WELCOME
INTERNATIONAL FINANCIAL
REPORTING STANDARDS (I F R S)
WHY IFRS ?
A single set of accounting standards would A single set of accounting standards would
enable internationally to standardize training enable internationally to standardize training
and assure better quality on a global screen, it and assure better quality on a global screen, it
would also permit international capital to flow would also permit international capital to flow
more freely, enabling companies to develop more freely, enabling companies to develop
consistent global practices on accounting consistent global practices on accounting
problems. It would be beneficial to regulators problems. It would be beneficial to regulators too, as a complexity associated with needing too, as a complexity associated with needing
to understand various reporting regimes
to understand various reporting regimes would would be reduced.
be reduced.
OBJECTIVES OF IFRS
to develop to develop , in the public interest, a single set of high quality, understandable and , in the public interest, a single set of high quality, understandable and enforceable
enforceable global accounting standards that require high quality, transparent and global accounting standards that require high quality, transparent and comparable information in financial statements and other financial reporting to help comparable information in financial statements and other financial reporting to help
participants in the world's capital markets and other users make economic participants in the world's capital markets and other users make economic
decisions;
decisions;
to promote to promote the use the use and rigorous application and rigorous application of those standards; of those standards;
in fulfilling the objectives associated with (1) and (2 in fulfilling the objectives associated with (1) and (2 ), ), to take account of to take account of , , as as appropriate, the special needs of
appropriate, the special needs of small and medium-sized entities small and medium-sized entities and emerging and emerging economies.
economies.
to bring to bring about convergence about convergence of national accounting standards and International of national accounting standards and International Accounting standards and IFRS to high quality solutions.
Accounting standards and IFRS to high quality solutions.
SCOPE OF IFRS
1.1.
IASB Standards are known as IASB Standards are known as International Financial Reporting Standards (IFRSs). International Financial Reporting Standards (IFRSs).
2.
2.
All International Accounting Standards (IASs) and Interpretations issued by the former All International Accounting Standards (IASs) and Interpretations issued by the former IASC (International Accounting Standard Committee) and SIC (Standard Interpretation IASC (International Accounting Standard Committee) and SIC (Standard Interpretation Committee) continue to be
Committee) continue to be applicable applicable unless and until they are amended or withdrawn. unless and until they are amended or withdrawn.
3.
3.
IFRSs apply to IFRSs apply to the general purpose financial statements and other financial reporting by the general purpose financial statements and other financial reporting by profit-oriented entities
profit-oriented entities -- those engaged in commercial, industrial, financial, and similar -- those engaged in commercial, industrial, financial, and similar activities, regardless of their legal form.
activities, regardless of their legal form.
4.4.
Entities other than profit-oriented business entities Entities other than profit-oriented business entities may also find IFRSs appropriate. may also find IFRSs appropriate.
SCOPE OF IFRS
5.5.
General purpose financial statements General purpose financial statements are intended to meet the common needs are intended to meet the common needs of shareholders, creditors, employees, and the public at large for information of shareholders, creditors, employees, and the public at large for information
about an entity's financial position, performance, and cash flows.
about an entity's financial position, performance, and cash flows.
6. 6. Other financial reporting includes Other financial reporting includes information provided outside financial information provided outside financial statements that assists in the interpretation of a complete set of financial statements that assists in the interpretation of a complete set of financial
statements or improves users' ability to make efficient economic decisions.
statements or improves users' ability to make efficient economic decisions.
7. 7. IFRS IFRS apply to apply to individual company and consolidated financial statements. individual company and consolidated financial statements.
8. 8. A complete set of A complete set of financial statements includes financial statements includes a balance sheet, an income a balance sheet, an income statement, a cash flow statement, a statement showing either all changes in statement, a cash flow statement, a statement showing either all changes in
equity or changes in equity other than those arising from investments by and equity or changes in equity other than those arising from investments by and
distributions to owners, a summary of accounting policies, and explanatory distributions to owners, a summary of accounting policies, and explanatory
notes.
notes.
SCOPE OF IFRS
9. 9. If an IFRS allows both a If an IFRS allows both a 'benchmark' and an 'allowed alternative 'benchmark' and an 'allowed alternative ' treatment ' treatment , , financial statements may be described as conforming to IFRS whichever treatment financial statements may be described as conforming to IFRS whichever treatment
is followed.
is followed.
10. 10. In developing Standards, IASB intends In developing Standards, IASB intends not to permit choices not to permit choices in accounting in accounting treatment
treatment. Further, IASB intends to reconsider the choices in existing IASs with a . Further, IASB intends to reconsider the choices in existing IASs with a view to reducing the number of those choices.
view to reducing the number of those choices.
11. 11. IFRS will present fundamental principles in bold face type IFRS will present fundamental principles in bold face type and other guidance in and other guidance in non-bold type (the 'black-letter'/'grey-letter' distinction). Paragraphs of both types non-bold type (the 'black-letter'/'grey-letter' distinction). Paragraphs of both types
have equal authority.
have equal authority.
12. 12. The The provision of provision of IAS 1 that conformity with IAS requires compliance with every IAS 1 that conformity with IAS requires compliance with every applicable IAS and Interpretation requires
applicable IAS and Interpretation requires compliance with all IFRSs as well. compliance with all IFRSs as well.
