ifrs summaries
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What is IFRS & ITS IMPORTANCE
International Financial Reporting Standards (IFRS) is a set of accounting standards,
developedbythe InternationalAccountingStandardsBoard(IASB)that isbecomingthe
globalstandardforthepreparationofpubliccompanyfinancialstatements.The IASB is
anindependentaccountingstandardsbody,basedinLondon.
THEPURPOSEOFIFRS
While converting to IFRS is a complex process, these standards have important and
positiveimplicationsfororganizationsandindividualsthatadoptthem
1. Forcompanies: reduced cost of capital and the ease of using one consistent reporting
standardfromsubsidiariesinmanydifferentcountries.
2. For investors: better information for decision making, leading to broader investment
opportunities.
3. For national regulatory bodies: better information for market participants in a
disclosurebasedsystem.
IMPORTANCEOFIFRS
TheobjectivebehindtheIFRSistomakeacommonplatformforbetterunderstandingof
accounting,internationally. Synchronizationofaccountingstandardsacrosstheglobeis
gaining importance day by dayasbusinesses are crossing their nationalboundaries. By
adopting IFRS, a business can present its financial statements on the same basis as its
foreign competitors, making comparisons easier. Furthermore, companies with
subsidiaries incountriesthatrequireorpermit IFRSmaybeabletouseoneaccounting
language
companywide.
Companies
also
may
need
to
convert
to
IFRS
if
they
are
a
subsidiaryofaforeigncompanythatmustuseIFRS,oriftheyhaveaforeigninvestorthat
must use IFRS. Its goal is to create comparable, reliable, and transparent financial
statementsthatwillfacilitategreatercrossbordercapitalraisingandtrade.
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ITSTIMETOLEARNIFRS
ICAIhasannouncedconvergencetoIFRSby2011whichisnotfaraway,sincefirmswould
needtostartpreparingthemselvesrightnowtoadoptthischange.
Itistimetoprepareforthechange,whichwillbringsubstantialandsignificantbusiness
transfiguration. Like inothercountriessuchasAustralia,NewZealandandcountries in
the European Union, the IFRSs will be adopted for the listed entities and other public
interestentitiessuchasbanks,insurancecompaniesandlargesizedentities.
More than12,000companies inalmost100nationshaveadopted IFRS, including listed
companies in the European Union. Some estimate that the number of countries
requiring or accepting IFRS could grow to 150 in the next few years. Other countries,
suchasJapanandMexico,haveplanstoconverge(eliminatesignificantdifferences)their
national
standards.
The
convergence
with
IFRS
is
an
important
decision
for
all
the
countriesstandingwithopenarmstowelcomenewbusinessfromallovertheworld.
The quicker the country's business organizations will move to working within this
framework,thequickertheinvestmentwillflowintotheirbusinesses.Inanincreasingly
competitivearena, thosewithout IFRS, looking for investment,have tostruggleagainst
thosethathavealreadytakenthewisedecisiontoenteredintotheframework.
So,let'sprepareourbusinessesforthisinevitableandfavorablechange,beforeitistoo
late.
IFRS1FIRSTTIMEADOPTIONOF
INTERNATIONALFINANCIALREPORTING
STANDARDS
1. Theobjective
of
this
IFRS
is
that
an
entitys
first
IFRS
financial
statements,
and
its
interim
financial reports for part of the period covered by those financial statements, contain
highqualityinformationthat:
a. istransparentforusersandcomparableoverallperiodspresented;
b. providesasuitablestartingpointforaccountingunder InternationalFinancialReporting
Standards(IFRSs);
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b. cashsettled sharebased payment transactions, in which the entity acquires goods or
servicesbyincurringliabilitiestothesupplierofthosegoodsorservicesforamountsthat
arebasedontheprice(orvalue)oftheentityssharesorotherequityinstrumentsofthe
entity;
c. transactionsin
which
the
entity
receives
or
acquires
goods
or
services
and
the
terms
of
thearrangementprovideeithertheentityorthesupplierofthosegoodsorserviceswith
a choice of whether the entity settles the transaction in cash or by issuing equity
instruments.
FOREQUITYSETTLEDSHAREBASEDPAYMENTTRANSACTIONS,
1. The IFRS requires an entity to measure the goods or services received, and the
corresponding increase in equity, directly, at the fair value of the goods or services
received,unlessthatfairvaluecannotbeestimatedreliably.
2. Iftheentitycannotestimatereliablythefairvalueofthegoodsorservicesreceived,theentity is required to measure their value, and the corresponding increase in equity,
indirectly,byreferencetothefairvalueoftheequityinstrumentsgranted.
FORCASHSETTLEDSHAREBASEDPAYMENTTRANSACTIONS
1. The IFRS requires an entity to measure the goods or services acquired and the liability
incurredatthefairvalueoftheliability.Untiltheliabilityissettled,theentityisrequired
to remeasure the fair value of the liability at each reporting date and at the date of
settlement,with
any
changes
in
value
recognized
in
profit
or
loss
for
the
period.
FORSHAREBASEDPAYMENTTRANSACTIONS
1. The terms of the arrangement provide either the entity or the supplier of goods or
serviceswithachoiceofwhethertheentitysettlesthetransaction incashorby issuing
equityinstruments,theentityisrequiredtoaccountforthattransaction.
IFRSDISCLOSURES:
a. the nature and extent of sharebased payment arrangements that existed during the
period;
b. how the fair value of the goods or services received, or the fair value of the equity
instrumentsgranted,duringtheperiodwasdetermined;
c. the effect of sharebased payment transactions on the entitys profit or loss for the
periodandonitsfinancialposition.
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IFRS 3 BUSINESS COMBINATIONS
Theobjectiveistoenhancetherelevance,reliabilityandcomparabilityoftheinformation
thatanentityprovides in its financialstatementsaboutabusinesscombinationand its
effects.
PRINCIPLE
Anacquirerofabusinessrecognizestheassetsacquiredand liabilitiesassumedattheir
acquisitiondatefairvaluesanddiscloses informationthatenablesuserstoevaluatethe
natureandfinancialeffectsoftheacquisition.
APPLYINGTHEACQUISITIONMETHOD
1. A business combination must be accounted for by applying the acquisition method,
unlessitisacombinationinvolvingentitiesorbusinessesundercommoncontrol.Oneof
thepartiestoabusinesscombinationcanalwaysbeidentifiedastheacquirer,beingthe
entitythatobtainscontroloftheotherbusiness(theacquiree).
2. The IFRS establishes principles for recognizing and measuring the identifiable assets
acquired, the liabilities assumed and any noncontrolling interest in the acquiree. Any
classifications or designations made in recognizing these items must be made in
accordance with the contractual terms, economic conditions, acquirers operating or
accountingpoliciesandotherfactorsthatexistattheacquisitiondate.
3. a.Eachidentifiableassetandliabilityismeasuredatitsacquisitiondatefairvalue.
b. Any noncontrolling interest in an acquiree is measured at fair value or as the non
controllinginterestsproportionateshareoftheacquireesnetidentifiableassets.
IFRSEXCEPTIONS
a. Leases and insurance contracts are required to be classified on the basis of the
contractualterms.
b. Contingentliabilities
that
are
apresent
obligation.
c. Specialrequirementsformeasuringareacquiredright.
d. Indemnificationassetsarerecognizedandmeasuredonabasisthatisconsistentwiththe
itemthatissubjecttotheindemnification,evenifthatmeasureisnotfairvalue.
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DISCLOSURE
a. Requires the acquirer to disclose information that enables users of its financial
statements
to
evaluate
the
nature
and
financial
effect
of
business
combinations
that
occurredduringthecurrentreportingperiodorafterthereportingdatebutbeforethe
financialstatementsareauthorisedforissue.
b. Afterabusinesscombination,theacquirermustdiscloseanyadjustmentsrecognised in
the current reporting period that relate to business combinations that occurred in the
currentorpreviousreportingperiods.
IFRS 4 INSURANCE CONTRACTS
1. TheobjectiveofthisIFRSrequires:
a. limitedimprovementstoaccountingbyinsurersforinsurancecontracts.
b. disclosure that identifies and explains the amounts in an insurers financial statements
arising from insurance contracts and helps users of those financial statements
understand the amount, timing and uncertainty of future cash flows from insurance
contracts.
2. TheIFRS
applies
to
all
insurance
contracts
(including
reinsurance
contracts)
that
an
entity
issuesandtoreinsurancecontractsthat itholds,exceptforspecifiedcontractscovered
by other IFRSs. It does not apply to other assets and liabilities of an insurer, such as
financialassetsandfinancialliabilitieswithinthescopeofIAS39
3. Exempts an insurer temporarily from some requirements of other IFRSs, including the
requirement to consider the Framework in selecting accounting policies for insurance
contracts.However,theIFRS:
a. prohibitsprovisions
for
possible
claims
under
contracts
that
are
not
in
existence
at
the
endofthereportingperiod
b. requiresatestfortheadequacyofrecognizedinsuranceliabilitiesandanimpairmenttest
forreinsuranceassets
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c. requiresaninsurertokeepinsuranceliabilitiesinitsstatementoffinancialpositionuntil
they are discharged or cancelled, or expire, and to present insurance liabilities without
offsettingthemagainstrelatedreinsuranceassets.
