IFRS Excellence Academy

Intangible under Development Some entities lump all the costs incurred on tangible and intangible assets under development into a single CWIP class of asset within PP&E. Intangible assets under development should not be presented as a component of PP&E. When the definition of intangible asset is met upon initial recognition, such assets should be presented as intangible assets, not just reclassified into intangible assets when ready to use. Happy Learning!

IAS 8 Summary Objective IAS 8 aims to prescribe the criteria for selecting and changing accounting policies, along with the accounting treatment and disclosure of changes in accounting policies, changes in accounting estimates, and corrections of errors. Scope IAS 8 applies to the financial statements of all entities. Key Concepts 1. Accounting Policies Definition: Specific principles, bases, conventions, rules, and practices applied by an entity in preparing and presenting financial statements. Selection: If an IFRS specifically applies to a transaction, event, or condition, the accounting policy applied should be determined by that standard. If no specific IFRS applies, management should use judgment to develop and apply an accounting policy that results in information that is relevant and reliable. 2. Changes in Accounting Policies Voluntary Changes: These are allowed only if they provide more reliable and relevant information. They should be applied retrospectively. Mandatory Changes: If a change is required by a new or revised IFRS, the entity should follow the transitional provisions of that IFRS. 3. Accounting Estimates Definition: Approximation of the amount of an item in the absence of precise means of measurement. Changes: Changes in accounting estimates result from new information or new developments and are not corrections of errors. These should be recognized prospectively. 4. Errors Definition: Omissions from, and misstatements in, the entity's financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information. Corrections: Material prior period errors should be corrected retrospectively in the first set of financial statements authorized for issue after their discovery by restating comparative amounts for prior periods. Disclosure Requirements 1. Changes in Accounting Policies Nature of the change Reasons for the change Amount of the adjustment for the current and each prior period presented, to the extent practicable The fact that comparative information has been restated or that it is impracticable to do so 2. Changes in Accounting Estimates Nature of the change Amount of the effect on the current period An estimate of the effect in future periods, if practicable 3. Corrections of Errors Nature of the error Amount of the correction for each prior period presented, to the extent practicable The fact that comparative information has been restated or that it is impracticable to do so

IAS 1 Summary Objective To ensure comparability of financial statements over time and across different entities. Components of Financial Statements IAS 1 requires a complete set of financial statements to include: 1. Statement of Financial Position (Balance Sheet): At the end of the period. 2. Statement of Profit or Loss and Other Comprehensive Income (Income Statement): For the period. 3. Statement of Changes in Equity: For the period. 4. Statement of Cash Flows: For the period. 5. Notes to the Financial Statements: Summarizing significant accounting policies and other explanatory information. 6. Comparative Information: For the preceding period. General Features 1. Fair Presentation and Compliance with IFRSs: Financial statements must present fairly the financial position, financial performance, and cash flows, in accordance with International Financial Reporting Standards (IFRS). 2. Going Concern: Financial statements should be prepared on a going concern basis unless management intends to liquidate the entity or cease trading. 3. Accrual Basis of Accounting: Items should be recognized when they occur, not as cash is received or paid. 4. Materiality and Aggregation: Material items should be presented separately, while immaterial amounts should be aggregated. 5. Offsetting: Assets and liabilities, or income and expenses, should not be offset unless required or permitted by IFRS. 6. Frequency of Reporting: At least annually. 7. Comparative Information: Comparative information for the previous period should be disclosed. 8. Consistency of Presentation: Presentation and classification of items should be retained from one period to the next unless a change is justified. Structure and Content 1. Current/Non-Current Distinction: Assets and liabilities should be classified as current or non-current. 2. Equity Section: Detailed in the statement of changes in equity. 3. Information to Be Presented in the Statement of Financial Position: Including but not limited to, property, plant, and equipment; investment property; intangible assets; financial assets and liabilities; provisions; and equity. 4. Information to Be Presented in the Statement of Profit or Loss and Other Comprehensive Income: Revenue, finance costs, share of the profit or loss of associates, tax expense, and profit or loss. Notes to Financial Statements 1. Significant accounting policies, critical judgments, and sources of estimation uncertainty should be disclosed. 2. Other information necessary for a fair presentation should be included. Disclosures 1. Capital Disclosures: Information about the entity's objectives, policies, and processes for managing capital. 2. Puttable Financial Instruments: Specific disclosures are required if the entity has puttable financial instruments.

