Professional Documents
Culture Documents
Topic 1.5
Sections 38, 10, 30, 32 and 33
Financial Statement Presentation
Disclosure checklist
Section 3
Financial Statement Presentation
Section 3 scope
Section 3 explains
fair presentation of financial statements
what compliance with the IFRS for SMEs
requires
what is a complete set of financial
statements
Section 3 compliance
10
11
12
13
14
16
Disclose
1 years comparative amounts
comparative information for narrative and
descriptive information when relevant to
understanding current periods financial
statements
19
20
Section 3 identification
22
23
Section 4
Statement of Financial Position
Section 4 scope
24
25
26
28
29
Section 4 examples
continued
30
Section 4 examples
continued
31
Ex 7 continued:
At 31/12/20X7 A presents
current assetsCU45,000 accrued
interest & CU300,000 capital repayable
on 31/12/20X8expected to be realised
within 12 months
non-current assetCU600,000 in +12
months
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Current liability if
expect to settle in entitys normal operating
cycle
held for trading
due to be settled in next 12 months
entity does not have an unconditional right
to defer settlement for at least 12 months
after reporting date
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Section 4 examples
continued
34
Section 4 examples
continued
35
36
Section 5
Statement of Comprehensive Income
and
Income Statement
Section 5 scope
37
38
39
40
42
Section 6
Statement of Changes in Equity
and
Statement of Income and Retained
Earnings
Section 6 scope
43
44
45
retained earnings
Shows
all the information required by Section 5
(comprehensive income)
retained earnings at the beginning and at
the end of the period
dividends recognised in the period
restatements of retained earnings for
correction of prior period errors and
changes in accounting policies
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Section 7
Statement of Cash Flows
Section 7 scope
48
49
51
52
53
indirect method
profit or loss is adjusted for the effects of
non-cash transactions, any deferrals or
accruals of past or future operating cash
receipts or payments, and items of income
or expense associated with investing or
financing cash flows
direct method
major classes of gross cash receipts &
gross cash payments are presented
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Section 7 investing activities
Investing activities are the acquisition &
disposal of long-term assets & other
investments not included in cash
equivalents.
Investing activity cash flows include
cash payments to acquire (cash receipts
from sale of) long-term assets (eg PP&E)
cash payments to acquire (cash receipts
from the sale) equity or debt instruments
of other entities and interests in joint
ventures (other than payments/receipts
for those instruments classified as cash
equivalents or held for dealing/trading)
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56
Section 7 example
57
58
Section 7 example
Ex 2: Same as Ex 1 except A has
significant influence over B (ie B is an
associate of A)
A would present:
scenario (i) CU110 outflow in investing
activities
scenario (ii) no cash flows
scenario (iii) no cash flows
scenario (iv) CU110 outflow in investing
activities & CU110 inflow in financing
activities
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60
61
62
63
Section 8
Notes to the Financial Statements
Section 8 scope
64
65
66
67
Disclose:
measurement bases used
other relevant accounting policies used
information about judgements made in
applying accounting policies that have the
most significant effect on the FS
information about key sources of
estimation uncertainty that have a
significant risk of causing a material
adjustment within 1 year (including their
nature and carrying amount)
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69
Ex 3* lease classification
In 20X3 A entered into an agreement (as lessee) for the use
of an executive jet. It is not clear whether the lease transfers
substantially all the risks and rewards incidental to
ownership. However, management judge the lease to be an
operating lease and therefore the lease is accounted for as
an executory contract. Had the lease been judged to be a
finance lease, the entity would have recognised the leased
asset and a corresponding lease liability and it would have
apportioned lease payments between finance costs and the
repayment of the liability. It would also have depreciated the
leased asset over its useful life. The entitys commitment to
make future noncancellable lease payments for the use of
the jet is set out in note 40.
71
Ex 4 continued:
Valuation models are used primarily to value
derivatives transacted in the overthecounter
market, including credit derivatives and unlisted
securities with embedded derivatives. All valuation
models are validated before they are used, and
periodically reviewed thereafter, by independent
qualified financial instrument valuation experts.
Wherever possible, valuations derived from models
are compared with quoted prices of similar financial
instruments, and with actual values when realised,
in order to further validate and calibrate our models.
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Ex 4 continued:
Our models incorporate information about the actual
or estimated market prices and rates, time value,
volatility, market depth and liquidity among others.
When available, we use market observable prices and
rates derived from market verifiable data. When such
factors are not market observable, changes in
assumptions could affect the reported fair value of
financial instruments. The models are applied from
one period to the next. However, estimating fair value
inherently involves a significant degree of judgement.
Management therefore establishes valuation
adjustments to cover the risks associated with the
estimation of unobservable input parameters and the
assumptions within the models themselves.
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Ex 4 continued:
Valuation adjustments are also made to reflect such
elements as aged positions, deteriorating creditworthiness
(including country-specific risks), concentrations in specific
types of instruments and market risk factors (interest rates,
currencies etc), and market depth and liquidity. Although a
significant degree of judgement is, in some cases, required
in establishing fair values, management believes the fair
values recorded in the statement of financial position and the
changes in fair values recorded in the statement of
comprehensive income are reflective of the underlying
economics, based on the controls and procedural
safeguards employed.
