Ias 1 7 8

Introductory Programme on IFRS for Young
Members
Organised by
Institute of Chartered Accountants of India

Presented by
CA Manish C. Iyer & CA Shilpi Hisaria

Technical Directorate, Institute of Chartered Accountants of India
CAManishC.Iyer&CAShilpiHisaria
1
manish.iyer@icai.in&shilpi.hisaria@icai.in
Copyright
CopyrightRecognition
Recognition
IFRS, IAS, SIC, IFRIC are copyright of
IFRS,IAS,SIC,IFRICarecopyrightof
InternationalAccountingStandards
CommitteeFoundation.
2
Documents in this module
Documentsinthismodule
IAS1
IAS7
IAS8
IAS 8
3
IAS1 PresentationofFinancial
Statements
FairPresentationandCompliancewithIFRS
p
GoingConcern
CompletesetofFinancialStatements
ComparativeInformation
ConsistencyofPresentation
SFPPresentation
SPLOCIPresentation
SOCIE P
SOCIEPresentation
i
NotesPresentation
4
Fair Presentation
FairPresentation
ApplicationofInternationalFinancialReporting
pp p g
StandardspresumedtoresultinFairPresentation
Managementtomakeexplicitandunreserved
statement of compliance with IFRSs in the notes
statementofcompliancewithIFRSsinthenotes
RequirementofallIFRSstobecompliedwith
DeparturefromIFRSspossible
Departure from IFRSs possible
Rarely
Otherentitiesinsimilarcircumstancesalsodepart
Departuretobedisclosedinthenotes
Disclosurecannotrectifyincorrectaccounting
policies
5
Going Concern
GoingConcern
Mgmt.toassessgoingconcernateachBSDate
NotaGoingConcernonlyon
Intentiontoliquidate
Intentiontoceasetrading
Intention to cease trading
Mgmt.hasnorealisticalternativebuttoclose
Uncertaintiesthatmayaffectgoingconcern
assumptiontobedisclosed
b d l d
BasisofFStobechangedwhennotagoingconcern
Factofnotbeingagoingconcerntobedisclosed
Fact of not being a going concern to be disclosed
Basistobedisclosed
Reasonsfornotbeingagoingconcerntobedisclosed
6
Complete set of Financial Statements
CompletesetofFinancialStatements
State
StatementofFinancialPosition(SFP)
e to a c a os t o (S )
StatementofProfitorLossandOther
p
ComprehensiveIncome
StatementofCashFlows
g q y
StatementofChangesinEquity
Notes
g g p p
SFPatthebeginningofthecomparativeperiod
Onchangeinaccountingpolicy,correctionoferror
andreclassification
7
Comparative Information
ComparativeInformation
Comparative
Comparativeinformationtobedisclosedfor
information to be disclosed for
allamountsreported
Comparativeinformationforpreviousperiod
Comparative information for previous period
onlyistobedisclosed
Comparativeinformationtobegivenalsoin
C i i f i b i l i
notes
8
ConsistencyofPresentation
y
PresentationandclassificationofitemsinFSto
be retained
beretained
Conditionsforchange
Eachmaterialclassofsimilaritemstobe
presentedseparately
Assetsandliabilitiesandincomeandexpensesto
be offset only if required or permitted by a
beoffsetonlyifrequiredorpermittedbya
StandardoranInterpretation
Reclassifycomparativeamountonchangein
Reclassify comparative amount on change in
presentation
Reclassificationnotnecessary,ifimpracticable
9
Statement of Financial Position
StatementofFinancialPosition
AssetsandLiabilitiestobeclassified
Assets and Liabilities to be classified
Current/NonCurrent
Liquidity
Furthersubclassificationsmaybeinnotes
10
Current Asset
CurrentAsset
Itisexpectedtoberealised
p inorisintendedfor
saleorconsumptionintheentitysnormal
operatingcycle
Itisheldprimarilyforthepurposeofbeing
It is held primarily for the purpose of being
traded
Itisexpectedtoberealised
It is expected to be realised withintwelvemonths
within twelve months
aftertheBalanceSheetDate
Itisacashoracashequivalentunlessitis
restrictedfrombeingexchangedorusedtosettle
i df b i h d d l
aliabilityforatleasttwelvemonthsafterthe
balancesheetdate
