Information Should I Disclose about Mineral Resources Exploration and Evaluation?
CHAPTER 31 - RETIREMENT BENEFIT PLANS
What Is a Retirement Benefit Plan?
What Is a Defined Contribution Plan?
What Is a Defined Benefit Plan?
How Do I Account for a Hybrid Retirement Plan?
What Are Vested and Unvested Benefits?
What Is a Trustee?
What Is Actuarial Present Value?
On What Salary Basis Do I Calculate Actuarial Present Value?
How Frequently Should I Obtain Actuarial Valuations?
On What Cost Basis Should I Record Retirement Plan Assets?
What Information Should I Disclose for All Retirement Plans?
What Does a Statement of Changes in Net Assets Available for Benefits Look Like?
What Does a Statement of Net Assets Available for Benefits Look Like?
What Information Do I Disclose about a Defined Contribution Plan?
What Information Do I Disclose about a Defined Benefit Plan?
What Information Do I Include in a Retirement Benefit Plan Report?
INDEX
Copyright © 2010 by John Wiley & Sons. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data:
Bragg, Steven M.
The vest pocket guide to IFRS/Steven M. Bragg.
p. cm.
Includes index.
ISBN 978-0-470-61947-6 (pbk.); ISBN 978-0-470-88547-5 (ebk); ISBN 978-0-470-88563-5 (ebk) ; ISBN 978-0-470-88564-2 (ebk)
1. Financial statements—Standards—Handbooks, manuals, etc. 2. Accounting—Standards—Handbooks, manuals, etc. I. Title.
HF5626.B73 2010 657’.3—dc222010013502
ABOUT THE AUTHOR
Steven Bragg, CPA, has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young. He received a master’s degree in finance from Bentley College, an MBA from Babson College, and a bachelor’s degree in economics from the University of Maine. He has been two-time President of the Colorado Mountain Club and is an avid alpine skier, mountain biker, and certified master diver. Mr. Bragg resides in Centennial, Colorado. He has written the following books:
Accounting and Finance for Your Small Business Accounting Best Practices Accounting Control Best Practices Accounting Policies and Procedures Manual Advanced Accounting Systems Billing and Collections Best Practices Business Ratios and Formulas Controller’s Guide to Costing Controller’s Guide to Planning and Controlling Operations Controller’s Guide: Roles and Responsibilities for the New Controller Controllership Cost Accounting Cost Reduction Analysis Essentials of Payroll Fast Close Financial Analysis GAAP Guide GAAP Policies and Procedures Manual GAAS Guide Inventory Accounting Inventory Best Practices Investor Relations Just-in-Time Accounting Management Accounting Best Practices Managing Explosive Corporate Growth Mergers and Acquisitions Outsourcing Payroll Accounting Payroll Best Practices Revenue Recognition Run the Rockies Running a Public Company Sales and Operations for Your Small Business The Controller’s Function The New CFO Financial Leadership Manual The Ultimate Accountants’ Reference The Vest Pocket Controller’s Guide The Vest Pocket Guide to IFRS Throughput Accounting Treasury Management
WHAT THIS BOOK WILL DO FOR YOU
This is a handy pocket problem solver for the accountant, controller, and chief financial officer. It provides complete coverage of all international financial reporting standards (IFRSs), using a question and answer format that provides concise explanations and hundreds of supporting examples for all IFRS topics. The layout is designed for quick comprehension of such questions as:
• What are the direct and indirect method layouts for the statement of cash flows?
• Should I consolidate a special purpose entity?
• What are the thresholds for segment reporting?
• How do I calculate diluted earnings per share?
• What related party information should I disclose?
• How do I account for adjusting events after the reporting period?
• How do I restate financial results in a hyperinflationary economy?
• How do I account for a joint venture?
• How do I account for an investment in an associate?
• What costs can I include in inventory?
• Can I adjust property, plant, and equipment to its fair value?
• How do I recognize intangible assets?
• When is an asset impaired, and how do I account for the impairment?
• What is a provision, and when do I recognize it?
• How do I recognize installment sales?
• How do I account for defined benefit plans?