4. IFRSpermitsaninsurertochangeitsaccountingpoliciesforinsurancecontractsonlyif,as
a result, its financial statements present information that is more relevant and no less
reliable,ormorereliableandnolessrelevant.
5. IFRS permits the introduction of an accounting policy that involves remeasuring
designated insurance liabilities consistently in each period to reflect current market
interestrates.
6. TheIFRSrequiresdisclosuretohelpusersunderstand:
a. theamountsintheinsurersfinancialstatementsthatarisefrominsurancecontracts.
b. theamount,timinganduncertaintyoffuturecashflowsfrominsurancecontracts.
IFRS 5 NONCURRENT ASSETS HELD
FOR SALE AND DISCONTINUED
OPERATIONS
1. Theobjective is tospecify theaccounting forassetsheldforsale,and thepresentation
anddisclosureofdiscontinuedoperations.Inparticular,theIFRSrequires:
a. assetsthatmeetthecriteriatobeclassifiedasheldforsaletobemeasuredatthelower
of carrying amount and fair value less costs to sell, and depreciation on such assets to
cease;and
b. assetsthatmeetthecriteriatobeclassifiedasheldforsaletobepresentedseparatelyin
the
statement
of
financial
position
and
the
results
of
discontinued
operations
to
be
presentedseparatelyinthestatementofcomprehensiveincome.
2. IFRS:
a. adoptstheclassificationheldforsale.
b. introducesconceptofdisposalgroup,beingagroupofassetstobedisposedof,bysaleor
otherwise,togetherasagroupinsingletransaction,&liabilitiesdirectlyassociatedwith
thoseassetsthatwillbetransferredintransaction.
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c. classifiesanoperationasdiscontinuedatthedatetheoperationmeetsthecriteriatobe
classifiedasheldforsaleorwhentheentityhasdisposedoftheoperation.
3. An entity shall classify a noncurrent asset (or disposal group) as held for sale if its
carrying amount will be recovered principally through a sale transaction rather than
throughcontinuing
use.
4. Forthistobethecase,theasset(ordisposalgroup)mustbeavailableforimmediatesale
in itspresentconditionsubjectonly to terms thatare usualandcustomary for salesof
such assets (or disposal groups) and its sale must be highly probable.
Adiscontinuedoperation isacomponentofanentitythateitherhasbeendisposedof,
orisclassifiedasheldforsale
5. A component of an entity comprises operations and cash flows that can be clearly
distinguished, operationally and for financial reporting purposes, from the rest of the
entity.Inotherwords,acomponentofanentitywillhavebeenacashgeneratingunitor
agroup
of
cash
generating
units
while
being
held
for
use.
IFRS 6 EXPLORATION FOR AND
EVALUATION OF MINERAL
RESOURCES
1. Theobjective
is
to
specify
the
financial
reporting
for
the
exploration
for
and
evaluation
of
mineralresources.
2. Exploration and evaluation expenditures are expenditures incurred by an entity in
connection with the exploration for and evaluation of mineral resources before the
technical feasibility and commercial viability of extracting a mineral resource are
demonstrable.
3. Exploration and evaluation assets are exploration and evaluation expenditures
recognizedasassetsinaccordancewiththeentitysaccountingpolicy.IFRS:
a. permitsan
entity
to
develop
an
accounting
policy
for
exploration
and
evaluation
assets
withoutspecificallyconsideringtherequirementsofparagraphs11and12ofIAS8.
b. requiresentitiesrecognizingexplorationandevaluationassetstoperformanimpairment
teston thoseassetswhenfactsandcircumstancessuggest thatthecarryingamountof
theassetsmayexceedtheirrecoverableamount.
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4. Anentityshalldetermineanaccountingpolicyforallocatingexplorationandevaluation
assets to cashgenerating units or groups of cashgenerating units for the purpose of
assessing such assets for impairment. Each cashgenerating unit or group of units to
which an exploration and evaluation asset is allocated shall not be larger than an
operatingsegment
determined
in
accordance
with
IFRS
8Operating
Segments.
5. Exploration and evaluation assets shall be assessed for impairment when facts and
circumstances suggest that the carrying amountofanexploration andevaluation asset
may exceed its recoverable amount. When facts and circumstances suggest that the
carryingamountexceedstherecoverableamount,anentityshallmeasure,presentand
discloseanyresultingimpairmentlossinaccordancewithIAS36.
6. Anentityshalldisclose informationthat identifiesandexplainstheamountsrecognised
in its financial statements arising from the exploration for and evaluation of mineral
resources.
IFRS 7 FINANCIAL INSTRUMENTS:
DISCLOSURES
1.
The
objective
enable
users
to
evaluate:
a. the significance of financial instruments for the entitys financial position and
performance;and
b. the nature and extent of risks arising from financial instruments to which the entity is
exposed during the period and at the end of the reporting period, and how the entity
managesthoserisks.
2. TheIFRSappliestoallentities,includingentitiesthathavefewfinancialinstrumentsand
thosethathavemanyfinancialinstruments.
3. WhenthisIFRSrequiresdisclosuresbyclassoffinancialinstrument,anentityshallgroup
financialinstruments
into
classes
that
are
appropriate
to
the
nature
of
the
information
disclosedandthattakeintoaccountthecharacteristicsofthosefinancialinstruments.
4. The principles in this IFRS complement the principles for recognising, measuring and
presenting financial assets and financial liabilities in IAS 32 Financial Instruments:
PresentationandIAS39FinancialInstruments:RecognitionandMeasurement.
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IFRS 8 OPERATING SEGMENTS
1. Core
principleAn
entity
shall
disclose
information
to
enable
users
of
its
financial
statementstoevaluatethenatureandfinancialeffectsofthebusinessactivitiesinwhich
itengagesandtheeconomicenvironmentsinwhichitoperates.IFRSshallapplyto:
a. theseparateorindividualfinancialstatementsofanentity:
i. whose debtorequity instrumentsare traded inapublicmarket (a domestic or foreign
stockexchangeoranoverthecountermarket,includinglocalandregionalmarkets),or
ii. that files, or is in the process of filing, its financial statements with a securities
commission or other regulatory organization for the purpose of issuing any class of
instrumentsinapublicmarket;and
b. theconsolidatedfinancialstatementsofagroupwithaparent:
i. whose debtorequity instrumentsare traded inapublicmarket (a domestic or foreign
stockexchangeoranoverthecountermarket,includinglocalandregionalmarkets),or
ii. that files, or is in the process of filing, the consolidated financial statements with a
securities commission or other regulatory organization for the purpose of issuing any
classofinstrumentsinapublicmarket.
2. TheIFRSspecifieshowanentityshouldreportinformationaboutitsoperatingsegments
in annual financial statements and, as a consequential amendment to IAS 34 Interim
FinancialReporting,requiresanentitytoreportselectedinformationaboutitsoperatingsegmentsininterimfinancialreports.
3. The IFRS requires an entity to report financial and descriptive information about its
reportable segments. Reportable segments are operating segments or aggregations of
operatingsegmentsthatmeetspecifiedcriteria.Operatingsegmentsarecomponentsof
an entity about which separate financial information is available that is evaluated
regularlybythechiefoperatingdecisionmakerindecidinghowtoallocateresourcesand
inassessingperformance?
4. TheIFRS
requires
an
entity
to
report
ameasure
of
operating
segment
profit
or
loss
and
of
segmentassets. Italsorequiresanentitytoreportameasureofsegment liabilitiesand
particularincomeandexpenseitemsifsuchmeasuresareregularlyprovidedtothechief
operating decision maker. It requires reconciliations of total reportable segment
revenues, total profit or loss, total assets, liabilities and other amounts disclosed for
reportablesegmentstocorrespondingamountsintheentitysfinancialstatements.
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5. The IFRS requires an entity to report information about the revenues derived from its
productsorservices(orgroupsofsimilarproductsandservices),aboutthecountries in
which it earns revenues and holds assets, and about major customers, regardless of
whetherthatinformationisusedbymanagementinmakingoperatingdecisions.
6. The IFRS also requires an entity to give descriptive information about the way the
operating segments were determined, the products and services provided by the
segments, differences between the measurements used in reporting segment
information and those used in the entitys financial statements, and changes in the
measurementofsegmentamountsfromperiodtoperiod.
IAS 1 PRESENTATION OF
FINANCIAL STATEMENTS
This Standard prescribes the basis for presentation of general purpose financial
statements to ensure comparability both with the entitys financial statements of
previous periods and with the financial statements of other entities. It sets out overall
requirementsforthepresentationoffinancialstatements,guidelinesfortheirstructure
andminimumrequirementsfortheircontent.