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Ex 4 continued:
Nevertheless, management have estimated the
effect that a change in assumptions to reasonably
possible alternatives could have on fair values
where model inputs are not market observable. For
all financial instruments carried at fair value which
rely on assumptions for their valuation, we estimate
that fair value could lie in a range from CU500,000
lower to CU500,000 higher than the fair values of
CU2,000,000 (see note 12) recognised in the
financial statements.
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Section 10
Accounting Policies, Estimates and
Errors
Section 10 scope
76
Section 10
Provides guidance for selecting and
applying the accounting policies
Specifies accounting for
changes in accounting estimates
corrections of errors in prior period
financial statements
79
80
81
83
84
85
Section 10 errors
86
87
88
89
90
91
92
Section 30
Foreign Currency Translation
93
Section 30 background
An entity can have transactions in foreign
currencies and it can have foreign
operations.
It may also present its FS in a foreign
currency.
Accounting for financial instruments
denominated in a foreign currency and
hedge accounting of foreign currency items
are dealt with in Sections 11 and 12 (session
on PM day-2 of this workshop).
Section 30 scope
94
95
99
Initial recognition
measure a foreign currency transaction in
the functional currency using the spot
exchange rate on the date when the
transaction first qualifies for recognition
102
103
Monetary items
recognise, in profit or loss when the
exchange differences arise (ie on settlement
or on retranslating (exception see paragraph
30.13).
Non-monetary items
recognise exchange differences (in profit or
loss or OCI) follows classification of the
underlying item.
Disclose
amount of exchange differences recognised
in profit or loss (excluding those on items
carried using the fair value model)
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105
107
108
Section 32
Events after the End of the Reporting
Period
109
Section 32 scope
Events after the end of the reporting
period are those events, favourable and
unfavourable, that occur between the end
of the reporting period and the date when
the financial statements are authorised
for issue.
110
Section 32 types of events
Two types of events after the end of the
reporting period
adjusting eventsthose that provide
evidence of conditions that existed at the
end of the reporting period
non-adjusting eventsthose that are
indicative of conditions that arose after
the end of the reporting period
111
112
Section 32 example adjusting event
Ex 7*: On 31/12/20X5 A assessed its
warranty obligation as CU100,000. Before
its 20X5 financial statements were
authorised for issue, A discovered a
latent defect in one of its lines of
products. It reassessed its warranty
obligation at 31/12/20X5 at CU150,000.
Adjusting eventlatent defect existed at
31/12/20X5. Measure warranty provision at
CU150,000 at 31/12/20X5.
115
116
117
Section 33
Related Party Disclosures
Section 33 scope
118
119
continued120
X family
Mrs X
Mr X
Ms Y
Ms Z
Operations
Director
Administration
Director
Financial
Director
Sales
Director
25%
25%
25%
Entity J
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25%
continued121
Related parties
continued122
continued123
continued124
Entity X
Entity A
Entity B
continued125
Xs influence overB
Joint
control
Control
Control
Xs
Joint
influence
control
overA
Significant
influence
Significant
influence
Yes 33.2(b)(ii)
Yes 33.2(b)
(ii)
Yes 33.2(b)(iii)
Yes 33.2(b)
(iv)
Yes 33.2(b)
(ii)
Yes 33.2(b)(iv)
Not related
continued126
continued128
Family X
Entity A
Entity B
continued129
Yes
33.2(b)(vi)
JC
Yes
33.2(b)(vi)
Family
Xs
influence SVP
over
EntityA
JC
SVP
Yes
Yes
33.2(b)(vi) 33.2(b)
(viii)
Yes
Yes
33.2(b)(vi) 33.2(b)(ix)
Yes
33.2(b)
(viii)
Yes
33.2(b)(ix)
Not
related
KMP
Yes
33.2(b)(x)
Yes
33.2(b)(x)
SI
Yes
33.2(b)
Yes
33.2(b)(vii
and x)
Yes
Not
KMP
Yes
33.2(b)
(x)
Yes
33.2(b)
(x)
Yes
33.2(b)
(vii and
x)
SI
Yes
33.2(b)
(viii)
Yes
33.2(b)(ix)
Not
related
Not
related
Not
related
Not
Not
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Section 33 relationship disclosures
Disclose related party relationship only if
an entity has related party transactions
Exceptiondisclose parent-subsidiary
relationship irrespective of whether there
are related party transactions
including name of its parent and ultimate
controlling party
if neither parent nor ultimate controlling
party produces FS available for public use
then also disclose name of the next most
senior parent that does do so
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134
Section 33 RPT disclosures
RPT disclosures include (at minimum):
the amount of the transactions
the amount of outstanding balances and:
their terms and conditions, including
whether they are secured, and the nature
of the consideration to be provided in
settlement, and
details of any guarantees given or
received.
provisions for uncollectible RP receivables.
expense recognised for RP bad/doubtful
debts.
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Section 33 aggregation
Disclose items of a similar nature in the
aggregate except when separate disclosure
is necessary for an understanding of the
effects of RPTs on the financial statements
Disclose separately for each of
entities with control, joint control or significant
influence over the entity
entities over which the entity has control,
joint control or significant influence
key management personnel of the entity or
its parent (in the aggregate)
other related parties
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