• How do I account for a share-based payment?
• What types of leases are there, and how do I account for them?
• How do I account for a business combination?
• How do I account for discontinued operations?
• How do I determine an entity’s functional currency, and how do I report transactions in that currency?
Vest Pocket IFRS is divided into sections, each dealing with four main categories of IFRS: the financial statements, assets and liabilities, revenue and expenses, and special transactions.
Part 1, The Financial Statements (Chapters 1-8), addresses IFRSs for the construction of financial statements. Part 1 is divided into separate chapters to address the basic form of the financial statements, how to consolidate them, and how to report on special situations. These special situations include the reporting of operating segments, earnings per share, and interim reporting, all of which are required for publicly held entities. Other chapters address special disclosures, including related party disclosures and the reporting of events occurring after the reporting period. Finally, Part 1 covers financial reporting in hyperinflationary economies.
Part 2, Assets and Liabilities (Chapters 9-16), addresses IFRSs for accounting issues related to assets and liabilities. There are separate chapters covering the accounting for investment property, interests in joint ventures, investments in associates, inventory, property, and intangible assets. A separate chapter addresses the key issue of asset impairment, and Part 2 concludes with a discussion of provisions and contingencies.
Part 3, Revenue and Expenses (Chapters 17-20), delves into a variety of revenue and expense topics. These include revenue recognition, employee benefits, share-based payments, and income taxes.
Part 4, Special Transactions (Chapters 21-31), addresses a broad range of accounting transactions. These include business combinations, changes in accounting estimates, discontinued operations, the effects of foreign exchange rate changes, financial instruments (such as derivatives), and the appropriate treatment of government grants, insurance contracts, leases, mineral exploration activities, and retirement benefit plans.
Throughout, Vest Pocket IFRS has been structured to provide concise answers to the IFRS questions that an accountant is most likely to encounter during a typical business day. Keep it handy for easy reference and daily use.
Free On-Line Resources by Steve Bragg
Steve issues a free accounting best practices podcast. You can sign up for it at www.accountingtools.com, or access it through iTunes.
PART I
THE FINANCIAL STATEMENTS
CHAPTER 1
FINANCIAL STATEMENTS PRESENTATION
What Is Profit or Loss?
Profit or loss is the total of an entity’s revenue and expenses, not including any components of other comprehensive income (see the next question). It is also known as net income.
Total comprehensive income is the combination of profit or loss and other comprehensive income.
What Is Other Comprehensive Income?
Other comprehensive income includes financial items that are not permitted in profit or loss. Items that you should insert in other comprehensive income include:
• Actuarial gains and losses on defined benefit plans (see the Employee Benefits chapter)
• Available-for-sale gains and losses caused by remeasurement (see the Financial Instruments: Recognition and Measurement chapter)
• Cash flow hedge gains and losses, effective portion only (see the Financial Instruments: Recognition and Measurement chapter)
• Changes in the revaluation surplus (see the Property, Plant, and Equipment chapter)
• Foreign currency translation gains and losses (see the Effects of Foreign Exchange Rate Changes chapter)
Reclassification adjustments are amounts reclassified into profit or loss in the current period that had been recognized in other comprehensive income in either the current or previous periods.
What Information Is Included in a Complete Set of Financial Statements?
All of the following should be included in a complete set of financial statements for a reporting period:
StatementDescriptionStatement of financial positionContains all asset, liability, and equity itemsStatement of comprehensive incomeContains all income and expense itemsStatement of changes in equityReconciles changes in equity for the presented periodsStatement of cash flowsDisplays all cash inflows and outflows from operating, financing, and investing activitiesNotesSummarizes accounting policies and explanatory information
You should clearly identify these financial statements and distinguish them from other information presented in the same report. It is important to do this, because International Financial Reporting Standards (IFRSs) apply only to financial statements; thus, users will be more likely to understand which documents within the report adhere to specific accounting standards.
You should include in the financial statements a prominent display of the name of the reporting entity (and note any change in it from the preceding reporting period), whether the statements are for a single entity or group of entities, the period covered by the statements, the presentation currency, and the level of rounding used to present amounts. This information usually is presented most easily in column and page headers.