Acomplete
set
of
financial
statements
comprises:
(a) astatementoffinancialpositionasattheendoftheperiod;
(b) astatementofcomprehensiveincomefortheperiod;
(c) astatementofchangesinequityfortheperiod;
(d) astatementofcashflowsfortheperiod;
(e) notes,comprisingasummaryofsignificantaccounting policiesandother
explanatoryinformation;and
(f) a statement of financial position as at the beginning of the earliest
comparativeperiod
when
an
entity
applies
an
accounting
policy
retrospectively or makes a retrospective restatement of items in it s financial
statements,or whenit reclassifiesitemsinitsfinancialstatements.
An entity whose financial statements comply with IFRSs shall make an explicit and
unreserved statement of such compliance in the notes. An entity shall not describe
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financial statements as complying with IFRSs unless they comply with all the
requirements of IFRSs. The application of IFRSs, with additional disclosure when
necessary, is presumed to result in financial statements that achieve a fair
presentation.
When preparing financial statements, management shall make an assessment of an
entitys ability to continue as a going concern. An entity shall prepare financial
statementsonagoingconcernbasisunlessmanagementeitherintendstoliquidatethe
entity or to cease trading, or has no realistic alternative but to do so. When
management is aware, in making its assessment, of material uncertainties related to
events or conditions that may cast significant doubt upon the entitys ability to
continueasagoingconcern,theentityshalldisclosethoseuncertainties.
An entity shall present separately each material class of similar items. An entity shall
presentseparately itemsofadissimilarnatureorfunctionunlesstheyare immaterial.
Anentityshallnotoffsetassetsandliabilitiesorincomeandexpenses,unlessrequired
orpermittedbyanIFRS.
An entity shall present a complete set of financial statements (including comparative
information)atleastannually.
IAS 2 INVENTORIES
TheobjectiveofthisStandardistoprescribetheaccountingtreatmentforinventories.
Aprimaryissueinaccountingforinventoriesistheamountofcosttoberecognisedas
anasset andcarried forwarduntil therelatedrevenuesarerecognised.This Standard
provides guidance on the determination of cost and its subsequent recognition as an
expense, includinganywritedowntonetrealizablevalue. Italsoprovidesguidance
onthe
cost
formulas
that
are
used
to
assign
costs
to
inventories.
Inventories shall be measured at the lower of cost and net realizable value.
Netrealizablevalueistheestimatedsellingpriceintheordinarycourseofbusinessless
theestimatedcostsofcompletionandtheestimatedcostsnecessarytomakethesale.
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The cost of inventories shall comprise all costs of purchase, costs of conversion and
othercostsincurredinbringingtheinventoriestotheirpresentlocationandcondition.
The cost of inventories shall be assigned by using the firstin, firstout (FIFO) or
weighted
average
cost
formula.
An
entity
shall
use
the
same
cost
formula
for
all
inventories having a similar nature and use to the entity. For inventories with a
differentnatureoruse,differentcostformulasmaybejustified.However,thecostof
inventories of items that are not ordinarily interchangeable and goods or services
produced and segregated for specific projects shall be assigned by using specific
identificationoftheirindividualcosts.
When inventories are sold, the carrying amount of those inventories shall be
recognisedasanexpense in theperiod inwhich therelatedrevenue isrecognised.
Theamount
of
any
write
down
of
inventories
to
net
realizable
value
and
all
losses
of
inventories shall be recognised as an expense in the period the writedown or loss
occurs. The amount of any reversal of any writedown of inventories, arising from an
increase in net realizable value, shall be recognised as a reduction in the amount of
inventoriesrecognisedasanexpenseintheperiodinwhichthereversaloccurs.IAS 8 ACCOUNTING POLICIES,
CHANGES IN ACCOUNTING
ESTIMATES AND ERRORS
The objective of this Standard is to prescribe the criteria for selecting and changing
accountingpolicies,togetherwiththeaccountingtreatmentanddisclosureofchanges
in accounting policies, changes in accounting estimates and corrections of errors.
The
Standard
is
intended
to
enhance
the
relevance
and
reliability
of
an
entitys
financialstatementsandthecomparabilityofthosefinancialstatementsovertimeand
withthefinancialstatementsofotherentities.
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Accountingpolicies
Accountingpolicies are the specific principles, bases, conventions, rules and practices
applied by an entity in preparing and presenting financial statements. When an IFRS
specificallyapplies
to
atransaction,
other
event
or
condition,
the
accounting
policy
or
policiesapplied to that item shallbedetermined by applying the IFRS and considering
anyrelevantImplementationGuidanceissuedbytheIASBfortheIFRS.
In the absence of a Standard or an Interpretation that specifically applies to a
transaction, other event or condition, management shall use its judgement in
developing and applying an accounting policy that results in information that is
relevant and reliable. In making the judgement management shall refer to, and
considertheapplicabilityof,thefollowingsourcesindescendingorder:
(a) the requirements and guidance in IFRSs dealing with similar and related issues;
and
(b) the definitions, recognition criteria and measurement concepts for assets,
liabilities,incomeandexpensesintheFramework.
An entity shall select and apply its accounting policies consistently for similar
transactions, other events and conditions, unless an IFRS specifically requires or
permits categorisation of items for which different policies may be appropriate. If an
IFRS requires or permits such categorisation, an appropriate accounting policy shall
be
selected
and
applied
consistently
to
each
category.
Anentityshallchangeanaccountingpolicyonlyifthechange:
(a) isrequiredbyanIFRS;or
(b) results in the financial statements providing reliable and more relevant information
abouttheeffectsoftransactions,othereventsorconditionsontheentitysfinancial
position,financialperformanceorcashflows.
An entity shall account for a change in accounting policy resulting from the initial
applicationofanIFRSinaccordancewiththespecifictransitionalprovisions,ifany,in
thatIFRS.
When
an
entity
changes
an
accounting
policy
upon
initial
application
of
an
IFRS that does not include specific transitional provisions applying to that change, or
changes an accounting policy voluntarily, it shall apply the change retrospectively.
However, a change in accounting policy shall be applied retrospectively except to the
extent that it is impracticable to determine either the periodspecific effects or the
cumulativeeffectofthechange.
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Changeinaccountingestimate
(c) Theuse
of
reasonable
estimates
is
an
essential
part
of
the
preparation
of
financial
statementsanddoesnotunderminetheirreliability.Achangeinaccountingestimate
isanadjustmentofthecarryingamountofanassetoraliability,ortheamountofthe
periodic consumption of an asset, that results from the assessment of the present
status of, and expected future benefits and obligations associated with, assets and
liabilities. Changes in accounting estimates result from new information or new
developmentsand,accordingly,arenotcorrectionsoferrors.Theeffectofachange
inanaccountingestimate,shallberecognisedprospectivelybyincludingitinprofitor
lossin:
(a) theperiodofthechange,ifthechangeaffectsthatperiodonly;or
(b)
the
period
of
the
change
and
future
periods,
if
the
change
affects
both.
Priorperioderrors
Prior period errors are omissions from, and misstatements in, the entitys financial
statements for one or more prior periods arising from a failure to use, or misuse of,
reliableinformationthat:
(a) was available when financial statements for those periods were authorised
for issue;and
(b) could reasonably be expected to have been obtained and taken into account in
thepreparation
and
presentation
of
those
financial
statements.
Such errors include the effects of mathematical mistakes, mistakes in applying
accountingpolicies,oversightsormisinterpretationsoffacts,andfraud.
Except to the extent that it is impracticable to determine either the periodspecific
effects or the cumulative effect of the error, an entity shall correct material prior
period errors retrospectively in the first set of financial statements authorised for issue
aftertheirdiscoveryby:
(a) restatingthecomparativeamountsforthepriorperiod(s)presentedinwhichthe
erroroccurred;or
(b) ifthe erroroccurredbeforethe earliest priorperiodpresented,restatingthe
opening balances of assets, liabilities and equity for the earliest prior period
presented.
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Omissions or misstatements of items are material if they could, individually or
collectively, influence the economic decisions of users taken on the basis of the
financialstatements.
IAS 10 Events after the Reporting
Period
TheobjectiveofthisStandardistoprescribe:
(a) when an entity should adjust its financial statements for events after the
reportingperiod;and
(b) the disclosures that an entity should give about the date when the
financial statements were authorized for issue and about events after the reporting
period.
TheStandardalsorequiresthatanentityshouldnotprepareitsfinancialstatementson
a going concern basis if events after the reporting period indicate that the going
concernassumptionisnotappropriate.
Events after the reportingperiod are those events, favourable and unfavourable, that
occur
between
the
end
of
the
reporting
period
and
the
date
when
the
financial
statementsareauthorizedforissue.Twotypesofeventscanbeidentified:
(a) those that provide evidence of conditions that existed at the end of the
reportingperiod(adjustingeventsafterthe reportingperiod);and
(b) thosethatareindicativeofconditionsthataroseafterthereportingperiod(nonadjustingeventsafterthereporting period).