LIST OF IFRS
IFRS 1 IFRS 1 First-time Adoption of International Financial Reporting Standards First-time Adoption of International Financial Reporting Standards
IFRS 2 IFRS 2 Share-based Payment Share-based Payment
IFRS 3 IFRS 3 Business Combinations Business Combinations
IFRS 4 IFRS 4 Insurance Contracts Insurance Contracts
IFRS 5 IFRS 5 Non-current Assets Held for Sale and Discontinued Operations Non-current Assets Held for Sale and Discontinued Operations
IFRS 6 IFRS 6 Exploration for and evaluation of Mineral Resources Exploration for and evaluation of Mineral Resources
IFRS 7 IFRS 7 Financial Instruments: Disclosures Financial Instruments: Disclosures
IFRS 8 IFRS 8 Operating Segments Operating Segments
FRAMEWORK FOR THE PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS
The The IASB Framework was approved by IASB Framework was approved by IASC Board IASC Board in April, 1989 for publication in April, 1989 for publication in July 1989, and adopted by the IASB in April, 2001.
in July 1989, and adopted by the IASB in April, 2001.
This Framework sets out the concepts that underlie the preparation and presentation This Framework sets out the concepts that underlie the preparation and presentation of financial statements for external users.
of financial statements for external users.
The The Framework Framework deals with: deals with:
– The objective The objective of financial statements; of financial statements;
– The The qualitative characteristics qualitative characteristics that determine the usefulness of information in that determine the usefulness of information in financial statement;
financial statement;
– The Definition, recognition and measurement of the The Definition, recognition and measurement of the elements elements from which from which financial statements are constructed; and
financial statements are constructed; and
– Concept of capital Concept of capital and capital maintenance. and capital maintenance.
The The Objective of Financial statements is to provide useful information to Objective of Financial statements is to provide useful information to users of financial statements in making economic decision.
users of financial statements in making economic decision.
Financial Statements are Financial Statements are prepared prepared to provide information on Financial to provide information on Financial Position, Operating Performance and changes in financial position of an Position, Operating Performance and changes in financial position of an
entity entity
Financial Statements are normally prepared on the Financial Statements are normally prepared on the assumption assumption that entity is that entity is a going concern and will continue in operation for the foreseeable future, a going concern and will continue in operation for the foreseeable future,
and prepared on accrual basis of accounting.
and prepared on accrual basis of accounting.
The four The four Qualitative characteristics Qualitative characteristics are Understandability, relevance, are Understandability, relevance, reliability and comparability are the attributes that make the financial reliability and comparability are the attributes that make the financial
information useful to users.
information useful to users.
The The elements elements directly related to the measurement of financial position are directly related to the measurement of financial position are assets, liabilities and equity.
assets, liabilities and equity.
An item that meets the definition of an element should be recognized if: An item that meets the definition of an element should be recognized if:
– it is probable that any future economic benefit associated the item will flow to or it is probable that any future economic benefit associated the item will flow to or from the entity.
from the entity.
– the item has a cost or value that can be measured with reliability. the item has a cost or value that can be measured with reliability.
Measurement Measurement is the process of determining the monetary amounts at which each is the process of determining the monetary amounts at which each element in the financial statements are to be recognized and carried in the Balance element in the financial statements are to be recognized and carried in the Balance
Sheet and Income statement.
Sheet and Income statement.
The concept of The concept of capital maintenance is concerned with how an entity defines the capital maintenance is concerned with how an entity defines the capital that it seeks to maintain. It provides the linkage between the concepts of capital that it seeks to maintain. It provides the linkage between the concepts of
capital and the concepts of profit because it provides the point of reference by which capital and the concepts of profit because it provides the point of reference by which
profit is measured.
profit is measured.
OBJECTIVE OF THE STANDARD:
OBJECTIVE OF THE STANDARD:
– The objective of this IFRS is to ensure that an entity’s The objective of this IFRS is to ensure that an entity’s first IFRS first IFRS financial statements
financial statements , and its , and its interim financial reports interim financial reports for part of the for part of the period covered by those financial statements, contain high quality period covered by those financial statements, contain high quality information that:
information that:
– it is transparen it is transparen t for users and t for users and comparable comparable over all the periods presented. over all the periods presented.
– Provides a suitable starting point Provides a suitable starting point for accounting under International for accounting under International Financial Reporting Standards (IFRS); and
Financial Reporting Standards (IFRS); and
– Can be generated at a Can be generated at a cos cos t t that does not that does not exceed the benefits to users.
exceed the benefits to users.
IFRS -1 : FIRST TIME ADOPTION OF
I F R S
POINTS:
POINTS:
An entity shall prepare and present an An entity shall prepare and present an opening IFRS statement of financial position opening IFRS statement of financial position at the
at the date of transition to IFRSs. This is the starting point for its accounting under date of transition to IFRSs . This is the starting point for its accounting under IFRSs.
IFRSs.
An entity shall prepare an An entity shall prepare an opening IFRS balance sheet opening IFRS balance sheet at the date of transition to at the date of transition to IFRSs. This is the starting point for its accounting under IFRSs. An entity
IFRSs. This is the starting point for its accounting under IFRSs. An entity need not need not present
present its opening IFRS balance sheet in its first IFRS financial statements. its opening IFRS balance sheet in its first IFRS financial statements.