11
Current Liability
CurrentLiability
It
Itisexpectedtobesettledintheentity
is expected to be settled in the entityssnormal
normal
operatingcycle
Itisheldprimarilyforthepurposeofbeing
It is held primarily for the purpose of being
traded
Itisduetobesettledwithintwelvemonthsafter
It is due to be settled within twelve months after
thebalancesheetdate
Theentitydoesnothaveanunconditionalright
The entity does not have an unconditional right
todefersettlementoftheliabilityforatleast
twelve months after the balance sheet date
twelvemonthsafterthebalancesheetdate
12
Issues
ThedurationofJhingli
g Ltd.snormaloperatingcycleis3
p g y
months.Ithasagreedwithsomecustomertoaccept
paymentininstallmentsin15months.Jhingli Ltd.has
classified such receivable as Other Non Current Assets
classifiedsuchreceivableasOtherNonCurrentAssets.
Whethertheclassificationisproper?
g Ltd.snormaloperatingcycleis
ThedurationofJhingli p g y
24months.Ithasgivenloanstoemployees.Someof
themarerealisable after13months.Jhingli Ltd.
classified the loans to employees as current assets
classifiedtheloanstoemployeesascurrentassets.
Whethertheclassificationisproper?
13
Issues
Acompanyhasexcessfinishedgoodsinventory
p y g y
thatitdoesnotexpecttorealizewithinthe
companysoperatingcycleoffifteenmonths.
How will such finished goods be classified?
Howwillsuchfinishedgoodsbeclassified?
Acompanyhassold10,000tonnes ofsteeltoits
customer.Thesalecontractprovidesforanormal
creditperiodofthreemonths.Thecompanys
operatingcycleissixmonths.However,the
company does not expect to receive the payment
companydoesnotexpecttoreceivethepayment
within12monthsfromthereportingdate.How
shouldthecompanyclassifysuchreceivable?
14
Issues
CompanyXhastakenfiveyearloan.Theloan
contains debt covenants, e.g., filing of quarterly
containsdebtcovenants,e.g.,filingofquarterly
information,failingwhichthebankcanrecallthe
loananddemandrepaymentthereof.The
company has not filed such information in the
companyhasnotfiledsuchinformationinthe
lastquarter;asaresultofwhichthebankhasthe
righttorecalltheloan.However,basedonpast
experienceand/orbasedonthediscussions
/ b h
withthebank,themanagementbelievesthe
default is minor and the bank will not demand
defaultisminorandthebankwillnotdemand
repaymentofloan.ThemanagementofCompany
Xhasclassifiedtheloanasnoncurrent.Whether
the classification is proper?
theclassificationisproper?
15
ABCGroup StatementofFinancialPosition
(inthousandsofcurrencyunits)
31 December 2014
31December2014 31 December 2013
31December2013
ASSETS
NonCurrenctAssets
Property Plant and Equipment
Property,PlantandEquipment 3 50 700
3,50,700 3 60 020
3,60,020
Goodwill 80,800 91,200
OtherIntangibleAssets 2,27,470 2,27,470
InvestmentsinAssociates 1,00,150 1,10,770
Investmentsinequityinstruments 1,42,500 1,56,000
TotalNonCurrentAssets 9,01,620 9,45,460
CurrentAssets
Inventories 1,35,230 1,32,500
TradeReceivables 91,600 1,10,800
OtherCurrentAssets 25,650 12,540
Cashandcashequivalents 3,12,400 3,22,900
Total Current Assets
TotalCurrentAssets 5 64 880
5,64,880 5 78 740
5,78,740
TotalAssets 14,66,500 15,24,200
16
EQUITYANDLIABILITIES
EquityAttributabletoownersoftheparent
Share Capital
ShareCapital 6,50,000
6 50 000 6,00,000
6 00 000
RetainedEarnings 2,43,500 1,61,700
OtherComponentsofEquity 10,200 21,200
9,03,700 7,82,900
NonControllingInterests
N C t lli I t t 70 050
70,050 48 600
48,600
TotalEquity 9,73,750 8,31,500
NonCurrentLiabilities
LongtermBorrowings 1,20,000 1,60,000
DeferredTax
f d 28,800 26,040
LongtermProvisions 28,850 52,240
TotalNonCurrentLiabilities 1,77,650 2,38,280
CurrentLiabilities
Tradeandotherpayables 1,15,100 1,87,620