An entity shall adjust the amounts recognised in its financial statements to reflect
adjustingevents
after
the
reporting
period.
Anentityshallnotadjusttheamountsrecognised in itsfinancialstatementstoreflect
nonadjusting events after the reporting period. If nonadjusting events after the
reporting period are material, nondisclosure could influence the economic decisions
of users taken on the basis of the financial statements. Accordingly, an entity shall
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disclose the following for each material category of nonadjusting event after the
reportingperiod:
(a) thenatureoftheevent;and
(b) anestimate
of
its
financial
effect,
or
astatement
that
such
an
estimate
cannot
be
made.
If an entity receives information after the reporting period about conditions that
existed at theend of the reporting period, itshall update disclosures thatrelate to
thoseconditions,inthelightofthenewinformation.
IAS 16 PROPERTY, PLANT AND
EQUIPMENT
TheobjectiveofthisStandardistoprescribetheaccountingtreatmentforproperty,
plantandequipmentsothatusersofthefinancialstatementscandiscern information
aboutanentitysinvestmentinitsproperty,plantandequipmentandthechangesin
such investment. The principal issues in accounting for property, plant and equipment
are the recognition of the assets, the determination of their carrying amounts and the
depreciationcharges
and
impairment
losses
to
be
recognised
in
relation
to
them.
Property,plantandequipmentaretangibleitemsthat:
(a) are held for use in the production or supply of goods or services, for rental to
others,orforadministrativepurposes;and
(b) areexpectedtobeusedduringmorethanoneperiod.
Thecostofanitemofproperty,plantandequipmentshallberecognisedasanassetif,
andonly
if:
(a) itisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowto
theentity;and
(b) thecostoftheitemcanbemeasuredreliably.
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Measurementatrecognition:An itemofproperty,plantandequipmentthatqualifies
for recognition as an asset shall be measured at its cost. The cost of an item of
property,plantandequipmentisthecashpriceequivalentattherecognitiondate.
Ifpaymentisdeferredbeyondnormalcreditterms,thedifferencebetweenthecash
priceequivalentand the totalpayment isrecognisedas interestovertheperiod of
credit unless such interest is recognised in the carrying amount of the item in
accordancewithIAS23.
Thecostofanitemofproperty,plantandequipmentcomprises:
(a) its purchase price, including import duties and nonrefundable purchase taxes,
afterdeductingtradediscountsand rebates.
(b) any costs directly attributable to bringing the asset to the location and condition
necessaryforittobecapableofoperatinginthemannerintendedbymanagement.
(c) the
initial
estimate
of
the
costs
of
dismantling
and
removing
the
item
and
restoring the site on which it is located, the obligation for which an entity incurs
eitherwhentheitemisacquiredorasaconsequenceofhavingusedtheitemduringa
particularperiodforpurposesotherthantoproduceinventoriesduringthatperiod.
Measurement after recognition: An entity shall choose either the cost model or the
revaluation model as its accounting policy and shall apply that policy to an entire
classofproperty,plantandequipment.
Cost model: After recognition as an asset, an item of property, plant and equipment
shall
be
carried
at
its
cost
less
any
accumulated
depreciation
and
any
accumulated
impairment losses. Revaluation model: After recognition as an asset, an item of
property, plant and equipment whose fair value can be measured reliably shall be
carriedatarevaluedamount,beingitsfairvalueatthedateoftherevaluationlessany
subsequentaccumulateddepreciationandsubsequentaccumulatedimpairmentlosses.
Revaluations shall be made with sufficient regularity to ensure that the carrying
amount does not differ materially from that which would be determined using fair
valueattheendofthereportingperiod.
If
an
assets
carrying
amount
is
increased
as
a
result
of
a
revaluation,
the
increase
shall be recognised in other comprehensive income and accumulated in equity under
theheadingofrevaluationsurplus.However,theincreaseshallberecognisedinprofitor
loss to the extent that it reverses a revaluation decrease of the same asset previously
recognisedinprofitorloss.
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Ifanassetscarryingamountisdecreasedasaresultofarevaluation,thedecreaseshallbe
recognised in profit or loss. However, the decrease shall be recognised in other
comprehensive income to the extent of any credit balance existing in the revaluation
surplusinrespectofthatasset.
Depreciation is the systematic allocation of the depreciable amount of an asset over its
useful life.Depreciableamount is thecostofanasset,orotheramountsubstituted for
cost,lessitsresidualvalue.Eachpartofanitemofproperty,plantandequipmentwith
acost that issignificant inrelation to the totalcost of the itemshallbe depreciated
separately.Thedepreciationchargeforeachperiodshallberecognisedinprofitor loss
unless it is included in the carrying amount of another asset. Thedepreciation
methodusedshallreflectthepattern inwhichtheassetsfutureeconomicbenefitsare
expectedtobeconsumedbytheentity.
The residualvalue of an asset is the estimated amount that an entity would currently
obtain from disposal of the asset, after deducting the estimated costs of disposal, if the
assetwerealreadyoftheageandintheconditionexpectedattheendofitsusefullife.
To determine whetheran itemof property,plantandequipment is impaired,anentity
appliesIAS36ImpairmentofAssets.
The carrying amount of an item of property, plant and equipment shall be
derecognised:
(a) ondisposal;or
(b) whennofutureeconomicbenefitsareexpectedfromitsuseordisposal.
IAS 17 LEASES
The objective of this Standard is to prescribe, for lessees and lessors, the appropriate
accounting policies and disclosure to apply in relation to leases. The classification of
leases adopted in this Standard is based on the extent to which risks and rewards
incidentaltoownershipofaleasedassetliewiththelessororthelessee.
A lease is classified as a finance lease if it transfers substantially all the risks and
rewardsincidentaltoownership.Aleaseisclassified asanoperatingleaseifitdoes
nottransfersubstantiallyalltherisksandrewardsincidentaltoownership.
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Leasesinthefinancialstatementsoflessees
OperatingLeases
Leasepayments
under
an
operating
lease
shall
be
recognised
as
an
expense
on
a
straightline basis over the lease term unless another systematic basis is more
representativeofthetimepatternoftheusersbenefit.
FinanceLeases
At the commencement of the lease term, lessees shall recognize finance leases as
assets and liabilities in their balance sheets at amounts equal to the fair value of the
leased property or, if lower, the present value of the minimum lease payments, each
determinedattheinceptionofthelease.Thediscountratetobeusedincalculating
thepresent
value
of
the
minimum
lease
payments
is
the
interest
rate
implicit
in
the
lease, ifthis ispracticabletodetermine; ifnot, the lessees incrementalborrowingrate
shallbeused.Any initialdirectcostsofthelesseeareaddedtotheamountrecognised
asanasset.
Minimum lease payments shall be apportioned between the finance charge and the
reductionoftheoutstanding liability.Thefinancechargeshallbeallocated toeach
periodduringthe leasetermsoastoproduceaconstantperiodicrateof interestonthe
remainingbalanceof the liability.Contingentrentsshallbechargedasexpenses in
theperiodsinwhichtheyareincurred.
A finance lease gives rise to depreciation expense for depreciable assets as well as
finance expense for each accounting period. The depreciation policy for depreciable
leasedassetsshallbeconsistentwiththatfordepreciableassetsthatareowned,and
the depreciation recognised shall be calculated in accordance with IAS 16 Property,
PlantandEquipment and IAS 38 IntangibleAssets. If there is no reasonable certainty
thatthelesseewillobtainownershipbytheendoftheleaseterm,theassetshallbe
fullydepreciatedovertheshorteroftheleasetermanditsusefullife.
Leasesin
the
financial
statements
of
lessors
OperatingLeases
Lessors shall present assets subject to operating leases in their statements of financial
position according to the nature of the asset. The depreciation policy for depreciable
leased assets shall be consistent with the lessors normal depreciation policy for
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similarassets,anddepreciationshallbecalculatedinaccordancewithIAS16andIAS
38.Lease income fromoperating leasesshallberecognised in incomeonastraight
linebasisoverthe leaseterm,unlessanothersystematicbasis ismorerepresentativeof
thetimepatterninwhichusebenefitderivedfromtheleasedassetisdiminished.
Finance Leases
Lessors shall recognise assets held under a finance lease in their statements of
financial position and present them as a receivable at an amount equal to the net
investment in the lease. The recognition of finance income shall be based on a pattern
reflecting a constant periodic rate of return on the lessors net investment in the
financelease.
Manufacturer or dealer lessors shall recognise selling profit or loss in the period, in
accordancewiththepolicyfollowedbytheentityforoutrightsales.Ifartificiallylowrates
of interest are quoted, selling profit shall be restricted to that which would apply if a
marketrateofinterestwerecharged.Costsincurredbymanufacturerordealerlessorsin
connectionwithnegotiatingandarrangingaleaseshallberecognisedasanexpensewhen
thesellingprofitisrecognised.
Saleandleasebacktransactions
Asaleandleasebacktransactioninvolvesthesaleofanassetandtheleasingbackofthe
sameasset.