In general, the IFRS requires an entity to In general, the IFRS requires an entity to comply with each IFRS effective at the end comply with each IFRS effective at the end of its first IFRS reporting period. In particular, the IFRS requires an entity to do the of its first IFRS reporting period. In particular, the IFRS requires an entity to do the
following in the opening IFRS statement of financial position that it prepares as a following in the opening IFRS statement of financial position that it prepares as a
starting point for its accounting under IFRSs:
starting point for its accounting under IFRSs:
recognize all assets and liabilities whose recognition is required by IFRSs. recognize all assets and liabilities whose recognition is required by IFRSs.
not to recognize items as assets or liabilities if IFRSs do not permit such recognition; not to recognize items as assets or liabilities if IFRSs do not permit such recognition;
IFRS-1
IFRS-1
reclassify items that it recognized under previous GAAP as one type of asset, reclassify items that it recognized under previous GAAP as one type of asset, liability or component of equity, but are different type of asset, liability or liability or component of equity, but are different type of asset, liability or
component of equity under IFRSs.
component of equity under IFRSs.
Apply IFRSs in measuring all recognized assets and liabilities. Apply IFRSs in measuring all recognized assets and liabilities.
The IFRS grants The IFRS grants limited exemptions from these requirements in specified limited exemptions from these requirements in specified areas where the cost of complying with them would be likely to exceed the areas where the cost of complying with them would be likely to exceed the
benefits to users of financial statements.
benefits to users of financial statements.
The IFRS also The IFRS also prohibits retrospective application prohibits retrospective application of IFRSs in some areas; of IFRSs in some areas;
particularly where retrospective application would require judgments by particularly where retrospective application would require judgments by
management about past conditions after the outcome of a particular management about past conditions after the outcome of a particular
transaction is already known.
transaction is already known.
The IFRS requires The IFRS requires disclosures disclosures that explain how the transition from previous that explain how the transition from previous GAAP to IFRSs affected the entities reported financial position, financial GAAP to IFRSs affected the entities reported financial position, financial
performance and cash flows.
performance and cash flows.
OBJECTIVE OF THIS STANDARD:
OBJECTIVE OF THIS STANDARD:
The objective of this IFRS is to The objective of this IFRS is to specify the financial reporting by an entity specify the financial reporting by an entity when it undertakes a share-based payment transaction.
when it undertakes a share-based payment transaction.
In particular, it requires an entity to In particular, it requires an entity to reflect in its profit or loss and financial reflect in its profit or loss and financial position the effects of share-based payment transactions, including expenses position the effects of share-based payment transactions, including expenses
associated with transactions in which
associated with transactions in which share options share options are granted to are granted to employees.
employees.
IFRS -2 : SHARE-BASED PAYMENTS
POINTS:
POINTS:
The IFRS requires an entity to The IFRS requires an entity to recognize recognize share-based payment share-based payment transactions in its financial statements, including transactions transactions in its financial statements, including transactions
with employees or other parties to be settled in cash, other with employees or other parties to be settled in cash, other
assets, or equity instruments of the entity.
assets, or equity instruments of the entity.
There are There are no exceptions to the IFRS, other than for no exceptions to the IFRS, other than for transactions to which other Standards apply.
transactions to which other Standards apply.
This This also applies also applies to transfers of equity instruments of the to transfers of equity instruments of the entity’s parent, or equity instruments of another entity in the entity’s parent, or equity instruments of another entity in the
same group as the entity, to parties that have supplied goods or same group as the entity, to parties that have supplied goods or
services to the entity.
services to the entity.
IFRS-2
The IFRS sets out The IFRS sets out measurement principles measurement principles and specific and specific requirements
requirements for for three types three types of share-based payment of share-based payment transactions:
transactions:
(a)
(a)
equity-settled equity-settled share-based payment transactions, in which the entity share-based payment transactions, in which the entity receives goods or services as consideration for equity instruments of receives goods or services as consideration for equity instruments of the entity (including shares or share options);
the entity (including shares or share options);
(b) cash-settled (b) cash-settled share-based payment transactions, in which the entity share-based payment transactions, in which the entity acquires goods or services by incurring liabilities to the supplier of acquires goods or services by incurring liabilities to the supplier of those goods or services for
those goods or services for amounts that are based on the price amounts that are based on the price (or (or value)
value) of the entity’s shares or other equity instruments of the entity; of the entity’s shares or other equity instruments of the entity;
and and (c) t
(c) transactions ransactions in which the entity receives or acquires goods or services in which the entity receives or acquires goods or services and the terms of the arrangement provide either the entity or the and the terms of the arrangement provide either the entity or the supplier of those goods or services with a choice of whether the entity supplier of those goods or services with a choice of whether the entity settles the transaction in cash or by issuing equity
settles the transaction in cash or by issuing equity instruments.
instruments.
IFRS-2
For equity-settled share-based payment transactions, the IFRS requires an entity to For equity-settled share-based payment transactions, the IFRS requires an entity to measure measure the goods or services received,
the goods or services received, and the corresponding increase in equity, and the corresponding increase in equity, directly, at the fair directly, at the fair value of the goods or services received, unless that fair value cannot be estimated reliably.
value of the goods or services received, unless that fair value cannot be estimated reliably.