It is not necessary, but useful, for management to also present a financial review that includes such items as the primary factors impacting financial performance, its investment policy, dividend policy, sources of funding, targeted financial ratios, and any other resources not recognized in the financial statements.
What Line Items Do I Include in the Statement of Financial Position?
You should include the following line items, at a minimum, in the statement of financial position:
Assets
• Cash and cash equivalents
• Trade and other receivables
• Investments accounted for using the equity method
• Other financial assets
• Current tax assets
• Investment property
• Inventories
• Biological assets
• Property, plant, and equipment
• Intangible assets
• Assets held for sale
• Deferred tax assets (do not classify as a current asset)
Liabilities
• Trade and other payables
• Provisions
• Current tax liabilities
• Other financial liabilities
• Deferred tax liabilities (do not classify as a current liability)
• Liabilities held for sale
Equity
• Noncontrolling interests
• Issued capital and reserves attributable to owners of the parent
You should add headings and subtotals to this minimum set of information if it will improve a user’s understanding of the financial statements. You should add other line items when their size, nature, or function makes separate presentation relevant to the user.
EXAMPLE 1.1
Katana Cutlery presents its statement of financial position in the following format:
KATANA CUTLERY STATEMENT OF FINANCIAL POSITION
(000s)as at 12/ 31/x2as at 12/ 31/x1ASSETSNoncurrent assets Property, plant, and equipment€551,000€529,000Goodwill82,00082,000Other intangible assets143,000143,000Investments in associates71,00093,000Available-for-sale financial assets121,000108,000968,000955,000Current assetsInventories139,000128,000Trade receivables147,000139,000Other current assets15,00027,000Cash and cash equivalents270,000215,000571,000509,000Total assets€1,539,000€1,464,000EQUITY AND LIABILITIESEquity attributable to owners of the parentShare capital€500,000€500,000Retained earnings425,000350,000Other components of equity25,00019,000950,000869,000Noncontrolling interests57,00038,000Total equity1,007,000907,000Noncurrent liabilitiesLong-term borrowings85,00065,000Deferred tax19,00017,000Long-term provisions38,00034,000Total noncurrent liabilities142,000116,000Current liabilitiesTrade and other payables217,000198,000Short-term borrowings133,000202,000Current portion of long-term borrowings5,0005,000Current tax payable26,00023,000Short-term provisions9,00013,000Total current liabilities390,000441,000Total liabilities532,000557,000Total equity and liabilities€1,539,000€1,464,000
What Information Should I Disclose in the Statement of Financial Position?
You should provide additional subclassifications of the primary line items required for the statement of financial position, if needed to clarify an entity’s operations, or to be in accordance with the various IFRSs. Examples of these additional classifications are:
• Separate property, plant, and equipment into different asset classifications.
• Separate accounts receivable into amounts receivable from trade customers, related parties, and prepayments.
• Separate inventories into merchandise, supplies, raw materials, work in process, and finished goods.
• Separate equity into paid-in capital, share premiums, and reserves.
For each class of share capital, you should disclose the following:
• Internal holdings. Any shares held by the entity or its subsidiaries or associates
• Par value. The par value per share or the fact that there is no par value
• Reclassifications. Any reclassifications of financial instruments between liabilities and equity, and the timing and reasons for the reclassifications
• Reconciliation. Reconciliation of the share totals at the beginning and end of the reporting period
• Reserved shares. Any outstanding share options or other contracts for the sale of shares, as well as the terms of these agreements
• Reserves. The nature of any equity reserves
• Rights and restrictions. Restrictions on dividend distribution and capital repayment, as well as any other rights, preferences, and restrictions
• Shares. The number of shares authorized, issued and fully paid, and issued but not fully paid
When Do I Present Information as Current or Noncurrent?
You should present current and noncurrent assets and liabilities within the statement of financial position, except when a presentation based on liquidity is more reliable and more relevant. If liquidity is the more relevant basis of presentation, then present all assets and liabilities sorted in order by level of liquidity.