The
lease
payment
and
the
sale
price
are
usually
interdependent
because
they are negotiated as a package. The accounting treatment of a sale and leaseback
transactiondependsuponthetypeofleaseinvolved.
IAS 18 REVENUE
The primary issue in accounting for revenue is determining when to recognise
revenue.Revenue
is
recognised
when
it
is
probable
that
future
economic
benefits
will
flow to the entity and these benefits can be measured reliably. This Standard
identifies thecircumstances inwhich thesecriteriawillbe metand, therefore, revenue
will be recognised. It also provides practical guidance on the application of these
criteria.
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Revenue is the gross inflow of economic benefits during the period arising in the
courseof theordinaryactivitiesofanentitywhen those inflowsresult in increases in
equity,otherthanincreasesrelatingtocontributionsfromequityparticipants.
This
Standard
shall
be
applied
in
accounting
for
revenue
arising
from
the
following
transactionsandevents:
(a) thesaleofgoods;
(b) therenderingofservices;and
(c) theusebyothersofentityassetsyieldinginterest,royaltiesanddividends.
The recognition criteria in this Standard are usually applied separately to each
transaction. However, in certain circumstances, it is necessary to apply the
recognition criteria to the separately identifiable components of a single transaction in
orderto
reflect
the
substance
of
the
transaction.
For
example,
when
the
selling
price
ofaproduct includesan identifiable amount forsubsequentservicing, thatamount is
deferred and recognised as revenue over the period during which the service is
performed. Conversely, the recognition criteria are applied to two or more
transactions together when they are linked in such a way that the commercial effect
cannot be understood withoutreference to theseries of transactions as a whole. For
example, an entity may sell goods and, at the same time, enter into a separate
agreement to repurchase the goods at a later date, thus negating the substantive
effectofthetransaction;insuchacase,thetwotransactionsaredealtwithtogether.
Revenue shall be measured at the fair value of the consideration received or
receivable. Fair value is the amount for which an asset could be exchanged, or a
liability settled, between knowledgeable, willing parties in an arms length
transaction.
The amount of revenue arising on a transaction is usually determined by agreement
betweentheentityandthebuyeroruseroftheasset.Itismeasuredatthefairvalueof
the consideration received or receivable taking into account the amount of any trade
discounts
and
volume
rebates
allowed
by
the
entity.
Saleofgoods
Revenuefromthesaleofgoodsshallberecognisedwhenallthefollowingconditionshave
beensatisfied:
(a) theentityhastransferredto thebuyerthesignificantrisksandrewardsof
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ownershipofthegoods;
(b) the entity retains neither continuing managerial involvement to the degree
usuallyassociatedwithownershipnoreffective controloverthegoodssold;
(c) theamountofrevenuecanbemeasuredreliably;
(d) itis
probable
that
the
economic
benefits
associated
with
the
transaction
will
flow
totheentity;and
(e)the costs incurred or to be incurred in respect of the transaction can be measured
reliably.
Renderingofservices
When the outcome of a transaction involving the rendering of services can be
estimated reliably, revenue associated with the transaction shall be recognised by
reference to the stage of completion of the transaction at the end of the reporting
period.
The
outcome
of
a
transaction
can
be
estimated
reliably
when
all
the
followingconditionsaresatisfied:
(a) theamountofrevenuecanbemeasuredreliably;
(b) itisprobablethattheeconomicbenefitsassociatedwiththetransactionwillflow
totheentity;
(c) thestageofcompletionofthetransactionattheendofthereportingperiodcanbe
measuredreliably;and
(d) thecosts incurredforthetransactionandthecoststocompletethetransaction
canbemeasuredreliably.
Therecognition
of
revenue
by
reference
to
the
stage
of
completion
of
atransaction
is
often
referred to as the percentage of completion method. Under this method, revenue is
recognised in th e accounting periods in which the services ar e rendered. The
recognitionofrevenueonthisbasisprovidesusefulinformationontheextentofservice
activityandperformanceduringaperiod.
When the outcome of the transaction involving the rendering of services cannot be
estimated reliably, revenue shall be recognised only to the extent of the expenses
recognisedthatarerecoverable.
Interest,royaltiesanddividends
Revenueshallberecognisedonthefollowingbases:
(a) interestshallberecognisedusingthe effectiveinterestmethodassetout in
IAS39,paragraphs9andAG5AG8;
(b) royaltiesshallberecognisedonanaccrualbasisinaccordancewiththesubstance
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oftherelevantagreement;and
(c) dividendsshallberecognisedwhentheshareholdersrighttoreceivepaymentis
established.
IAS 19 EMPLOYEE BENEFITS
Employeebenefits are all forms of consideration given by an entity in exchange for
servicerenderedbyemployees.
The
objective
of
this
Standard
is
to
prescribe
the
accounting
and
disclosure
for
employeebenefits.TheStandardrequiresanentitytorecognise:
(a) a liabilitywhenanemployeehasprovidedservice inexchangeforemployee
benefitstobepaidinthefuture;and
(b) anexpensewhentheentityconsumestheeconomicbenefitarisingfromservice
providedbyanemployeeinexchangeforemployeebenefits.
This Standard shall be applied by an employer in accounting for all employee
benefits,exceptthosetowhichIFRS2SharebasedPaymentapplies.
Shortterm
employee
benefits
Shorttermemployeebenefitsareemployeebenefits(otherthanterminationbenefits)
which fall due wholly within twelve months after the end of the period in which the
employeesrendertherelatedservice.
Whenanemployeehasrenderedservicetoanentityduringanaccountingperiod,the
entity shall recognise the undiscounted amount of shortterm employee benefits
expectedtobepaidinexchangeforthatservice:
(a) asaliability
(accrued
expense),
after
deducting
any
amount
already
paid.
If
the
amountalreadypaidexceedstheundiscounted amount of the benefits, an entity
shall recognize that excess as an asset (prepaid expense) to the extent that the
prepayment will lead to, for example, a reduction in future payments or a cash
refund;and
(b) asanexpense,unlessanotherStandardrequiresorpermitstheinclusionofthe
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benefitsinthecostofanasset(see,forexample,IAS2InventoriesandIAS16Property,
PlantandEquipment).
Postemploymentbenefits
Postemployment benefits are employee benefits (other than termination benefits)
which are payable after the completion of employment. Postemployment benefit
plans are formal or informal arrangements under which an entity provides post
employmentbenefits foroneormoreemployees.Postemploymentbenefitplansare
classifiedaseitherdefinedcontribution plansordefinedbenefitplans,dependingon
theeconomicsubstanceoftheplanasderivedfromitsprincipaltermsandconditions.
Postemploymentbenefits:definedcontributionplans
Definedcontribution
plans
are
post
employment
benefit
plans
under
which
an
entity
pays fixed contributions into a separate entity (a fund) and will have no legal or
constructive obligation to pay further contributions if the fund does not hold sufficient
assets to pay all employee benefits relating to employee service in the current and
priorperiods.Underdefinedcontributionplans:
(a) theentityslegalorconstructive obligationislimitedtotheamountthatitagreesto
contribute to the fund. Thus, the amount of the postemployment benefits received
by the employee is determined by the amount of contributions paid by an entity (and
perhaps also the employee) to a postemployment benefit plan or to an insurance
company,together
with
investment
returns
arising
from
the
contributions;
and
(b) in consequence, actuarial risk (that benefits will be less than expected) and
investmentrisk(thatassets investedwillbe insufficienttomeetexpectedbenefits)fall
ontheemployee.
When an employee has rendered service to an entity during a period, the entity shall
recognise the contribution payable to a defined contribution plan in exchange for that
service:
(a)asa liability(accruedexpense),afterdeductinganycontributionalreadypaid. If
thecontributionalreadypaidexceedsthecontributiondueforservicebeforetheendof
thereportingperiod,anentityshallrecognisethatexcessasanasset (prepaid
expense) to the extent that the prepayment will lead to, for example, a reduction in
futurepaymentsoracashrefund;
(b) as an expense, unless another Standard requires or permits the inclusion of thecontributionin the costofanasset(see,for example, IAS 2 Inventories and IAS
16Property,PlantandEquipment).
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Post-employment benefits: defined benefit plans
Defined benefit plans are postemployment benefit plans other than defined
contributionplans.Underdefinedbenefitplans:
(a) the entitys obligation is to provide the agreed benefits to current and former
employees;and
(b) actuarialrisk(thatbenefitswillcostmorethanexpected)andinvestmentriskfall,in
substance,ontheentity.Ifactuarialorinvestmentexperienceareworsethanexpected,
theentitysobligationmaybeincreased.