If the entity cannot estimate reliably If the entity cannot estimate reliably the fair value of the goods or services received, the entity the fair value of the goods or services received, the entity is required to
is required to measure their value measure their value , and the corresponding increase in equity , and the corresponding increase in equity , indirectly , indirectly, by , by reference to the fair value of the equity instruments granted. Furthermore:
reference to the fair value of the equity instruments granted. Furthermore:
(a) (a) for transactions with employees for transactions with employees and others and others providing similar services, the entity is providing similar services, the entity is required to
required to measure the fair value of the equity instruments granted, measure the fair value of the equity instruments granted, because it is because it is typically not possible to estimate reliably the fair value of employee services received.
typically not possible to estimate reliably the fair value of employee services received.
The fair value of the equity instruments granted is measured
The fair value of the equity instruments granted is measured at grant date. at grant date.
(b) (b) for transactions with parties other than employees for transactions with parties other than employees (and those providing similar services), (and those providing similar services), there is a rebut table presumption that the fair value of the goods or services received can there is a rebut table presumption that the fair value of the goods or services received can be estimated reliably. That fair value is measured at the
be estimated reliably. That fair value is measured at the date the entity obtains date the entity obtains the goods the goods or the counterparty renders service. In rare cases, if the presumption is rebutted, the
or the counterparty renders service. In rare cases, if the presumption is rebutted, the transaction is measured by reference to the fair value of the equity instruments granted, transaction is measured by reference to the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty measured at the date the entity obtains the goods or the counterparty renders service.
renders service.
IFRS-2
(c)(c)
for goods or services measured by reference to the fair value of the equity for goods or services measured by reference to the fair value of the equity instruments granted, the IFRS specifies that
instruments granted, the IFRS specifies that vesting conditions, other than vesting conditions, other than market conditions
market conditions, are not taken into account , are not taken into account when estimating the fair value when estimating the fair value of the shares or options at
of the shares or options at the relevant measurement date the relevant measurement date (as specified above). (as specified above).
Instead, vesting conditions are taken into account by adjusting the number of Instead, vesting conditions are taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount so equity instruments included in the measurement of the transaction amount so that, ultimately, the amount recognized for goods or services received as
that, ultimately, the amount recognized for goods or services received as consideration for the equity instruments granted is based on the number of consideration for the equity instruments granted is based on the number of equity instruments that eventually vest. Hence, on a cumulative basis, no equity instruments that eventually vest. Hence, on a cumulative basis, no amount is recognized for goods or services received if the equity instruments amount is recognized for goods or services received if the equity instruments granted do not vest because of failure to satisfy a vesting condition (other granted do not vest because of failure to satisfy a vesting condition (other than a market condition).
than a market condition).
(d)(d)
the IFRS requires the fair value of equity instruments the IFRS requires the fair value of equity instruments granted to be granted to be based on based on market prices
market prices, if available, and to take into account the terms and conditions , if available, and to take into account the terms and conditions upon which those equity instruments were granted.
upon which those equity instruments were granted. In the absence In the absence of market of market prices, fair value is estimated, using a valuation technique to estimate what prices, fair value is estimated, using a valuation technique to estimate what the price of those equity instruments would have been on the measurement the price of those equity instruments would have been on the measurement date in an arm’s length transaction between knowledgeable, date in an arm’s length transaction between knowledgeable, willing
willing parties. parties.
IFRS-2
(e) (e) the IFRS also sets out requirements if the terms and conditions of an the IFRS also sets out requirements if the terms and conditions of an option option or share grant are modified
or share grant are modified (e.g. an option is reprised) or if a grant is (e.g. an option is reprised) or if a grant is
cancelled, repurchased or replaced with another grant of equity instruments.
cancelled, repurchased or replaced with another grant of equity instruments.
For example, irrespective of any modification, cancellation or settlement of a For example, irrespective of any modification, cancellation or settlement of a grant of equity instruments to employees, the IFRS generally requires the grant of equity instruments to employees, the IFRS generally requires the entity to recognize
entity to recognize, as a minimum, the services received measured at the , as a minimum, the services received measured at the grant date fair value of the equity instruments granted.
grant date fair value of the equity instruments granted.
For cash-settled share-based payment transactions, the IFRS requires an entity to For cash-settled share-based payment transactions, the IFRS requires an entity to measure the goods or services acquired and the liability incurred at the fair value measure the goods or services acquired and the liability incurred at the fair value of the liability. Until the liability is settled, the entity is required to
of the liability. Until the liability is settled, the entity is required to re measure re measure the fair value of the liability at each reporting date
the fair value of the liability at each reporting date and at the date of settlement, and at the date of settlement, with any changes in value recognized in profit or loss for the period.
with any changes in value recognized in profit or loss for the period.
IFRS-2
For share-based payment transactions in which the terms of the arrangement For share-based payment transactions in which the terms of the arrangement provide either the entity or the supplier of goods or services with a choice of provide either the entity or the supplier of goods or services with a choice of
whether the entity settles the transaction in cash or by issuing equity instruments, whether the entity settles the transaction in cash or by issuing equity instruments,
the entity is required to account for that transaction, or the components of that the entity is required to account for that transaction, or the components of that
transaction, as a cash-settled share-based payment transaction if, and to the extent transaction, as a cash-settled share-based payment transaction if, and to the extent
that, the entity has incurred a liability to settle in cash (or other assets), or as an that, the entity has incurred a liability to settle in cash (or other assets), or as an equity-settled share-based payment transaction if, and to the extent that, no such equity-settled share-based payment transaction if, and to the extent that, no such
liability has been incurred.
liability has been incurred.