Learning (IAS 1) What are the requirement for departing from the requirement of an IFRS? When an entity departs from a requirement of an IFRS, it shall disclose: 1. That management has concluded that the financial statements present fairly the entity’s financial position, financial performance and cash flows, 2. That it has complied with applicable IFRSs, except that it has departed from a particular requirement to achieve a fair presentation, 3. 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 conceptual framework, and the treatment adopted, and 4. For each period presented, the financial effect of the departure on each item in the financial statements that would have been reported in the complying with the requirement.

Learning (IAS 1) Can entity departs from the requirement of IFRS? Yes, In the extremely rare circumstances in which management concludes that compliance with a requirement in an IFRS would be so misleading that it would conflict with the objective of financial statements set out in the Conceptual Framework, the entity shall depart from that requirement if the relevant regulatory framework requires, or otherwise does not prohibit, such a departure. [Para 19]

Learning (IAS 1) What are the requirements of Fair Representation? In virtually all circumstances, an entity achieves a fair presentation by compliance with applicable IFRSs. A fair representation also requires an entity: 1. To select and apply accounting policies in accordance with IAS 8. IAS 8 sets out a hierarchy of authoritative guidance that management considers in the absence of an IFRS that specifically applies to an item. 2. To present information, including accounting policies in a manner that provides relevant, reliable, comparable and understandable information. 3. To provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance. [Para 17]

Learning (IAS 1) Can it be said if company prepares its financial statement in accordance with IFRS is a compliance with Fair presentation? The application of IFRS, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation. Fair presentation requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Conceptual framework for financial reporting. [Para 15]

Learning (IAS 1) Can entity present Single statement of profit or loss and other comprehensive income? Yes, an entity may present a single statement of profit or loss and other comprehensive income, with profit or loss and other comprehensive income presented in two sections. The sections shall be presented together, with the profit or loss section presented first followed directly by the other comprehensive income section. An entity may present the profit or loss section in a separate statement of profit or loss. If so, the separate statement of profit or loss shall immediately precede the statement presenting comprehensive income, which shall begin with profit or loss. [Para 10A]

Learning (IAS 1) What are the components of other comprehensive income? The components of other comprehensive income includes: 1. Changes in revaluation surplus 2. Remeasurement of defined benefit plans 3. Gains and losses arising from translating the financial statements of a foreign operations 4. Gains and losses arising from investments in equity instruments designed at fair value through other comprehensive income in accordance with Para 5.7.5 of IFRS 9 Financial Instruments 5. Gains and losses on financial asset measured at fair value through other comprehensive income in accordance with Para 4.1.2A of IFRS 9 6. The effective portion of gains and losses on hedging instrument in a cash flow hedge and the gains and losses on hedging instruments that hedge investment in equity instruments measured at fair value through other comprehensive income in accordance with Para 5.7.5 of IFRS 9 7. For particular liabilities designated as at fair value through profit or loss, the amount of the change in fair value that is attributable to change in the liability’s credit risk 8. Changes in the value of the time value of options when separating the intrinsic value and time value of an option contract and designating as the hedging instrument only the changes in the intrinsic value 9. Changes in the value of the forward elements of forward contracts when separating the forward element and spot element of a forward contract and designating as the hedging instrument only the changes in the spot element, and changes in the value of the foreign currency basis spread of a financial instrument when excluding it from the designation of the financial instrument as the hedging instrument. 10. Insurance finance income and expenses from contracts issued within the scope of IFRS 17 Insurance contract excluded from profit or loss when total insurance finance income or expenses is disaggregated to include in profit or loss an amount determined by a systematic allocation applying Para 88(b) of IFRS 17 or by an amount that eliminates accounting mismatches with the finance income or expense arising on the underlying items applying Para 89(b) of IFRS 17 and 11. Finance income and expense from reinsurance contracts held excluded from profit or loss when total reinsurance finance income or expenses is disaggregated to include in profit or loss an amount determined by a systematic allocation applying Para 88(b) of IFRS 17

Learning (IAS 1) What is the complete set of financial statements?   A complete set of financial statement comprises of: 1. A statement of financial position as at the end of period 2. A statement of profit or loss and other comprehensive income for the period 3. A statement of changes in equity for the period 4. A statement of cash flows for the period 5. Notes, comprising material accounting policy information and other explanatory information 6. Comparative information in respect of the preceding period 7. A statement of financial position as at the beginning of the preceding period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statement, or when it reclassifies items in its financial statement in accordance with Para 40A-40D of IAS 1