Shorttermborrowings 1,50,000 2,00,000
CurrentportionofLongtermBorrowings 10,000 20,000
Currenttaxpayable 35,000 42,000
Shorttermprovisions 5,000 4,800
TotalCurrentLiabilities 3,15,100 4,54,420
TotalLiabilities 4,92,750 6,92,700
Total Equity and Liabilities
TotalEquityandLiabilities 14,66,500
14,66,500 15,24,200
15,24,200
17
SingleStatementonFunctionofExpenseBasis
ABCGroup StatementofProfitorLossandOtherComprehensiveIncome
(in thousands of currency units)
31December2014 31December2013
Revenue 3,90,000 3,55,000
C t fS l
CostofSales 245000 2 30 000
2,30,000
GrossProfit 1,45,000 1,25,000
OtherIncome 20,667 11,300
Distributioncosts
b 9,000 8,700
AdministrativeExpenses 20,000 21,000
OtherExpenses 2,100 1,200
FinanceCosts 8,000 7,500
Shareofprofitofassociates 35,100 30,100
ProfitbeforeTax 1,61,667 1,28,000
Incometaxexpense 40,417 32,000
ProfitfortheyearfromContinuingOperations 1,21,250 96,000
Lossfortheyearfromdiscontinuedoperations 30,500
PROFITFORTHEYEAR 1,21,250 65,500
18
OtherComprehensiveIncome
p
Itemsthatwillnotbereclassifiedtoprofitorloss:
GainsonPropertyrevaluation 933 3,367
Remeasurement ofDefinedBenefitPlans 667 1,333
,
Shareofgain(loss)onpropertyrevaluationofassociates 400 700
Incometaxrelatingtoitemsthatwillnotbereclassified 166 1,000
500
500 3 000
3,000
Itemsthatmaybereclassifiedsubsequentlytoprofitorloss:
Exchangedifferencesontranslatingforeignoperations 5,334 10,667
Available for sale financial assets
Availableforsalefinancialassets 24
24,000
000 26 667
26,667
Cashflowhedges 667 4,000
Incometaxrelatingtoitemsthatmaybereclassified 4,833 8,334
14,500
14 500 25 000
25,000
Othercomprehensiveincomefortheyear,netoftax 14,000 28,000
TOTALCOMPREHENSIVEINCOMEFORTHEYEAR 1,07,250 93,500
19
ABCGroupStatementofProfitorLossonNatureofExpenseBasis
31December2014 b 31December2013 b
Revenue 3,90,000 3,55,000
OtherIncome 36,667 26,300
Total Income
TotalIncome 4,26,667
4 26 667 3,81,300
3 81 300
Changesininventoriesoffinishedgoodsandworkinprogress 1,15,100 1,07,900
Rawmaterialandconsumablesused 96,000 92,000
Employeebenefitsexpense 45,000 43,000
Depreciationandamortisationexpense 19,000 17,000
ImpairmentofProperty,plantandequipment 4,000
OtherExpenses 6,000 5,500
Fi
FinanceCosts
C t 15,000
15 000 18,000
18 000
TotalExpense 3,00,100 2,83,400
ShareofProfitofAssociates 35,100 30,100
Profit before Tax
ProfitbeforeTax 1,61,667 1,28,000
Incometaxexpense 40,417 32,000
ProfitfortheyearfromContinuingOperations 1,21,250 96,000
LossfortheyearfromDiscontinuedOperations 30,500
PROFITFORTHEYEAR 1,21,250 65,500
20
ABCGROUPDisclosureofComponentsofOCIinNotes
2014 2013
Exchangedifferencesontranslatingforeignoperations 5,334 10667
Available forsale
Availablefor saleffinancial
inancialaassets
ssets 24,000
24 000 26667
Cashflowhedges:
Gains(losses)arisingduringtheyear 4,667 4000
Less:Reclassificationadjustmentsforgains(losses)includedin
profitorloss 4,000 667
4000
Gains oonnpproperty
Gains ropertyrevaluation
revaluation 933 3367
RemeasurementsofDefinedbenefitplans 667 1333
ShareofOCIofassociates 400 700
Other
h comprehensive
h i income 18,667 37,334
IncometaxrelatingtocomponentsofOCI 4,667 9334
OtherComprehensive
p Incomefortheyear 14,000, 28,000
,
21
ABCGroup DisclosureofTaxEffectsrelatingtoeachcomponentofOCI
31December2014 31December2013
Before Tax Netof Before Tax
Tax Expense Tax Tax ExpenseNetofTax
Exchangedifferenceson
t
translatingforeignoperations
l ti f i ti 5 334
5,334 1,334
1 334 4000 10667 2667
2667 8000
Availableforsalefinancial
assets 24,000 6,000 18000 26667 6667 20000
Cashflowhedges 667 167 500 4000 1000 3000
Gains on property revaluation 933