The IFRS prescribes The IFRS prescribes various disclosure requirements to enable users of financial various disclosure requirements to enable users of financial statements to understand:
statements to understand:
the nature and extent of share-based payment arrangements that the nature and extent of share-based payment arrangements that existed existed during during the period;
the period;
how the fair value how the fair value of the goods or services received, or the fair value of the of the goods or services received, or the fair value of the equity instruments granted, during the period was determined; and
equity instruments granted, during the period was determined; and
the effect of share-based payment transactions on the entity’s profit or loss for the effect of share-based payment transactions on the entity’s profit or loss for the period and on its financial position.
the period and on its financial position.
IFRS-2
OBJECTIVE OF THIS STANDARD:
OBJECTIVE OF THIS STANDARD:
The objective of the IFRS is to The objective of the IFRS is to enhance the relevance, reliability and enhance the relevance, reliability and comparability
comparability of the information that an entity provides in its financial statements of the information that an entity provides in its financial statements about a
about a business combination and its effects business combination and its effects. It does that by establishing principles . It does that by establishing principles and requirements for
and requirements for how an acquirer: how an acquirer :
– (a) recognizes and measures in its financial statements the identifiable (a) recognizes and measures in its financial statements the identifiable assets assets acquired, the liabilities
acquired, the liabilities assumed assumed and any non-controlling interest in the and any non-controlling interest in the acquire;
acquire;
– (b) recognizes and measures the goodwill (b) recognizes and measures the goodwill acquired in the business combination acquired in the business combination or a gain from a bargain purchase; and
or a gain from a bargain purchase; and
– (c) determines what information to disclose (c) determines what information to disclose to enable users of the to enable users of the financial statements to evaluate the nature and financial effects financial statements to evaluate the nature and financial effects of the business combination.
of the business combination.
IFRS -3 : BUSINESS COMBINATIONS
POINTS:
POINTS:
Core principle Core principle
An acquirer of a business An acquirer of a business recognises recognises the assets acquired and liabilities the assets acquired and liabilities assumed at their
assumed at their acquisition-date acquisition-date fair values and discloses information that fair values and discloses information that enables users to evaluate the nature and financial effects of the acquisition.
enables users to evaluate the nature and financial effects of the acquisition.
Applying the acquisition method Applying the acquisition method
A business combination must be A business combination must be accounted accounted for by applying the acquisition for by applying the acquisition method
method , unless it is a combination involving entities or businesses under , unless it is a combination involving entities or businesses under common control. One of the parties to a business combination can always be common control. One of the parties to a business combination can always be
identified as the acquirer, being the entity that obtains control of the other identified as the acquirer, being the entity that obtains control of the other
business (the acquiree). Formations of a joint venture or the acquisition of an business (the acquiree). Formations of a joint venture or the acquisition of an asset or a group of assets that does not constitute a business are not business asset or a group of assets that does not constitute a business are not business
combinations.
combinations.
IFRS-3
The The IFRS establishes principles IFRS establishes principles for recognising and measuring the for recognising and measuring the
identifiable assets acquired, the liabilities assumed and any non-controlling identifiable assets acquired, the liabilities assumed and any non-controlling
interest in the acquiree. Any classifications or designations made in interest in the acquiree. Any classifications or designations made in
recognising these items must be made in accordance with the contractual recognising these items must be made in accordance with the contractual
terms, economic conditions, acquirer’s operating or accounting policies and terms, economic conditions, acquirer’s operating or accounting policies and
other factors that exist at the acquisition date.
other factors that exist at the acquisition date.
Each Each identifiable asset and liability is measured at its acquisition-date identifiable asset and liability is measured at its acquisition-date fair fair value
value. Any non-controlling interest in an acquiree is measured at fair value . Any non-controlling interest in an acquiree is measured at fair value or as the non-controlling interest’s proportionate share of the acquiree’s or as the non-controlling interest’s proportionate share of the acquiree’s
net identifiable assets.
net identifiable assets.
IFRS-3
The IFRS provides The IFRS provides limited exceptions to these recognition and measurement limited exceptions to these recognition and measurement principles:
principles:
a) a) Leases and insurance contracts Leases and insurance contracts are required to be classified on the basis of are required to be classified on the basis of the contractual terms and other factors at the inception of the contract (or when the contractual terms and other factors at the inception of the contract (or when the terms have changed) rather than on the basis of the factors that exist at the the terms have changed) rather than on the basis of the factors that exist at the acquisition date.
acquisition date.
b) b) Only those contingent liabilities Only those contingent liabilities assumed in a business combination that are a assumed in a business combination that are a present obligation and can be measured reliably are recognized.
present obligation and can be measured reliably are recognized.
c) c) Some assets and liabilities are required to be recognised or measured in Some assets and liabilities are required to be recognised or measured in accordance with
accordance with other IFRSs other IFRSs , rather than at fair value. The assets and , rather than at fair value. The assets and liabilities affected are those falling within the scope of IAS 12
liabilities affected are those falling within the scope of IAS 12 Income Taxes Income Taxes , , IAS 19
IAS 19 Employee Benefits Employee Benefits, IFRS 2 , IFRS 2 Share-based Payment Share-based Payment and IFRS 5 and IFRS 5 Non- Non- current Assets Held for Sale and Discontinued Operations
current Assets Held for Sale and Discontinued Operations . .
