IFRS IAS Flashcards
Ch13 - IFRS 5 Non-Current Assets held for sales and discontinued operations
What are the conditions that must be met for the sale of non-current assets (or disposal groups) to be considered PROBABLE IFRS 5?
(Hint: PUMAS)
P - Price must be reasonable
U - Unlikely that significant selling plan changes will be made
M - Management committed to sell
A - Active programme to find buyer
S - Sale expected to take place within one year of classification
Ch17 - Integrated Reporting Framework (IR)
What are the Objectives of IR?
- Improve quality information
- promote a more cohesive and efficient approach
- Support integrated thinking, decision making and actions that focus on value creation short, medium and long term
Ch17 - IR
Name the Fundamental Concepts of IR.
- Value creation (short, medium and long term)
- The capitals
- The value creation Process
CH17 - IR
What are the Guiding Principles of IR?
HINT: A-G
A - Strategic focus on Future orientation B - Connectivity of Information C - Stakeholder relationships D - Materiality E - Conciseness F - Reliability and completeness G - Consistency and comparability
CH17 - IR
What are the elements that an Integrated Report should include?
HINT: there are 8 elements
- Organizational Overview
- Governance
- Business Model
- Risks and Opportunities
- Strategy and resource allocation
- Performance
- Outlook
- Basis of preparation and presentation
Ch13 - IFRS 5 Non-current assets held for sale and Discontinued operations
Under IFRS 5, what is the criteria that must be met for a non-current asset to be classified as held for sale?
An entity may classify a non-current asset as Held For Sale, if its carrying amount will primarily be recovered through a sale, rather than through its use.
a) Asset must be available for immediate sale in its present condition.
b) The sale must be highly probable. This is satisfied if all PUMAS are met.
Ch3 - IAS 38 Intangible assets
Define Intangible Asset.
Separable, non-monetary asset without physical substance. Must be:
a) controlled by the entity
b) something from which the entity expects economic benefits to flow
Ch3 - IAS 38 Intangible assets
What does “Identifiable” mean, within the context of an Intangible Asset?
a) it is separable,
OR
b) arises from contractual legal rights
Ch3 - IAS 38 Internally generated Intangible assets
What conditions must be met for RnD costs to be capitalized.
Research Costs MUST BE EXPENSED
Development costs: must satisfy the PIRATE
P - probable econ bens will flow to entity as a result
I - intent to complete sell/use
R - resources adequate to complete, sell/use
A - ability to use/sell asset
T - technical feasibility reached to sell/use
E - expenses can be reliably measured
Ch3 - IAS 38 Intangible assets
Illustrate 5 ways intangible asset can be acquired and how it is measured under the different circumstances.
Separate acquisition — Cost (which is purchase price)
Acquired part of bus combo — FV inline with IFRS3
Internally generated GW — not recognised!
Internally generated IA — PIRATE
Acquired by government grant — Asset and grant at FV plus expenditure directly attributable to prep for use.
Ch3 - IAS 40 Investment property
How is invest. property measured at recognition?
Under IAS 40, at cost less costs to bring into working condition as well as transaction costs.
After recognition, option to switch to revaluation model. ALL properties must be measured the same way though!
FV Model – changes in FV direct to PnL (not OCI)
Cost Model – same as IAS 16 PPE
IAS 16 - PPE
How is PPE measured at initial recognition?
PPE initially measured at Cost. Option to switch to reval model
Purchase Price net of discounts \+ Directly attributable costs to bring into working condition \+ Borrowing costs on qualifying asset
IAS 16 - PPE
What costs constitute as “Directly attributable costs of bringing asset into working condition?
- Employee benefit costs
- site restoration provision
- site prep
- initial delivery and transportation costs
- installation and assembly
. professional fees - testing costs
IFRS 3 Business combinations
What criteria must be met when determining whether a transaction meets the definition of a business combination under IFRS 3?
The business combination must involve the acquisition of a business, which generally has three elements:
Inputs – an economic resource (e.g. non-current assets, intellectual property) that creates outputs when one or more processes are applied to it
Process – a system, standard, protocol, convention or rule that when applied to an input or inputs, creates outputs (e.g. strategic management, operational processes, resource management)
Output – the result of inputs and processes applied to those inputs.
IFRS 3 Business combinations
Name the Exceptions to the recognition and measurement principles under IFRS3.
HINT: I CARIES
Indemnification assets - an acquirer recognises indemnification assets at the same time and on the same basis as the indemnified item [IFRS 3.27-28]
Contingent liabilities – the requirements of IAS 37 Provisions, Contingent Liabilities and Contingent Assets do not apply to the recognition of contingent liabilities arising in a business combination [IFRS 3.22-23]
Assets held for sale – IFRS 5 Non-current Assets Held for Sale and Discontinued Operations is applied in measuring acquired non-current assets and disposal groups classified as held for sale at the acquisition date.