Accountingbyanentityfordefinedbenefitplansinvolvesthefollowingsteps:
(a) using actuarial techniques to make a reliable estimate of the amount of benefit that
employeeshaveearnedinreturnfortheir service inthecurrentandpriorperiods.This
requiresan
entity
to
determine
how
much
benefit
is
attributable
to
the
current
and
prior
periods and to make estimates (actuarial assumptions) about demographic variables
(suchasemployee turnover and mortality) and financial variables (such as future
increasesinsalariesandmedicalcosts)thatwillinfluencethecostofthe benefit
(b) discounting that benefit using the Projected Unit Credit Method in order to
determinethepresentvalueofthedefinedbenefit
(c) obligationandthecurrentservicecost
(d)determiningthefairvalueofanyplanassets
(e)determining the total amount of actuarial gains and losses and the amount of those
actuarialgainsandlossestoberecognised
(f) where a plan has been introduced or changed, determining the resulting past
servicecostand
(g) whereaplanhasbeencurtailedorsettled,determiningtheresultinggainorloss
Where an entity has more than one defined benefit plan, the entity applies these
proceduresfor
each
material
plan
separately.
Otherlongtermemployeebenefits
Other longterm employee benefits are employee benefits (other than post
employment benefits and termination benefits) which do not fall due wholly within
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twelve months after the end of the period in which the employees render the related
service.
The Standard requires a simpler method of accounting for other longterm employee
benefits
than
for
postemployment
benefits:
actuarial
gains
and
losses
and
past
servicecostarerecognisedimmediately.
Terminationbenefits
Terminationbenefitsareemployeebenefitspayableasaresultofeither:
(a)an entitys decision to terminate an employees employment before the normal
retirementdate;or
(b)an employees decision to accept voluntary redundancy in exchange for those
benefits.
An entity shall recognise termination benefits as a liability and an expense when, and
onlywhen,theentityisdemonstrablycommittedtoeither:
(a)terminate the employment of an employee or group of employees before the
normalretirementdate;or
(b)provide termination benefits as a result of an offer made in order to encourage
voluntaryredundancy.
Where termination benefits fall due more than 12 months after the end of the
reportingperiod,theyshallbediscounted.
In the case of an offer made to encourage voluntary redundancy, the measurement of
terminationbenefitsshallbebasedonthenumberofemployeesexpectedtoacceptthe
offer.
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IAS 21 THE EFFECTS OF CHANGES
IN FOREIGN EXCHANGE RATES
Anentitymaycarryonforeignactivitiesintwoways.Itmayhavetransactionsinforeign
currencies or it may have foreignoperations. In addition,an entity may present its
financialstatementsinaforeigncurrency.TheobjectiveofthisStandardistoprescribe
how to include foreign currency transactions and foreign operations in the financial
statementsofanentityandhowtotranslatefinancialstatements intoapresentation
currency. The principal issues are which exchange rate(s) to use and how toreport
theeffectsofchangesinexchangeratesinthefinancialstatements.
This Standard does not apply to hedge accounting for foreign currency items,
including the hedging of a net investment in a foreign operation. IAS 39 applies to
hedgeaccounting.
ThisStandarddoesnotapplytothepresentation inastatementofcashflowsofthe
cashflowsarisingfromtransactionsinaforeigncurrency,ortothetranslationofcash
flowsofaforeignoperation(seeIAS7StatementofCashFlows).
Functional currency
Functionalcurrency is the currency of the primary economic environment in which
theentityoperates.Theprimaryeconomicenvironmentinwhichanentityoperatesis
normallytheoneinwhichitprimarilygeneratesandexpendscash.
Anentityconsidersthefollowingfactorsindeterminingitsfunctionalcurrency:
(a) the currency: that mainly influences sales prices for goods and services (this
will often be the currency in which sales prices for its goods and services are
denominatedandsettled);andofthecountrywhosecompetitiveforcesandregulations
mainlydeterminethesalespricesofitsgoodsandservices.
(b) thecurrencythatmainlyinfluenceslabour,materialandothercostsofproviding
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goods or services (this will often be the currency in which such costs are
denominatedandsettled).
Reportingforeigncurrencytransactionsinthefunctionalcurrency
Foreign currency is a currency other than the functional currency of the entity. Spot
exchangerateistheexchangerateforimmediatedelivery.
Exchangedifference is the difference resulting from translating a given number of
unitsofonecurrencyintoanothercurrencyatdifferentexchangerates.
Netinvestmentinaforeignoperationistheamountofthereportingentitysinterestin
the net assets of that operation.A foreign currency transaction shall be recorded,
on initialrecognition inthe functionalcurrency,byapplyingtotheforeigncurrency
amount
the
spot
exchange
rate
between
the
functional
currency
and
the
foreign
currencyatthedateofthetransaction.
Attheendofeachreportingperiod:
(a) foreigncurrencymonetaryitemsshallbetranslatedusingtheclosingrate;
(b) nonmonetary items that are measured in terms of historical cost in a foreign
currencyshallbetranslatedusingtheexchangerateatthedateofthetransaction;and
(c) nonmonetaryitemsthataremeasuredatfairvalueinaforeigncurrencyshallbe
translatedusingtheexchangeratesatthedatewhenthefairvaluewasdetermined.
Exchange differences arising on the settlement of monetary items or on translating
monetary items at rates different from those at which they were translated on initial
recognitionduringtheperiodorinpreviousfinancialstatementsshallberecognisedin
profitorlossintheperiodinwhichtheyarise.
However, exchange differences arising on a monetary item that forms part of a
reporting entitys net investment in a foreign operation shall be recognised in profit or
loss in the separate financial statements of the reporting entity or the individual
financial statements of the foreign operation, as appropriate. In the financial
statements
that
include
the
foreign
operation
and
the
reporting
entity
(e.g.
consolidated
financial statements when the foreign operation is a subsidiary), such exchange
differences shall be recognised initially in other comprehensive income and
reclassifiedfromequitytoprofitorlossondisposalofthenetinvestment.
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Furthermore, when a gain or loss on a nonmonetary item is recognised in other
comprehensive income, any exchange component of that gain or loss shall be
recognised in other comprehensive income. Conversely, when a gain or loss on a non
monetary item is recognised in profit or loss, any exchange component of that gain or
lossshallberecognisedinprofitorloss.
Translationtothepresentationcurrency/Translationofaforeignoperation
The Standard permits an entity to present its financial statements in any currency (or
currencies). For this purpose, an entity could be a standalone entity, a parent
preparing consolidated financial statements or a parent, an investor or a venturer
preparing separate financial statements in accordance with IAS 27 Consolidated and
Separate Financial Statements. If the presentation currency differs from the entity's
functional
currency,
it
translates
its
results
and
financial
position
into
the
presentation
currency.Forexample,whenagroupcontainsindividualentitieswithdifferentfunctional
currencies,theresultsandfinancialpositionofeachentityareexpressed inacommon
currencysothatconsolidatedfinancialstatementsmaybepresented.
An entity is required to translate its results and financial position from its functional
currency into a presentation currency (or currencies) using the method required for
translating a foreign operation for inclusion in the reporting entitys financial
statements.
The results and financial position of an entity whose functional currency is not the
currency of a hyperinflationary economy shall be translated into a different
presentationcurrencyusingthefollowingprocedures:
(a) assets and liabilities for each statement of financial position presented (ie
including comparatives) shall be translated at the closing rate at the date of that
statementoffinancialposition;
(b) incomeandexpensesforeachstatementofcomprehensive incomeorseparate
incomestatementpresented(ieincludingcomparatives)shallbetranslatedatexchange
ratesat
the
dates
of
the
transactions;
and
(c)allresultingexchangedifferencesshallberecognisedinothercomprehensiveincome.
Any goodwill arising on the acquisition of a foreign operation and any fair value
adjustmentstothecarryingamountsofassetsand liabilitiesarisingontheacquisition
of that foreign operation shall be treated as assets and liabilities of the foreign
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IAS 23 BORROWING COSTS
Coreprinciple
Borrowing costs that are directly attributable to the acquisition, construction or
productionofaqualifyingassetformpartofthecostofthatasset.Otherborrowing
costsarerecognisedasanexpense.
Borrowingcostsare interestandothercoststhatanentity incurs inconnectionwith
theborrowingoffunds.
Recognition
An entity shall capitalise borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset as part of the cost of that
asset. An entity shall recognize other borrowing costs as an expense in the period in
whichitincursthem.
Aqualifyingasset isanassetthatnecessarilytakesasubstantialperiodoftimetoget
readyforitsintendeduseorsale.
To the extent that anentity borrows fundsspecifically for the purpose of obtaininga
qualifying asset, the entity shall determine the amount of borrowing costs eligible for
capitalisation as the actual borrowing costs incurred on that borrowing during the
periodlessanyinvestmentincomeonthetemporaryinvestmentofthoseborrowings.
Totheextentthatanentityborrowsfundsgenerallyandusesthemforthepurposeof
obtainingaqualifyingasset,theentityshalldeterminetheamountofborrowingcosts
eligible for capitalisation by applying a capitalisation rate to the expenditures on that
asset. The capitalisation rate shall be the weighted average of the borrowing costs
applicabletotheborrowingsoftheentitythatareoutstandingduringtheperiod,other
than borrowings made specifically for the purpose of obtaining a qualifying asset.