IFRS-3
(d) There are special requirements for measuring
(d) There are special requirements for measuring a reacquired right a reacquired right . .
(e) Indemnification assets (e) Indemnification assets are recognised and measured on a basis that is are recognised and measured on a basis that is
consistent with the item that is subject to the indemnification, even if that consistent with the item that is subject to the indemnification, even if that measure is not fair value.
measure is not fair value.
The IFRS requires the acquirer, having recognised the identifiable assets, the The IFRS requires the acquirer, having recognised the identifiable assets, the liabilities and any non-controlling interests,
liabilities and any non-controlling interests, to identify any difference to identify any difference between: between:
a) a) the aggregate of the consideration transferred, any non-controlling interest the aggregate of the consideration transferred, any non-controlling interest in the acquiree and, in a business combination achieved in stages, the
in the acquiree and, in a business combination achieved in stages, the
acquisition-date fair value of the acquirer’s previously held equity interest in acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree; and
the acquiree; and
b) the net identifiable assets acquired.
b) the net identifiable assets acquired.
The difference will, generally, be
The difference will, generally, be recognised as goodwill recognised as goodwill . If the acquirer . If the acquirer has made a gain from a bargain purchase that gain is recognised has made a gain from a bargain purchase that gain is recognised in profit or loss.
in profit or loss.
IFRS-3
The The consideration consideration transferred in a business combination (including any contingent transferred in a business combination (including any contingent consideration)
consideration) is measured at fair value. is measured at fair value .
In general, an acquirer measures and accounts for assets acquired and liabilities In general, an acquirer measures and accounts for assets acquired and liabilities assumed or incurred in a business combination after the business combination has assumed or incurred in a business combination after the business combination has
been completed in accordance with other applicable IFRSs. However, the IFRS been completed in accordance with other applicable IFRSs. However, the IFRS
provides accounting requirements for reacquired rights, contingent liabilities, provides accounting requirements for reacquired rights, contingent liabilities,
contingent consideration and indemnification assets.
contingent consideration and indemnification assets.
Disclosure Disclosure
The IFRS requires the acquirer to disclose information that enables users of its The IFRS requires the acquirer to disclose information that enables users of its financial statements to evaluate the
financial statements to evaluate the nature and financial effect of business nature and financial effect of business combinations
combinations that occurred during the current reporting period or after the that occurred during the current reporting period or after the reporting date but before the financial statements are authorised for issue.
reporting date but before the financial statements are authorised for issue.
After a business combination, the acquirer must After a business combination, the acquirer must disclose any adjustments disclose any adjustments recognised
recognised in the current reporting period that relate to business in the current reporting period that relate to business combinations that occurred in the current or previous reporting combinations that occurred in the current or previous reporting
periods.
periods.
IFRS-3
OBJECTIVE OF STANDARD:
OBJECTIVE OF STANDARD:
The objective of this IFRS is to The objective of this IFRS is to specify the financial reporting specify the financial reporting for for insurance contracts
insurance contracts by any by any entity that issues such contracts entity that issues such contracts (described (described in this IFRS as an
in this IFRS as an insurer insurer ) until the Board completes the second phase of ) until the Board completes the second phase of its project on insurance contracts. In particular, this IFRS requires:
its project on insurance contracts. In particular, this IFRS requires:
limited improvements to accounting limited improvements to accounting by insurers for insurance by insurers for insurance contracts.
contracts.
disclosure disclosure that identifies and explains the that identifies and explains the amounts amounts in an insurer’s in an insurer’s financial statements arising from insurance contracts and helps users financial statements arising from insurance contracts and helps users of those financial statements
of those financial statements understand the amount, timing and understand the amount, timing and uncertainty of future cash flows
uncertainty of future cash flows from insurance from insurance contracts.
contracts.
IFRS -4 : INSURANCE CONTRACTS
POINTS:
POINTS:
An An insurance contract is a contract under which one party (the insurer) insurance contract is a contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by accepts significant insurance risk from another party (the policyholder) by
agreeing to compensate the policyholder if a specified uncertain future event agreeing to compensate the policyholder if a specified uncertain future event
(the insured event) adversely affects the policyholder.
(the insured event) adversely affects the policyholder.
The IFRS The IFRS applies applies to all insurance contracts (including reinsurance contracts) to all insurance contracts (including reinsurance contracts) that an entity issues and to reinsurance contracts that it holds, except for
that an entity issues and to reinsurance contracts that it holds, except for specified contracts covered by other IFRSs. It
specified contracts covered by other IFRSs. It does not apply does not apply to other assets to other assets and liabilities of an insurer, such as financial assets and financial liabilities and liabilities of an insurer, such as financial assets and financial liabilities
within the scope of IAS 39
within the scope of IAS 39 Financial Instruments: Recognition and Financial Instruments: Recognition and Measurement
Measurement. Furthermore, it does not address accounting by policyholders. . Furthermore, it does not address accounting by policyholders.