Whether you present line items by current/noncurrent or by liquidity, you should separately disclose the amount you expect to recover or settle after more than 12 months for any line item that combines amounts that are expected to be recovered within 12 months of the reporting period and later than 12 months from the reporting period.
You should classify an asset as current when an entity expects to sell or consume it during its normal operating cycle or within 12 months after the reporting period, or if it holds the asset in order to trade it, or if it is a cash or cash equivalent (unless it is restricted from use). Current assets always include cash, inventories, and assets held for trading. You should classify all other assets as noncurrent.
You should classify a liability as current when the entity expects to settle it during its normal operating cycle or within 12 months after the reporting period, or if it holds the liability in order to trade it, or if it is scheduled for settlement within 12 months, or if the entity does not have the right to defer its settlement for at least 12 months. You should classify financial liabilities as current when they are scheduled for settlement within 12 months, even if the original term was for a longer period. Current liabilities always include trade payables and accruals for employee and other operating costs. You should classify all other liabilities as noncurrent.
If an entity reaches an agreement after the reporting period but before the financial statements are authorized for issuance, to reschedule payments or refinance so that payments are due after the 12-month period, you should still categorize them as current liabilities. If an entity expects and has the ability to refinance or roll over an obligation so that it is due more than 12 months after the reporting period, then you should classify the obligation as noncurrent.
If an entity breaches a provision of a long-term debt agreement during a reporting period and this effectively makes the agreement payable on demand, you should categorize it as a current liability, even if the lender agrees, before the financial statements are authorized for issuance, not to demand payment. However, if the lender agrees, by the end of the reporting period, to provide at least a 12-month grace period, then you can classify the debt as noncurrent.
An entity’s operating cycle is the time required to acquire assets for processing and convert them into cash. If you cannot determine the operating cycle, assume that it is 12 months.
What Line Items Do I Include in the Statement of Comprehensive Income?
You should present all items of income and expense for the reporting period in a statement of comprehensive income. Alternatively, you can split this information into an income statement and a statement of comprehensive income.
You should include the following line items, at a minimum, in the statement of comprehensive income:
• Revenue
• Finance costs
• Share of associates’ and joint ventures’ profit or loss recorded with the equity method
• Tax expense
• Post-tax profit or loss for discontinued operations and for the disposal of these operations
• Profit or loss
• Other comprehensive income, subdivided into each component thereof
• Share of associates’ and joint ventures’ other comprehensive income recorded with the equity method
• Total comprehensive income
A key additional item is to present an analysis of the expenses in profit or loss, using a classification based on their nature or functional area, maximizing the relevance and reliability of presented information. If you elect to present expenses by their nature, the format looks similar to Exhibit 1.1.
Exhibit 1.1 NATURAL EXPENSE PRESENTATION
RevenueXXXExpenses:Change in finished goods inventoriesXXXRaw materials usedXXXEmployee benefits expenseXXXDepreciation expenseXXXTelephone expenseXXXOther expensesXXXTotal expensesXXXProfit before taxXXX
Exhibit 1.2 FUNCTIONAL EXPENSE PRESENTATION
RevenueXXXCost of salesXXXGross profitXXXAdministrative expensesXXXDistribution expensesXXXResearch and development expensesXXXOther expensesXXXTotal expensesXXXProfit before taxXXX
Alternatively, if you present expenses by their functional area, the format looks similar to Exhibit 1.2.
Of the two methods, presenting expenses by their nature is easier, since it requires no allocation of expenses between functional areas. Conversely, the functional area presentation may be more relevant to users of the information, who can see more easily where resources are being consumed. If you elect to use a functional area presentation, you also must disclose information about the nature of the expenses, at least including separate presentation of depreciation expense, amortization expense, and employee benefits expense.
In addition, you should disclose the profit or loss and total comprehensive income attributable to any noncontrolling interests and to the owners of the parent entity.
Taxes require additional disclosure to the line items noted above. You should disclose the amount of tax related to each component of other comprehensive income. This information can be included in the statement itself or in the associated notes. You should not present any components of other comprehensive income net of related taxes.
You should provide additional headings, subtotals, and line items to the items noted above if doing so will increase a user’s understanding of the entity’s financial performance.