Reacquired rights – the measurement of reacquired rights is by reference to the remaining contractual term without renewals [IFRS 3.29]
Income taxes – the recognition and measurement of income taxes is in accordance with IAS 12 Income Taxes [IFRS 3.24-25]
Employee benefits – assets and liabilities arising from an acquiree’s employee benefits arrangements are recognised and measured in accordance with IAS 19 Employee Benefits (2011) [IFRS 2.26]
Share-based payment transactions - these are measured by reference to the method in IFRS 2 Share-based Payment.
IAS 19 employee benefits
what are the elements of PV Obligations
Opening Balance Interest expense on obligation Current service cost Past service cost Benefits paid (from Cr. to FV Plan Assets)
IAS 19 employee benefits
what are the elements of FV Plan Assets
Beg balance Interest Income on plan Return on plan assets Contributions made Benefits paid (Dr. PV Plan Obligation)
IFRS 11 Joint Arrangements
What is the main difference between a Joint Operation and a JV?
Joint operation is a joint arrangement whereby parties have rights to assets and obligations for liabilities relating to the arrangement.
No adjustments are necessary on consolidation.
Joint Venture, parties have rights to the net assets.
Equity method used if
ACCA Code of Ethics and Conduct
What are the fundamental threats to the fundamental principles?
- Self interest
- Self review
- Familiarity
- Advocacy
- Intimidation
IAS 8 Accounting policies, changes in estimates and errors
When is a change in accounting policy permissible under IAS 8?
A change in accounting policy is only permitted when:
- is required by and IFRS; or
- results in FS providing more reliable and more relevant information.
DP/2017/1 Disclosure Initiative - Principles of Disclosure
What are the 8 sections of the Disclosure Initiative?
- Overview of the ‘disclosure problem’ and the objective of this project
- Principles of effective communication
- Roles of the primary FS and the Notes
- Location of information
- Use of performance measures in the FS
- Disclosure of Accounting policies
- Centralised disclosure objectives
- New Zealand Accounting Standards Board staff’s approach to drafting disclosure requirements in IFRSs
DP/2017/1 Disclosure Initiative - Principles of Disclosure
What are the 3 main aspects in
“1. Overview of the ‘disclosure problem’ and the objective of this project”
- Not enough relevant information, resulting in inappropriate investing/lending decisions
- Irrelevant information hindering UNDERSTANDIBILITY
- Ineffective communication, also reducing DP/2017/1 Disclosure Initiative - Principles of Disclosure
DP/2017/1 Disclosure Initiative - Principles of Disclosure
What are the 7 Principles with respect to:
2. Principles of effective communication?
- Entity specific
- Clear and simple
- Organised to highlight important matters
- Linked to important information
- Free from unnecessary duplicatoin
- Comparable
- In an appropriate format
DP/2017/1 Disclosure Initiative - Principles of Disclosure
What are the primary FS under
3. Roles of the primary FS and the Notes?
Financial Position
Financial Performance
Changes in Equity
Cash Flows
Notes
DP/2017/1 Disclosure Initiative - Principles of Disclosure
Outline
4. Location of information.
(HINT: info needed for IFRS, info labelled Non-IFRS)
Info needed to comply with IFRS can be outside the face as long as this improves UNDERSTANDIBILITY.
Info labelled Non-IFRS can be placed inside FS as long as:
- It’s disclosed and
- Explained why it’s useful
DP/2017/1 Disclosure Initiative - Principles of Disclosure
Outline
5. Use of performance measures in the FS?
Use of non-IFRS performance measures (EBITDA, EBIT) are permitted as long as they are relevant to UNDERSTANDING the FS.
Should be:
- clearly labelled
- reconciled to IFRS measures
DP/2017/1 Disclosure Initiative - Principles of Disclosure
What are the three categories of accounting policies under
6. Disclosure of Accounting policies
Category 1 - Always necessary to UNDERSTAND the FS
Category 2 - Not in Cat. 1, but necessary to UNDERSTAND the FS.
Category 3 - Not in Cat. 1 or 2, but used to prepare the FS.
ED/2015/8 Draft IFRS Practice Statement: Application of Materiality
What is the objective underlying ED application of materiality.
Non-mandatory guidance Issued as part of Disclosure Initiative.
Response to concerns surrounding application of Materiality which can lead to excessive disclosure of immaterial information, while obscuring important information in the FS.