IFRS-4
The IFRS The IFRS exempts an insurer temporarily exempts an insurer temporarily (ie during phase I of this (ie during phase I of this project) from some requirements of other IFRSs, including the
project) from some requirements of other IFRSs, including the requirement to consider the
requirement to consider the Framework in selecting accounting policies Framework in selecting accounting policies for insurance contracts. However, the IFRS:
for insurance contracts. However, the IFRS:
a. a. prohibits provisions prohibits provisions for possible claims under for possible claims under contracts that are not contracts that are not in in existence existence at the end of the reporting period (such as catastrophe and at the end of the reporting period (such as catastrophe and
equalisation provisions).
equalisation provisions).
b. b. requires a requires a test test for the adequacy of recognised insurance liabilities and for the adequacy of recognised insurance liabilities and an impairment test for reinsurance assets.
an impairment test for reinsurance assets.
c. c. requires an insurer to requires an insurer to keep insurance liabilities keep insurance liabilities in its statement of in its statement of
financial position until they are discharged or cancelled, or expire, and financial position until they are discharged or cancelled, or expire, and
to present insurance liabilities without offsetting them against related to present insurance liabilities without offsetting them against related
reinsurance assets.
reinsurance assets.
IFRS-4
IFRS-4
The IFRS permits an insurer to The IFRS permits an insurer to change its accounting policies change its accounting policies for for insurance contracts only if, as a result, its financial statements present insurance contracts only if, as a result, its financial statements present information that is
information that is more relevant and no less reliable, or more reliable more relevant and no less reliable, or more reliable and no less relevant
and no less relevant . In particular, an insurer cannot introduce any of . In particular, an insurer cannot introduce any of the following practices
the following practices , although it may continue using accounting , although it may continue using accounting policies that involve them:
policies that involve them:
a. a. measuring insurance liabilities on an undiscounted basis. measuring insurance liabilities on an undiscounted basis.
b. b. measuring contractual rights to future investment management measuring contractual rights to future investment management fees fees at an amount that exceeds their fair value as implied by a comparison at an amount that exceeds their fair value as implied by a comparison with current fees charged by other market participants for similar with current fees charged by other market participants for similar
services. services.
a. a. using non-uniform accounting policies using non-uniform accounting policies for the insurance liabilities of for the insurance liabilities of subsidiaries.
subsidiaries.
The IFRS permits the The IFRS permits the introduction of an accounting policy introduction of an accounting policy that involves that involves re re measuring designated insurance liabilities consistently
measuring designated insurance liabilities consistently in each period to in each period to reflect current market interest rates (and, if the insurer so elects, other reflect current market interest rates (and, if the insurer so elects, other
current estimates and assumptions). Without this permission, an insurer current estimates and assumptions). Without this permission, an insurer
would have been required to apply the change in accounting policies would have been required to apply the change in accounting policies
consistently to all similar liabilities.
consistently to all similar liabilities.
The IFRS requires The IFRS requires disclosure disclosure to help users understand: to help users understand:
the amounts the amounts in the insurer’s financial statements that in the insurer’s financial statements that arise from insurance arise from insurance contracts.
contracts.
the amount, timing and uncertainty of future cash flows the amount, timing and uncertainty of future cash flows from insurance from insurance contracts
contracts
IFRS-4
OBJECTIVE OF STANDARD:
OBJECTIVE OF STANDARD:
The objective of this IFRS is to The objective of this IFRS is to specify the accounting specify the accounting for assets held for for assets held for sale, and the
sale, and the presentation and disclosure presentation and disclosure of discontinued operations. In of discontinued operations. In particular, the IFRS requires:
particular, the IFRS requires:
a. a. assets that meet the assets that meet the criteria to be classified criteria to be classified as held for sale to be as held for sale to be measured at the
measured at the lower lower of carrying amount and fair value less costs to of carrying amount and fair value less costs to sell, and depreciation on such assets to cease; and
sell, and depreciation on such assets to cease; and
b. b. assets that meet the criteria to be classified as held for sale to be assets that meet the criteria to be classified as held for sale to be presented separately
presented separately in the statement of financial position and the in the statement of financial position and the results of discontinued operations
results of discontinued operations to be presented separately in the to be presented separately in the statement of comprehensive income.
statement of comprehensive income.
IFRS -5 : NON-CURRENT ASSETS HELD FOR
SALE AND DISCONTINUED OPERATIONS
POINTS:
POINTS:
The IFRS: The IFRS:
a) a) adopts the classification adopts the classification ‘held for sale’. ‘held for sale’.
b) b) introduces the concept of a introduces the concept of a disposal group, being a group of assets to be disposal group , being a group of assets to be disposed of, by sale or otherwise, together as a group in a single transaction, disposed of, by sale or otherwise, together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in and liabilities directly associated with those assets that will be transferred in the transaction.
the transaction.
c) c) classifies an operation classifies an operation as discontinued at the date the operation meets the as discontinued at the date the operation meets the criteria to be classified as held for sale or when the entity has disposed of the criteria to be classified as held for sale or when the entity has disposed of the operation.
operation.
An entity shall An entity shall classify classify a non-current asset (or disposal group) as held a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a for sale if its carrying amount will be recovered principally through a sale
sale transaction rather than through continuing use. transaction rather than through continuing use.
IFRS-5
present condition subject only to terms that are usual and customary for present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups)
sales of such assets (or disposal groups) and its sale must be and its sale must be highly highly probable
probable . .