EXAMPLE 1.2
Plasma Storage Devices presents its statement of financial position in two statements by the nature of the items, resulting in the following format, beginning with the income statement:
PLASMA STORAGE DEVICES INCOME STATEMENT FOR THE YEARS ENDED DECEMBER 31
(000s)20×220×1Revenue€900,000€850,000Other income25,00020,000Changes in finished goods inventories(270,000)(255,000)Raw materials used(90,000)(85,000)Employee benefits expense(180,000)(170,000)Depreciation and amortization expense(135,000)(125,000)Impairment of property, plant, and equipment0(50,000)Other expenses(75,000)(72,000)Finance costs(29,000)(23,000)Share of profit of associates21,00030,000Profit before tax167,000120,000Income tax expense(58,000)(42,000)Profit for the year from continuing operations109,00078,000Loss for the year from discontinued operations(42,000)0PROFIT FOR THE YEAR€67,000€78,000Profit attributable to:Owners of the parent60,00070,000Noncontrolling interests7,0008,000€67,000€78,000Earnings per share:Basic€0.13€0.16Diluted0.090.10
Plasma Storage Devices then continues with the following statement of comprehensive income:
PLASMA STORAGE DEVICES STATEMENT OF COMPREHENSIVE INCOME
(000s)20×220×1Profit for the year€67,000€78,000Other comprehensive income:Exchange differences on translating foreign operations5,0009,000Available-for-sale financial assets10,000(2,000)Cash flow hedges(1,000)(3,000)Gains on property revaluation7,00011,000Actuarial losses on defined benefit pension plan(2,000)(2,000)Share of other comprehensive income of associates1,0004,000Other comprehensive income, net of tax20,00017,000TOTAL COMPREHENSIVE INCOME€87,000€95,000Total comprehensive income attributable to:Owners of the parent78,00086,000Noncontrolling interests9,0009,000€87,000€95,000
What Information Should I Disclose in the Statement of Comprehensive Income?
You should ensure that the following information is included in either the statement of comprehensive income or its associated notes:
• Reclassification adjustments. Disclose any reclassification adjustments related to components of other comprehensive income (arise when items previously recognized in other comprehensive income are shifted into profit or loss).
• Material items. If an income or expense item is material, separately disclose its nature and amount. Examples of items that may require separate disclosure are inventory write-downs, restructurings, asset disposals, discontinued operations, provision reversals, and the settlement of litigation.
What Line Items Do I Include in the Statement of Changes in Equity?
You should include the following line items in the statement of changes in equity:
• Total comprehensive income (with separate presentation of the amounts attributable to the owners of the parent entity and to noncontrolling interests)
• Effects of retrospective applications or restatements on each component of equity (usually shown as adjustments to the opening balance of retained earnings)
• Reconciliation of changes during the period for each component of equity resulting from profit or loss, each item of other comprehensive income, and transactions with owners (including contributions by and distributions to them)
• Dividends recognized, and the related amount per share (alternatively, this item can be presented in the associated notes)
EXAMPLE 1.3
Musical Heritage Company presents its statement of changes in equity as follows to reflect changes in its equity over a two-year period:
What Are the Main Components of the Statement of Cash Flows?
The statement of cash flows contains information about activities that generate and use cash. The primary activities are:
• Operating activities, which are an entity’s primary revenue-producing activities. Examples of operating activities are cash receipts from the sale of goods, as well as from royalties and commissions, and payments to employees and suppliers.
• Investing activities, which involve the acquisition and disposal of long-term assets. Examples of investing activities are cash receipts from the sale of property, the sale of debt or equity instruments of other entities, and repayment of loans made to other entities, and from futures contracts, swap contracts, and forward contracts. Examples of cash payments that are investment activities include capitalized development costs, the acquisition of property, plant, and equipment, purchases of the debt or equity of other entities, and payments for futures contracts, swap contracts, and forward contracts.
• Financing activities, which result in alterations to the amount of contributed equity and the entity’s borrowings. Examples of financing activities include cash receipts from the sale of the entity’s own equity instruments or from issuing debt, as well as cash payments to buy back shares and to pay off outstanding debt.