The amount of borrowing costs that an entity capitalises during a period shall not
exceedtheamountofborrowingcostsitincurredduringthatperiod.
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An entity shall begin capitalising borrowing costs as part of the cost of a qualifying
assetonthecommencementdate.Thecommencementdateforcapitalisation isthe
datewhentheentityfirstmeetsallofthefollowingconditions:
(a) itincursexpendituresfortheasset;
(b) itincursborrowingcosts;and
(c) itundertakesactivitiesthatarenecessarytopreparetheassetforitsintendeduse
orsale.
An entity shall suspend capitalisation of borrowing costs during extended periods in
whichitsuspendsactivedevelopmentofaqualifyingasset.
An entity shall cease capitalising borrowing costs when substantially all the activities
necessarytopreparethequalifyingassetforitsintendeduseorsalearecomplete.
Disclosure
Anentityshalldisclose:
(a) theamountofborrowingcostscapitalisedduringtheperiod;and
(b)thecapitalisationrateusedtodeterminetheamountofborrowingcostseligiblefor
capitalization.
IAS 27 CONSOLIDATED AND
SEPARATE FINANCIAL
STATEMENTS
Theobjective
of
IAS
27
is
to
enhance
the
relevance,
reliability
and
comparability
of
theinformationthataparententityprovidesinitsseparatefinancialstatementsandin
it s consolidated financial statements fo r a group of entities under it s control.
TheStandardspecifies:
(a) thecircumstances inwhichanentitymustconsolidatethefinancialstatementsof
anotherentity(beingasubsidiary);
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(b) theaccountingforchangesinthelevelofownershipinterestinasubsidiary;
(c) theaccountingforthelossofcontrolofasubsidiary;and
(d) the information that an entity must disclose to enable users of the financial
statements
to
evaluate
the
nature
of
the
relationship
between
the
entity
and
its
subsidiaries.
Consolidatedfinancialstatementsarethefinancialstatementsofagrouppresentedas
thoseofasingleeconomic entity.Agroupis aparentandallit ssubsidiaries.A
subsidiaryisanentity,includinganunincorporatedentitysuchasapartnership,thatis
controlled by anotherentity (knownas the parent). Control is thepower togovern
the financial and operating policies of an entity so as to obtain benefits from its
activities.
Presentation of consolidated financial statements
A parent must consolidate its investments in subsidiaries. There is a limited exception
available to some nonpublic entities. However, that exception does not relieve
venture capital organisations, mutual funds, unit trusts and similar entities from
consolidatingtheirsubsidiaries.
Consolidationprocedures
A group must use uniform accounting policies for reporting like transactions and
other events in similar circumstances. The consequences of transactions, and
balances,betweenentitieswithinthegroupmustbeeliminated.
In preparing consolidated financial statements, an entity combines the financial
statementsoftheparentanditssubsidiarieslinebylinebyaddingtogetherlikeitems
of assets, liabilities, equity, income and expenses. In order that the consolidated
financial
statements
present
financial
information
about
the
group
as
that
of
a
single
economicentity,thefollowingstepsarethentaken:
(a)thecarryingamountoftheparents investment ineachsubsidiaryandtheparents
portion of equity of each subsidiary are eliminated (see IFRS 3, which describes the
treatmentofanyresultantgoodwill);
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(b)noncontrolling interests in the profit or loss of consolidated subsidiaries for the
reportingperiodareidentified;and
(c) noncontrolling interests in the net assets of consolidated subsidiaries are
identified separately from the parents ownership interests in them. Non
controllinginterests
in
the
net
assets
consist
of:
(i) the amount of those non controlling interests at the date of the original
combinationcalculatedinaccordancewith IFRS3;and
(ii) the noncontrolling interests share of changes in equity since the date of the
combination.
Noncontrollinginterests
Noncontrolling
interests
must
be
presented
in
the
consolidated
statement
of
financial
position within equity, separately from the equity of the owners of the parent. Total
comprehensive income must be attributed to the owners of the parent and to the non
controlling interests even if this results in the noncontrolling interests having a deficit
balance.
Changesintheownershipinterests
Changesinaparentsownershipinterestinasubsidiarythatdonotresultinthelossof
controlareaccountedforwithinequity.Whenanentity losescontrolofasubsidiary it
derecognises the assets and liabilities and related equity components of the former
subsidiary.Anygainorlossisrecognisedinprofitorloss.Anyinvestmentretainedinthe
formersubsidiaryismeasuredatitsfairvalueatthedatewhencontrolislost.
Separatefinancialstatements
When an entity elects, or is required by local regulations, to present separate financial
statements,investmentsinsubsidiaries,jointlycontrolledentitiesandassociatesmustbe
accountedforatcostorinaccordancewithIAS39FinancialInstruments:Recognitionand
Measurement.
Disclosure
An entity must disclose information about the nature of the relationship between the
parententityanditssubsidiaries.
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IAS 28 INVESTMENTS IN
ASSOCIATES
ThisStandardshallbeapplied inaccountingfor investments inassociates.However,
itdoesnotapplytoinvestmentsinassociatesheldby:
(a) venturecapitalorganisations,or
(b) mutual funds, unit trusts an d similar entities including investmentlinked
insurancefundsthatuponinitialrecognitionaredesignatedasatfairvaluethroughprofit
or loss or are classified as held for trading and accounted for in accordance with IAS 39
FinancialInstruments:
Recognition
and
Measurement.
Such
investments
shall
be
measured at fair value in accordance with IAS 39, with changes in fair value
recognisedinprofitorlossintheperiodofthechange.
Significant influence is the power to participate in the financial and operating policy
decisionsoftheinvesteebutisnotcontrolorjointcontroloverthosepolicies.
If an investor holds, directly or indirectly (eg through subsidiaries), 20 per cent or
more of the voting power of the investee, it is presumed that the investor has
significant influence, unless it can be clearly demonstrated that this is not the case.
Conversely, if the investor holds, directly or indirectly (eg through subsidiaries), less
than 20 per cent of the voting power of the investee, it is presumed that the
investor does not have significant influence, unless such influence ca n be
clearly demonstrated. A substantial or majority ownership by another investor does
notnecessarilyprecludeaninvestorfromhavingsignificantinfluence.
Undertheequitymethod,theinvestmentinanassociateisinitiallyrecognisedatcost
andthecarryingamountisincreasedordecreasedtorecognisetheinvestorsshareof
theprofitorlossoftheinvesteeafterthedateofacquisition.Theinvestorsshareof
the
profit
or
loss
of
the
investee
is
recognised
in
the
investors
profit
or
loss.
Distributions received from an investee reduce the carrying amount of the investment.
Adjustments to the carrying amount may also be necessary for changes in the
investorsproportionate interestintheinvesteearisingfromchanges inthe investees
other comprehensive income. Such changes include those arising from the
revaluation of property, plant and equipment and from foreign exchange translation
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differences. The investors share of those changes is recognised in other
comprehensive income of the investor (see IAS 1 Presentation of Financial
Statements(asrevisedin2007)).
The
investors
financial
statements
shall
be
prepared
using
uniform
accounting
policiesforliketransactionsandeventsinsimilarcircumstances.
After application of the equity method, including recognising the associates losses,
the investor applies the requirements of IAS 39 to determine whether it is necessary to
recogniseanyadditionalimpairmentlosswithrespecttotheinvestorsnetinvestment
intheassociate.
Separatefinancialstatements
When
separate
financial
statements
are
prepared,
investments
in
subsidiaries,
jointly
controlledentitiesandassociatesthatarenotclassifiedasheldforsale(orincludedina
disposalgroupthatisclassifiedasheldforsale)inaccordancewithIFRS5shallbeaccounted
foreither:
(a) atcost,or
(b) inaccordancewithIAS39.
Thesameaccountingshallbeappliedforeachcategoryof investments. Investments in
subsidiaries,jointlycontrolledentitiesandassociatesthatareclassifiedasheldforsale(or
included inadisposalgroupthat isclassifiedasheldforsale) inaccordancewith IFRS5
shallbeaccountedforinaccordancewiththatIFRS.
Investments in jointly controlled entities and associates that are accounted for in
accordancewithIAS39intheconsolidatedfinancialstatementsshallbeaccountedforin
thesamewayintheinvestorsseparatefinancialstatements.
IAS 31 INTERESTS IN JOINTVENTURES
This Standard shall be applied in accounting for interests in joint ventures and the
reporting of joint venture assets, liabilities, income and expenses in the financial
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statements of venturers and investors, regardless of the structures or forms under
which thejoint venture activities take place. However, it does not apply to venturers
interestsinjointlycontrolledentitiesheldby:
(a) venturecapital
organisations,
or
(b) mutual funds, unit trusts an d similar entities including investmentlinked
insurancefundsthatuponinitialrecognitionaredesignatedasatfairvaluethroughprofit
or loss or are classified as held for trading and accounted for in accordance with IAS 39
FinancialInstruments:RecognitionandMeasurement.