Gainsonpropertyrevaluation 933 333
333 600 3367 667
667 2700
RemeasurementsofDefined
benefitplans 667 167 500 1333 333 1000
ShareofOCIofassociates 400 400 700 700
Other Comprehensive Income 18,667

OtherComprehensiveIncome 18,667 4,667
4,667 14,000
14,000 37,334
37,334 9,334
9,334 28,000
28,000
22
Notes
StatementofCompliancewithIFRSs
Statement of Compliance with IFRSs
SummaryofSAP
Measurementbasis
Measurement basis
Otheraccountingpolicies
Judgments made for applying the accounting policies
Judgmentsmadeforapplyingtheaccountingpolicies
Furthersubclassificationoflineitemspresented
SourcesofEstimationUncertainty
So rces of Estimation Uncertaint
CapitalDisclosures
23
Members
Organised by

Presented by

24
IAS 7 StatementofCashFlows
IAS7 Statement of Cash Flows
Definitions
PresentationofCashflows
Disclosures
i l
25
Definitions
Cash
CashEquivalents
C h l
CashFlows
OperatingActivities
InvestingActivities
Financing Activities
FinancingActivities
26
Presentation of Cash Flows
PresentationofCashFlows
OperatingActivities
Operating Activities
DirectMethod
IndirectMethod
Indirect Method
InvestingActivities
Ongrossbasis
FinancingActivities
Ongrossbasis
27
Presentation of Cash flows
PresentationofCashflows
Foreigncurrencycashflows
Foreign currency cash flows
Interest&Dividends
ClassificationofInterestpaidandInterest&
Cl ifi ti fI t t id d I t t&
Dividendsreceivedforfinancialinstitution
ClassificationofInterestpaidandinterest&
Classification of Interest paid and interest &
dividendsreceivedforotherentities
ClassificationofDividendspaid
Classification of Dividends paid
28
Presentation of Cash Flows
PresentationofCashFlows
TaxesonIncome
Taxes on Income
Classification
Acquisitions
AcquisitionsandDisposalsofSubsidiariesand
and Disposals of Subsidiaries and
otherbusinessunits
Classification
Cl ifi i
Presentation
Disclosures
NoncashTransactions
29
Disclosures
Policy
Policyfordeterminingcashandcash
for determining cash and cash
equivalents
ComponentsofCashandCashEquivalents
Components of Cash and Cash Equivalents
Restrictiononuseofcashandcash
equivalentsheld
i l h ld
30
Members
Organised by

Presented by

31
IAS8 AccountingPolicies,Changes
inAccountingEstimatesandErrors
d
SelectionofAccountingPolicies
Selection of Accounting Policies
ChangesinAccountingPolicies
Errors
ChangesinAccountingEstimates
Disclosures
32
SelectionofAccountingPolicies
Whetherastandard/interpretationappliestothetransaction,eventorcondition
YES NO
Whethermostrecentpronouncementsofotherstandardsettingbodiesusinga
similarconceptualframeworktodevelopaccountingstandardsareavailable
YES NO
Usejudgement todevelopandapplyanaccountingpolicythatisrelevant
andreliableandapplythatpolicytothetransaction,eventorcondition
Apply that requirement / pronouncement of accounting standard and interpretation

Applythatrequirement/pronouncementofaccountingstandardandinterpretation
manish.iyer@icai.in&shilpi.hisaria@icai.in 33
ChangesinAccountingPolicies
RequiredbyStd.or
p
Interpretation p
Toprovidemorereliableand
relevantinformation
NO
Transitional
ProvisionsSpecified? VoluntaryChangein
AccountingPolicytobe
appliedretrospectively
YES
ApplyTransitionalProvisions
pp y
manish.iyer@icai.in&shilpi.hisaria@icai.in 34
CaseStudy
In2010,WhiteLtd.adoptedthepercentageof
completion method of accounting for long term
completionmethodofaccountingforlongterm
constructioncontracts.PrepareextractsofISand
SOCIE
2010tobe 2009as
reported reported
ProfitbeforeIncomeTaxes 120000 130000
IncomeTaxes (20000) (26000)
NetProfit 100000 104000
RetainedEarnings,beginning 134000 30000
RetainedEarnings, ending 234000 134000