The statement of cash flows also incorporates the concept of cash and cash equivalents. A cash equivalent is a short-term (usually maturing in three months or less), very liquid investment that is easily convertible into cash, and which is at minimal risk of a change in value.
What Are the Direct and Indirect Method Layouts for the Statement of Cash Flows?
You can use the direct method or the indirect method to present the statement of cash flows. The direct method presents the specific cash flows associated with items that affect cash flow. Items typically affecting cash flow include:
• Cash collected from customers
• Interest and dividends received
• Cash paid to employees
• Cash paid to suppliers
• Interest paid
• Income taxes paid
Under the indirect method, the presentation begins with net income or loss, with subsequent additions to or deductions from that amount for noncash revenue and expense items, resulting in net cash provided by operating activities.
Examples of both methods are located in the answer to the next question.
What Line Items Should I Include in the Statement of Cash Flows?
The statement of cash flows reports cash activities during a reporting period, subdivided into operating, investing, and financing activities. The information you should include in these activities is as follows:
• Operating activities. Use either the direct method (disclosing major classes of gross cash receipts and payments) or the indirect method (adjusting profit or loss for changes in inventories, receivables, payables, and a variety of noncash items). The IFRS recommended approach is to use the direct method.
• Investing activities. Separately report the major classes of gross cash receipts and payments caused by investing activities.
• Financing activities. Separately report the major classes of gross cash receipts and payments caused by financing activities.
There are a number of special situations that call for unique treatment within the statement of cash flows. They are as follows:
• Changes in ownership interests. Separately report the aggregate cash flows from obtaining and losing control of subsidiaries in investing activities. When doing so, report the total consideration paid or received, the proportion of this consideration comprising cash and cash equivalents, the amount of cash and cash equivalents in the subsidiaries over which the entity has gained or lost control, and the major categories of assets and liabilities other than cash and cash equivalents in the subsidiaries over which the entity has gained or lost control.
• Components of cash and cash equivalents. Disclose the components of cash and cash equivalents, and also reconcile the amount of cash and cash equivalents in the statement of cash flows with the amounts reported for these items in the statement of financial position. Also note the entity’s policy for determining the composition of cash and cash equivalents, and the effect of any changes to this policy in the reporting period.
• Foreign currency cash flows. If an entity has transactions in a foreign currency, record them in its functional currency (see the Effects of Foreign Exchange Rate Changes chapter) using the relevant exchange rate on the cash flow date. If an entity has a foreign subsidiary, it also should translate the cash flows of the subsidiary into its functional currency on the various cash flow dates. A weighted average exchange rate for the reporting period can be used for these translations.
• Income taxes. Separately disclose cash flows from taxes on income and classify them within cash flows from operating activities. You should classify them within cash flows from financing or investing activities only if they are specifically identified with those activities.
• Interest and dividends. Separately disclose cash flows from interest and dividends received and paid. You should disclose the total amount of interest paid during a period in the statement of cash flows, even if you have capitalized the interest expense. The categorization of interest and dividends is as follows:
Interest paid: Operating cash flows or financing cash flows
Interest received: Operating cash flows or investing cash flows
Dividends paid: Operating cash flows or financing cash flows
Dividends received: Operating cash flows or investing cash flows
• Investments in subsidiaries, associates, and joint ventures. If you use the equity or cost methods to account for investments in associates or subsidiaries, then report only cash flows between the entity and the investee. If you use proportionate consolidation to account for investments in a jointly controlled entity, then report the entity’s proportionate share of the jointly controlled entity’s cash flows.
• Net reporting. It is sometimes acceptable to combine cash receipts and payments into a single reported net number. Specifically, you can use net reporting for cash receipts and payments concerning items involving fast turnover, short maturities, and large amounts. Examples are payments and receipts related to credit card customers, investments, and short-term borrowings. You also can use net reporting for cash transactions on behalf of customers where the cash flows reflect the customer’s activities rather than the entity’s. Examples are funds held for customers by an investment fund, and rent collected on behalf of a property owner.
• Noncash transactions