ED/2015/8 Draft IFRS Practice Statement: Application of Materiality
List the 4 sections of ED/2015/8 Application of Materiality.
- General characteristics of Materiality
- who are primary users
- the need for quantitative and qualitative assessment
- Application of Materiality when deciding how to DISCLOSE and PRESENT information
- when to aggregate/ disaggregate information
- how to deal with immaterial information
- Application of Materiality when RECOGNISING and MEASURING information
- use of rounding
- Assessment of whether OMMISSIONS and MISSTATEMENTS are material to the FS.
- assessing whether misstatements are material
- dealing with intentional misstatements
ED/2015/3 Revised IASB Conceptual Framework
What is Chapter 1 called and what are most prominent proposed changes?
Ch1. The Objective of General Purpose Financial Reporting
- Emphasis on need for info to assess mgmt stewardship of entity resources
ED/2015/3 Revised IASB Conceptual Framework
What is Chapter 2 called and what are most prominent proposed changes?
Ch2. Qualitative characteristics of useful financial information
“Prudence” explicitly stated
Substance over form added to “Faithful” representation
ED/2015/3 Revised IASB Conceptual Framework
What is Chapter 3 called and what are most prominent proposed changes?
Ch3. FS and the reporting entity
New definition of what constitutes a reporting entity:
“ an entity that chooses or is required to issue general purpose FS”
Boundary of reporting entity regarding “Control”
ED/2015/3 Revised IASB Conceptual Framework
What is Chapter 4 called and what are most prominent proposed changes?
Ch4 - The elements of the Financial Statements
Probability threshold removed from recognition criteria
Revised Asset Definition:
- A present economic resource controlled by the entity as a result of past events.
Revised Liability Definition:
- A present obligation of the entity to deliver economic resources as a result of past events.
economic resource: the right that has the potential to produce economic benefits
Role of uncertainty removed i.e. “expected”
ED/2015/3 Revised IASB Conceptual Framework
What is Chapter 5 called and what are most prominent proposed changes?
Ch5 - Recognition and derecognition
Recognise ALL assets and liabilities if:
- results in faithful representation
- benefits of providing outweigh cost of providing
- relevant information about the element
ED/2015/3 Revised IASB Conceptual Framework
What is Chapter 6 called and what are most prominent proposed changes?
Ch6 - Measurement
Revised measurement basis:
- Historical Cost
- Current value
i) FV (market participant perspective)
ii) ‘Value in Use’ (assets) / ‘Fulfillment value’ (liabilities)
ED/2015/3 Revised IASB Conceptual Framework
What is Chapter 7 called and what are most prominent proposed changes?
Ch7 - Presentation and disclosure
New principles for splitting information about financial performance into P/L and OCI
Rebuttable presumption that income and expenses in OCI will be reclassed to P/L in future period provided doing so enhances information presented in P/L in future period.
Info in the Notes:
- info and risks connected to recognised and unrecognised elements.
Use of presentation and disclosure as communication tools includes:
- CLASSIFYING
- AGGREGATING
Purpose of P/L is to:
- depict current return provided by economic
resources.
- provide info regarding future CF prospects
ED/2015/3 Revised IASB Conceptual Framework
What is Chapter 8 called and what are most prominent proposed changes?
Ch8 - Concepts of Capital and Capital Maintenance
NO CHANGES
IFRS 9 - Financial Instruments
How are Financial assets measured initially AND subsequently?
Debt instruments
a) Held to collect cash only:
Initially: FV + Trans Costs
Subsequently: Amortised cost
b) Held to collect CF and to trade
Initially: FV + Trans Costs
Subsequently: FV thru OCI – RECLASS to P/L on derecognition
Equity instruments NOT held for trading
Initially: FV + Trans Costs
Subsequently: FV thru OCI – RECLASS to RE on derecognition
All other Financial Assets
Initially: FV – Expense transaction costs
Subsequently: FV thru P/L
IFRS 9 - Financial Instruments
How are Financial Liabilities measured initially AND subsequently?
Most financial Liabilities (trade payables, loans, PS)
Initially: FV - LESS Trans Costs
Subsequently: Amortised cost
Financial Liabilities thru P/L
(Business is trading Liabilities for a profit)
(Initially FV thru P/L eliminates accounting mismatch)
Initially: FV – Expense transaction costs!
Subsequently: FV thru P/L
Fin Liabilities arising when transfer of fin asset does not qualify for derecognition
Initially: Consideration received
Subsequently: Same basis as transferred asset
Financial Guarantee Contracts
Initially: FV - LESS Trans Costs
Subsequently: Higher of:
- Impairment loss allowance
- Amt initially recognised less amts amortised to P/L (IFRS 15)