35
CaseStudy
The
Theeffectsofchangesinaccountingpolicyare
effects of changes in accounting policy are
presentedbelow:
Differenceinincome
Difference in income Effect of
Effectof
underthepercentage change netof
ofcompletion taxes
method
Priorto2009 20000 14000
2009 15000 10500
For 2010 20000 14000
36
PriorPeriodErrors
RelatingtoPreviousYears RelatingtoFinancial
FinancialStatements Statementsbeforeaperiod
presentedascomparative
d i presentedascomparative
d i
period period
RestatetheComparative ApplyasifVoluntarychange
PeriodsFinancialStatements inAccountingPolicy
37
CaseStudy
In
In2010,WhiteLtd.discoveredthatin2009,
2010 White Ltd discovered that in 2009
thecompanyfailedtorecordintheaccounts
depreciation expense in the amount of
depreciationexpenseintheamountof
Rs.40000,relatingtoanewlyconstructed
building Given below is an extract from IS and
building.GivenbelowisanextractfromISand
retainedearnings:
38
CaseStudy
2010 2009
GrossProfit 200000 230000
GeneralandAdministrative (80000) (80000)
Expenses, includingdepreciation
Netincomebeforeincometaxes 120000 150000
IncomeTaxes 20000 30000
NetProfit 100000 120000
RetainedEarnings, beginning 150000 30000
Retained Earnings Ending
RetainedEarnings,Ending 250000 150000
39
AccountingEstimates
40
Disclosures
ForchangeinAccountingPolicy
QualitativeDisclosures
TitleofIFRS
Natureofchange
Whetherthechangeisinaccordancewithtransitionalprovisions
Transitionalprovisions
T ii l ii
Ifretrospectiveapplicationisimpracticableforpriorperiod,orfor
periodbeforethosepresented
Thecircumstancesthatledtotheexistenceofthatconditionanda
descriptionofhowandfromwhenthechangeinaccountingpolicyhas
beenapplied
QuantitativeDisclosures
Amt.ofadj.toFSlineitemaffected
Amt of adj to FS line item affected
Amtofadj.toBasicandDilutedEPS
Amt.ofadj.toperiodbeforethosepresented
41
Disclosures
FornewIFRSnotappliedthatisnotyet
effective
Thefact
PossibleimpactofapplicationofnewIFRSonthe
p pp
entitysFSintheperiodofinitialapplication
ForchangesinAccountingEstimates
Natureofchange
Amt.ofchangeinthecurrentperiodandfuture
periods
42
Disclosures
PriorPeriodErrors
QualitativeDisclosures
NatureofPriorPeriodErrors
Ifretrospectiveapplicationisimpracticableforaparticular
priorperiod
Thecircumstancesthatledtotheexistenceofthatconditionand
adescriptionofhowandfromwhentheerrorhasbeencorrected
QuantitativeDisclosures
Foreachpriorpresented,theamt.ofcorrection
F h i t d th t f ti
ForeachFSlineitemaffected
BasicandDilutedEPS
Amt
Amt.ofcorrectionatthebeginningofearliestcomparative
of correction at the beginning of earliest comparative
periodpresented
43
Presented by
CA Manish C. Iyer
FCA, DISA(ICAI), DipIFR(ACCA)
+91 9650035652
y @g
cmanishiyer@gmail.com
CA Shilpi Hisaria
B. Com(H), ACA
+91 9910527389
hisaria.shilpi@gmail.com
44

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Introductory Programme on IFRS for Young

Institute of Chartered Accountants of India

CA Manish C. Iyer & CA Shilpi Hisaria

Cashflowhedges 667 167 500 4000 1000 3000

Gains on property revaluation 933

ShareofOCIofassociates 400 400 700 700

Other Comprehensive Income 18,667

Institute of Chartered Accountants of India

CA Manish C. Iyer & CA Shilpi Hisaria

Institute of Chartered Accountants of India

CA Manish C. Iyer & CA Shilpi Hisaria

Apply that requirement / pronouncement of accounting standard and interpretation

ProfitbeforeIncomeTaxes 120000 130000

IncomeTaxes (20000) (26000)

NetProfit 100000 104000

RetainedEarnings,beginning 134000 30000

RetainedEarnings, ending 234000 134000

2009 15000 10500

For 2010 20000 14000

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