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Overview of IFRS&
Presentation of Financial Statements
The Institute of Chartered Accountants of India (Set up by an Act of Parliament)
IFRS Comprises
IAS
IAS
IAS
IFRS
IAS 1 : Presentation of Financial Statements
Introduction Issued in September 2007
Replaces the previous version of 2003
Mandatory for period starting on or after January 1, 2009
Earlier adoption permitted
Equivalent Indian GAAP Schedule VI AS 1 : Disclosure of Accounting Policies
Objective To prescribe the basis
for presentation of general purpose financial statements
To ensure comparability With entity’s own statements of previous periods With financial statements of other entities
To set Overall requirements for the presentation of financial statements Guidelines for their structure Minimum requirements for their content
Financial Statements Comprises of
A statement of financial position as at the end of the period A statement of comprehensive income for the period A statement of changes in equity for the period A statement of cash flows for the period Notes, comprising
A summary of significant accounting policies Other explanatory information
A Statement of financial position as at the beginning of the earliest comparative period When an entity applies an accounting policy retrospectively Makes a retrospective restatement of items in its financial
statements When it reclassifies items in its financial statements
General Features Fair presentation and compliance with IFRSs Going Concern Accrual Basis of accounting Materiality and aggregation Offsetting Frequency of reporting Comparative information Consistency of presentation
Fair Presentation and Compliance with IFRSs Financial statement to comply with all the requirements of IFRSs
The application of IFRSs (with additional disclosures) when necessary is presumed to result in fair presentation
Entity to make an explicit and unreserved statement of compliance in notes
Adoption of an inappropriate accounting policy can not be rectified by disclosure of accounting policies, notes or explanatory material
Fair presentation and compliance with IFRSs When non - compliance with the requirements of IFRSs permitted
In extremely rare circumstances When management considers
While assessing a requirement in an IFRS That the objective of financial statement in not achieved in the particular
circumstances As the entity’s circumstances are different from entities complying with
that requirement And concludes
That compliance with a requirement in an IFRS Would be so misleading That it would conflict With the objectives of the financial statements
Fair Presentation Departure from IFRS where regulatory framework requires or does not prohibit
such a departure: Entity to disclose – in the year of departure
that management has concluded that the financial statements present fairly the entity’s financial position, financial performance and cash flows
That it has complied with applicable IFRSs, except that it has departed from a particular requirement to achieve a fair presentation
the title of the IFRS from which the entity has departed the nature of the departure, including the treatment that the IFRS would
require the reason why that treatment would be so misleading in the circumstances
that it would conflict with the objective of financial statements set out in the Framework
the treatment adopted for each period presented, the financial effect of the departure on each item
in the financial statements that would have been reported in complying with the requirement.
Fair presentation and compliancewith IFRSs
Rebuttable presumption that if other entities in similar circumstances comply with the requirement, the entity’s compliance with the requirement would not be so misleading that it would conflict with the objective of financial statements set out in the Framework
Going Concern How to assess:
Consider all available information about the future (minimum 12 months from the reporting date) particularly
Current and expected profitability
Debt repayment schedules
Potential sources of replacement financing
Depends on the facts of each case
Going Concern If management is aware
Of material uncertainties related to events or conditions That may cast significant doubt On entity’s ability to continue as going concern
Disclose the uncertainties
When financial statements not prepared on a going concern basis Disclose the fact Disclose the basis for preparation of financial statement The reasons why the entity is not a going concern
Materiality and Aggregation
Definition:
Omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions that users make on the basis of financial statements.
Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances
The determining factor could be The size or nature of the item, or a combination of both
Offsetting Not to offset
Assets and liabilities Income and expenses
unless permitted by an IFRS
What is not offsetting Measuring assets net of valuation allowances
Obsolescence allowance on inventories Doubtful debts on allowances
Gains (losses) on non-current assets less selling expenses Net basis (Gains less losses) arising from a group or similar transactions
unless material
Frequency At least annually
When change in reporting period, disclose The period covered The reason for using a longer or shorter period The fact that amounts presented in financial statements are not entirely
comparable
May also adopt 52 week period
Comparative Information
Disclose comparative information in respect of the previous period for
all amounts in current period financial statements Narrative and descriptive information when it is relevant to an
understanding of current period’s financial statements
Present when disclosing comparative information, as a minimum Two statements of financial position Two of each of the other statements Related notes
Comparative Information
Present
When an entity Applies an accounting policy retrospectively Makes a retrospective restatement of items in its financial statements Reclassifies items in its financial statements
disclosing comparative information, as a minimum Three statements of financial position Two of each of the other statements Related notes
Comparative Information When change in presentation or classification of items in financial statements
Reclassify comparative amounts Disclose
The nature of reclassification The amount of each item or class of items that is reclassified The reason of reclassification
When reclassification of comparative amounts is not practicable Disclose
The reason for not reclassifying the amounts The nature of adjustments that would have been made if the amounts
had been reclassified
Consistency Retain the presentation and classification of items in the financial statements
from one period to the next unless
It is apparent, following a significant change in the nature of the entity’s operations or a review of its financial statements, that another presentation of classification would be more appropriate
An IFRS requires a change in presentation
Change only when changed presentation provides information that is
Reliable and more relevant to the users Revised structure is likely to continue
Information to be presented in Statement of Financial Position
No prescribed format Minimum line items prescribed Items listed are different in nature or function Additional line items, headings and sub-totals may be presented if relevant Classify as
Current assets and non-current assets Current liabilities and non-current liabilities Unless order of liquidity provides reliable and relevant information
(generally – financial institutions) Disclose under each line item where amount expected to be recovered or settled
after more than 12 months
Information to be presented in Statement of Financial Position
Minimum line items - assetsA Property, plant and equipmentB Investment propertyC Intangible assetsD Financial assets excluding (E), (H) & (I)E Investments accounted for using the equity methodF Biological assetsG InventoriesH Trade and other receivablesI Cash and cash equivalentsJ The total of assets classified as held for sale and assets included in disposal
group as held for sale in accordance with IFRS 5
Information to be presented in Statement of Financial Position
Minimum line items - LiabilitiesK Trade and other payablesL ProvisionsM Financial liabilities excluding (K) & (L)N Liabilities and assets for current tax (IAS 12)O Deferred tax liabilities and deferred tax assets (IAS 12)P Liabilities included in disposal group as held for sale in
accordance with IFRS 5Q Non-controlling interests, presented within equityR Issued capital and reserves attributable to owners of the
parent
Information to be presented in Statement of Financial Position
Additional line items to be judged on the basis of The nature and liquidity of assets The function of assets within the entity The amount, nature and timings of liabilities
Information to be presented in Statement of Financial Position
Asset is classified as a current asset if it is Expected to be realized in the entity’s normal operating cycle; or Intended for sale or consumption in the entity’s normal operating cycle; or Held primarily for the purpose of being traded; or Expected to be realized within 12 months after the reporting period; or Cash or cash equivalent
All other assets are non-current assets
Non-current assets include tangible, intangible and financial assets of a long-term nature
Current Assets
Operating Cycle
Time between the acquisition of assets for processing & their realization in cash or cash equivalents
If the normal operating cycle can not be identified, it is assumed to be 12 months
Information to be presented in Statement of Financial Position
Liability is classified as a current liability if
It is expected to be settled in the entity’s normal operating cycle; or
It is held primarily for the purpose of being traded; or
It is due to be settled within 12 months after the reporting period; or
The entity does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
All other liabilities are non-current liabilities
Non-adjusting events in respect of Loans classified as Current Liabilities
Refinancing on a long term basis
Rectification of a breach of a long term arrangement
Granting by the lender of grace to rectify a breach of a long term arrangement ending atleast 12 months after the reporting period
Information to be presented in Statementof Financial Position
Disclose
either in the statement of financial position
or in notes
sub-classification of line items based on
Requirements of IFRSs
Size, nature and function of the amounts involved
Information to be presented in Statementof Financial Position
Disclose either in the statement of financial position or in the statement of changes in equity in the notes
Desired information for each class of share capital The number of authorized shares The number of issued and fully paid shares The number of issued but not fully paid shares Par value per share or that the shares have no par value
A description of the nature and purpose of each reserve within equity
Statement of Comprehensive Income
Option to present all items of income and expense recognized in a period Option 1: in a single statement
‘statement of comprehensive income’
Option 2: in two statements ‘Separate income statement’ displaying components of profit or loss
‘Statement of comprehensive income’ beginning with profit or loss and displaying components of other comprehensive income
Statement of Comprehensive Income
Minimum line items Revenue Finance costs Share of the profit or loss of associates and joint ventures accounted for using
the equity method Tax expense A single amount comprising the total of
The post-tax profit or loss of discontinued operations The post tax gain or loss recognized on the measurement to fair value less costs to
sell or on the disposal of the assets or disposed group(s) constituting the discontinued operations