For the For the sale to be highly probable sale to be highly probable , the appropriate level of management , the appropriate level of management must be committed to a plan to sell the asset (or disposal group), and an must be committed to a plan to sell the asset (or disposal group), and an active program to locate a buyer and complete the plan must have been active program to locate a buyer and complete the plan must have been
initiated. Further, the asset (or disposal group) must be actively marketed initiated. Further, the asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value. In for sale at a price that is reasonable in relation to its current fair value. In
addition, the
addition, the sale should be expected to qualify for recognition as a sale should be expected to qualify for recognition as a completed sale
completed sale within one year within one year from the date of classification from the date of classification , except as , except as permitted by paragraph 9, and actions required to complete the plan should permitted by paragraph 9, and actions required to complete the plan should indicate that it is unlikely that significant changes to the plan will be made indicate that it is unlikely that significant changes to the plan will be made
or that the plan will be withdrawn.
or that the plan will be withdrawn.
IFRS-5
A A discontinued operation discontinued operation is a component of an entity is a component of an entity that either has been that either has been disposed of, or is classified as held for sale, and
disposed of, or is classified as held for sale, and
a) a) represents a separate major line of business or geographical area of represents a separate major line of business or geographical area of operations,
operations,
b) b) is part of a single co-ordinated plan to dispose of a separate major line of is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
business or geographical area of operations or
c) c) is a subsidiary acquired exclusively with a view to resale. is a subsidiary acquired exclusively with a view to resale.
A component of an entity comprises
A component of an entity comprises operations and cash flows operations and cash flows
that can be clearly distinguished that can be clearly distinguished , operationally and for financial , operationally and for financial reporting purposes, from the rest of the entity. In other words, a reporting purposes, from the rest of the entity. In other words, a
component of an entity will have been a cash-generating unit or a group component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use.
of cash-generating units while being held for use.
An entity shall An entity shall not classify as held for sale not classify as held for sale a non-current asset (or a non-current asset (or disposal group) that is to be abandoned
disposal group) that is to be abandoned . This is because its . This is because its carrying amount will be recovered principally
carrying amount will be recovered principally through continuing use.
through continuing use.
IFRS-5
OBJECTIVE OF STANDARD:
OBJECTIVE OF STANDARD:
The objective of this IFRS is to specify the The objective of this IFRS is to specify the financial reporting for the exploration for and financial reporting for the exploration for and evaluation of mineral resources.
evaluation of mineral resources.
POINTS:
POINTS:
Exploration and evaluation expenditures are expenditures incurred by an entity in Exploration and evaluation expenditures are expenditures incurred by an entity in connection with the exploration for and evaluation of mineral resources
connection with the exploration for and evaluation of mineral resources before the technical before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable.
feasibility and commercial viability of extracting a mineral resource are demonstrable.
Exploration for and evaluation of mineral resources is the search for mineral resources, Exploration for and evaluation of mineral resources is the search for mineral resources, including minerals, oil, natural gas and similar non-regenerative resources
including minerals, oil, natural gas and similar non-regenerative resources after the entity has after the entity has obtained legal rights
obtained legal rights to explore in a specific area, as well as the determination of the technical to explore in a specific area, as well as the determination of the technical feasibility and commercial viability of extracting the mineral resource.
feasibility and commercial viability of extracting the mineral resource.
Exploration and evaluation assets are exploration and evaluation expenditures Exploration and evaluation assets are exploration and evaluation expenditures recognized as assets
recognized as assets in accordance with the entity’s accounting policy. in accordance with the entity’s accounting policy.
IFRS-6 : EXPLORATION FOR AND
EVALUATION OF MINERALS
The IFRS:
The IFRS:
a)a)
permits an entity to develop an accounting policy permits an entity to develop an accounting policy for exploration and for exploration and evaluation assets without specifically
evaluation assets without specifically considering considering the requirements of the requirements of paragraphs 11 and 12 of IAS 8. Thus, an entity adopting IFRS 6 may paragraphs 11 and 12 of IAS 8. Thus, an entity adopting IFRS 6 may continue to use the accounting policies applied immediately before continue to use the accounting policies applied immediately before adopting the IFRS. This includes continuing to use recognition and adopting the IFRS. This includes continuing to use recognition and measurement practices that are part of those accounting policies.
measurement practices that are part of those accounting policies.
b)b)
requires entities recognising exploration and evaluation assets to requires entities recognising exploration and evaluation assets to perform perform an impairment test
an impairment test on those assets when facts and circumstances suggest on those assets when facts and circumstances suggest that the carrying amount of the assets may exceed their recoverable
that the carrying amount of the assets may exceed their recoverable amount.
amount.
a)a)
varies the recognition varies the recognition of impairment from that in IAS 36 but measures of impairment from that in IAS 36 but measures the impairment in accordance with that Standard once the impairment is the impairment in accordance with that Standard once the impairment is identified.
identified.
IFRS-6
An entity shall An entity shall determine an accounting policy determine an accounting policy for allocating exploration for allocating exploration and evaluation assets
and evaluation assets to cash-generating units to cash-generating units or groups or groups of cash-generating of cash-generating units for the purpose of
units for the purpose of assessing such assets for impairment assessing such assets for impairment . Each cash- . Each cash- generating unit or group of units to which an exploration and evaluation generating unit or group of units to which an exploration and evaluation
asset is allocated
asset is allocated shall not be larger than an operating segment determined shall not be larger than an operating segment determined in accordance with IFRS 8
in accordance with IFRS 8 Operating Segments Operating Segments . .