Ajointventureisacontractualarrangementwherebytwoormorepartiesundertake
an economic activity that is subject tojoint control.Joint control is the contractually
agreed sharing of control over an economic activity, and exists only when the
strategic financial and operating decisions relating to the activity require the
unanimousconsent
of
the
parties
sharing
control
(the
venturers).
Control
is
the
power
to govern the financial and operating policies of an economic activity so as to obtain
benefitsfromit.
Aventurerisapartytoajointventureandhasjointcontroloverthatjointventure.
Jointventurestakemanydifferentformsandstructures.ThisStandardidentifiesthree
broad typesjointly controlled operations, jointly controlled assets and jointly
controlledentitiesthatarecommonlydescribedas,andmeetthedefinitionof,joint
ventures.
Jointlycontrolledoperations
Theoperationofsomejointventuresinvolvestheuseoftheassetsandotherresources
of the venturers rather than the establishment of a corporation, partnership or
other entity, or a financial structure that is separate from the venturers themselves.
Each venturer uses its own property, plant and equipment and carries its own
inventories. Italso incurs its own expenses and liabilities and raises its own finance,
whichrepresentitsownobligations.
Inrespectofitsinterestsinjointlycontrolledoperations,aventurershallrecognisein
itsfinancialstatements:
(a) theassetsthatitcontrolsandtheliabilitiesthatitincurs;and
(b) theexpensesthatitincursanditsshareoftheincomethatitearnsfromthesaleof
goodsorservicesbythejointventure.
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Jointlycontrolledassets
Somejoint ventures involve thejoint control, and often thejoint ownership, by the
venturersof
one
or
more
assets
contributed
to,
or
acquired
for
the
purpose
of,
the
joint
venture and dedicated to the purposes of thejoint venture. The assets are used to
obtainbenefitsfortheventurers.Eachventurermaytakeashareoftheoutputfrom
theassetsandeachbearsanagreedshareoftheexpensesincurred.
In respect of its interest injointly controlled assets, a venturer shall recognise in its
financialstatements:
(a) its share of thejointly controlled assets, classified according to the nature of the
assets;
(b) anyliabilities
that
it
has
incurred;
(c) its share of any liabilities incurredjointly with the other venturers in relation to the
jointventure;
(d) any income from the sale or use of its share of the output of thejoint venture,
together with its share of an yexpenses incurred by the jo in t venture; an d (e)
anyexpensesthatithasincurredinrespectofits interest in the
jointventure.
Jointlycontrolledentities
A
jointly
controlled
entity
is
a
joint
venture
that
involves
the
establishment
of
a
corporation, partnership or other entity in which each venturer has an interest. The
entity operates in the same way as other entities, except that a contractual arrangement
between the venturers establishesjoint control over the economic activity of the
entity.
A venturer shall recognise its interest in ajointly controlled entity using proportionate
consolidationortheequitymethod.
Proportionateconsolidationisamethodofaccountingwherebyaventurersshareofeach
of the assets, liabilities, income andexpensesofajointlycontrolledentity is combined
line by line with similar items in the venturers financial statements or reported as
separatelineitemsintheventurersfinancialstatements.
The equity method is a method of accounting whereby an interest in ajointly
controlled entity is initially recorded at cost and adjusted thereafter for the post
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acquisition change in the venturers share of net assets of thejointly controlled entity.
Theprofitorlossoftheventurer includestheventurersshareoftheprofitorlossof
thejointlycontrolledentity.
Transactionsbetween
aventurer
and
ajoint
venture
When a venturer contributes or sells assets to ajoint venture, recognition of any
portion of a gain or loss from the transaction shall reflect the substance of the
transaction. While the assets are retained by thejoint venture, and provided the
venturerhas transferred thesignificantrisksandrewardsofownership, the venturer
shallrecogniseonlythatportionofthegainorlossthatisattributabletotheinterests
oftheotherventurers.Theventurershallrecognisethefullamountofanylosswhenthe
contribution or sale provides evidence of a reduction in the net realisable value of
currentassets
or
an
impairment
loss.
When a venturer purchases assets from ajoint venture, the venturer shall not
recognise its share of the profits of thejoint venture from the transaction until it
resells the assets to an independent party. A venturer shall recognise its share of the
losses resulting from these transactions in the same way as profits except that losses
shall be recognised immediately when they represent a reduction in the net realisable
valueofcurrentassetsoranimpairmentloss.
Separatefinancialstatementsofaventurer
When separate financial statements are prepared, investments in subsidiaries, jointly
controlledentitiesandassociatesthatarenotclassifiedasheldforsale(orincludedina
disposalgroupthatisclassifiedasheldforsale)inaccordancewithIFRS5shallbeaccounted
foreither:
(a) atcost,or
(b) inaccordancewithIAS39.
Thesame
accounting
shall
be
applied
for
each
category
of
investments.
Investments
in
subsidiaries,jointlycontrolledentitiesandassociatesthatareclassifiedasheldforsale(or
included inadisposalgroupthat isclassifiedasheldforsale) inaccordancewith IFRS5
shallbeaccountedforinaccordancewiththatIFRS.
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Investments in jointly controlled entities and associates that are accounted for in
accordancewithIAS39intheconsolidatedfinancialstatementsshallbeaccountedfor
inthesamewayintheinvestorsseparatefinancialstatements.
IAS 37 PROVISIONS, CONTINGENT
LIABILITIES AND CONTINGENT
ASSETS
The objective of this Standard is to ensure that appropriate recognition criteria and
measurement bases are applied to provisions, contingent liabilities and contingent
assets and that sufficient information is disclosed in the notes to enable users to
understandtheirnature,timingandamount.
IAS 37 prescribes the accounting and disclosure for all provisions, contingent
liabilitiesandcontingentassets,except:
(a) those resulting from executory contracts, except where the contract is onerous.
Executorycontractsarecontractsunder whichneitherparty has performed any of
itsobligationsorbothpartieshavepartiallyperformedtheirobligationstoanequal
extent;
(b)thosecoveredbyanotherStandard.
Provisions
Aprovision
is
aliability
of
uncertain
timing
or
amount.
Recognition
Aprovisionshouldberecognisedwhen,andonlywhen:
(a) anentityhasapresentobligation(legalorconstructive)asaresultofapastevent;
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(b) it is probable (ie more likely than not) that an outflow of resources embodying
economicbenefitswillberequiredtosettletheobligation;and
(c) a reliable estimate can be made of the amount of the obligation. The Standard
notes that it is only in extremely rare cases that a reliable estimate will not be
possible.
Inrarecasesitisnotclearwhetherthereisapresentobligation.Inthesecases,apast
event is deemed to give rise to a present obligation if, taking account of all available
evidence, it is more likely than not that a present obligation exists at the end of the
reportingperiod.
Measurement
The amount recognised as a provision shall be the best estimate of the expenditure
requiredto
settle
the
present
obligation
at
the
end
of
the
reporting
period.
The
best
estimate of the expenditure required to settle the present obligation is the amount
thatanentitywouldrationallypaytosettletheobligationattheendofthereporting
periodortotransferittoathirdpartyatthattime.
Where the provision being measured involves a large population of items, the
obligation is estimated by weighting all possible outcomes by their associated
probabilities. Where a single obligation is being measured, the individual most likely
outcome may be the best estimate of the liability. However, even in such a case, the
entityconsidersotherpossibleoutcomes.
Contingentliabilities
Acontingentliabilityis:
(a) a possible obligation that arises from past events and whose existence will be
confirmed only by the occurrence or nonoccurrence of one or more uncertain future
eventsnotwhollywithinthecontroloftheentity;or
(b) apresentobligationthatarisesfrompasteventsbutisnotrecognisedbecause:
(i) itisnotprobablethatanoutflowofresourcesembodyingeconomicbenefitswill
berequired
to
settle
the
obligation;
or
(ii) theamountoftheobligationcannotbemeasuredwithsufficientreliability.
An entity should not recognise a contingent liability. An entity should disclose a
contingentliability,unlessthepossibilityofanoutflowofresourcesembodyingeconomic
benefitsisremote.
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Contingentassets
Acontingentassetisapossibleassetthatarisesfrompasteventsandwhoseexistencewill
beconfirmed
only
by
the
occurrence
or
non
occurrence
of
one
or
more
uncertain
future
eventsnotwhollywithinthecontroloftheentity.
Anentityshallnotrecogniseacontingentasset.However,whentherealisationofincome
isvirtuallycertain,thentherelatedasset isnotacontingentassetand itsrecognitionis
appropriate.
IAS 38 INTANGIBLE ASSETSThe objective of this Standard is to prescribe the accounting treatment for intangible
assetsthatarenotdealtwithspecifically inanotherStandard.ThisStandardrequires
an entity to recognise an intangible asset if, and only if, specified criteria are met. The
Standard also specifies how to measure the carrying amount of intangible assets and
requiresspecifieddisclosuresaboutintangibleassets.
Anintangibleasse
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