Profit or loss Each component of other comprehensive income classified by nature Share of the other comprehensive income of associates and joint ventures
accounted for using the equity method Total comprehensive income
Statement of Comprehensive Income
Disclose following as allocation of profit or loss for the period
Profit or loss for the period attributable to
Non-controlling interests Owners of the parent
Total comprehensive income for the period attributable to
Non-controlling interests Owners of the parent
Statement of Comprehensive Income
Also permitted Additional line items, headings and sub-totals permitted Amend the description of line items Change the order of line items
Not permitted Offsetting of income and expense unless permitted by IFRSs To present any items of income or expense as extraordinary items either in
the
statement of comprehensive income Separate income statement, if prepared, or in notes
Statement of Comprehensive Income
Profit or loss for the period
All items of income or expense recognized in the period are included in profit or loss unless an IFRS requires otherwise
Items not recognized in profit or loss are ‘other comprehensive income’
Statement of Comprehensive Income
Other comprehensive income comprises of items of income and expense not recognized in profit or loss as required or permitted by other IFRSs Includes
Reclassification adjustments Effect of changes in accounting policies (IAS 8) Changes in revaluation surplus (IAS 16) Actuarial gains (losses) on defined benefit plans (IAS 19) Gains (losses) on translation of the financial statements of a foreign
operation (IAS 21) Gains (losses) on re-measuring available for sale financial assets (IAS
39) The effective portion of gains (losses) on hedging instruments in a cash
flow hedge (IAS 39)
Statement of Comprehensive Income
For other comprehensive income for the period
Disclose the amount of income-tax relating to each component of other comprehensive income (including reclassification adjustments) either in the statement of comprehensive income or in notes
May present components of other comprehensive income either
Net of related tax effects
Before related tax effects with one tax amount
Statement of Comprehensive Income
Reclassification adjustments
May be presented
in the statement of comprehensive income or
in notes
When presented in notes
The entity presents the components of other comprehensive income after any related reclassification adjustments
Statement of Comprehensive Income
Presentation of expenses
Either of two method ‘Nature of expense’ method ‘Function of expense’ or ‘cost of sales’ method
Choice depends on Historical and industry factors Nature of entity
Management to select presentation that is Reliable More relevant
Statement of changes in Equity
Equity includes
Each class of contributed equity
The accumulated balance of each class of other comprehensive income
Retained earnings
Statement of changes in Equity
Changes in equity
Between the beginning of the reporting period
And the end of the reporting period
Reflects the increase or decrease
In the entity’s net assets
Statement of changes in Equity
Changes in equity of a period represent
The total amount of income and expense, including gains and losses, generated by the entity’s activities of that period
Changes resulting from transactions with owners in their capacity as owners such as
Equity contributions
Reacquisition of entity’s own equity instruments
Dividends
Transaction costs directly related to such transactions
Statement of changes in Equity
Show in the statement
Total comprehensive income for the period, showing separately the total amounts attributable to owners of the parent and to non-controlling interests
For each component of equity, the effects of retrospective application or retrospective restatement
recognized in accordance with IAS 8 A reconciliation between the carrying amount at the beginning and the
end of the period, separately disclosing changes resulting from Profit or loss Each item of other comprehensive income
Contd…
Statement of changes in Equity
Show in the statement…contd
Transactions with owners in their capacity as owners, showing separately contributions by and distributions to owners and changes in ownership interests that do not result in a loss of control
Dividends
Present either in the statement of changes in equity or in the notes The amount of dividends recognized as distribution to owners, and The related amount per share
Statement of Cash Flows
Provides users of financial statements
with a basis to assess the ability of the entity
To generate cash and cash equivalents and
The needs of the entity to utilize those cash flows
IAS 7 sets out requirements for the presentation and disclosure of cash flow information
Main differences with Indian GAAP
Treatment of bank overdrafts
Cash flows from extraordinary items
Classification of interest and dividends
Notes - Structure Presentation
Systematic manner Each item in
Statement of financial position
Statement of comprehensive income / separate income statement
Statement of changes in equity
Statement of cash flows Should be cross-referenced to any related information in the notes
Notes - Structure Order
A statement of compliance with IFRSs A summary of significant accounting policies applied Supporting information for items presented in
Statement of financial position Statement of comprehensive income / separate income statement Statement of changes in equity Statement of cash flows
In the order in which each statement & each line item is presented Other disclosures including:
Contingent liabilities and unrecognized contractual commitments Non-financial disclosures
Order may be varied if necessary or desirable Information may be combined
Notes – Disclosure of Accounting Policies
To disclose and include
Measurement bases
Accounting Policies
Judgments that management has made
Notes :Sources of Estimation Uncertainty
Required
When there are uncertainties that have a significant risk of causing material adjustment To the carrying amount of assets and liabilities Within next financial year
Disclose
Information about the key assumptions concerning the future Other key sources of estimation uncertainty at the end of the reporting
period
Notes :Sources of Estimation Uncertainty
In respect of concerned assets and liabilities, include details of:
Their nature
Their carrying amount at the end of the reporting period
Notes – Other Disclosures
Dividends
The amounts
of dividends proposed or declared before the financial statements were authorized for issue but not recognized as a distribution to owners during the period and
the related amount per share
The amount of any cumulative preference dividends not recognized
Notes – Other Disclosures
Capital Disclosures - Principle Disclose information That enables users of its financial statements To evaluate The entity’s
objectives, policies and processes
For managing capital
Notes – Other Disclosures
Capital Disclosures – Disclose
Qualitative information about its objectives, policies and processes for managing capital
Summary quantitative data about what it manages as capital
Any changes in above from the previous period
Whether during the period it complied with any externally imposed capital requirements to which it is subject
When the entity has not complied with such externally imposed capital requirements, the consequences of such non-compliances
Thank You