The Vest Pocket Guide to IFRS

Steven M. Bragg

• Publisher: Wiley
• Year: 2010
• ISBN:
  9780470885642
• Edition: 3
• Topic: Negocios y empresa
• Subtopic: Normas contables

Quick answers to your IFRS questions

Presented in a question and answer format, The Vest Pocket IFRS provides a brief explanation of each IFRS topic, the issues involved, and the solution. Coverage includes calculations, journal entries, flowcharts outlining various options, footnotes disclosures, and brief examples.

• Provides quick answers to specific questions in a Q & A format
• Focuses on the most common accounting problems arising from a particular IFRS topic
• Calculations, footnotes disclosures, and brief examples are provided
• Other titles by Bragg: The Vest Pocket Controller, Accounting Best Practies, Sixth Edition, and Just-in-Time Accounting, Third Edition

The first book of its kind to answer IFRS issues on the spot, The Vest Pocket IFRS gives you the quick, specific IFRS answers you need right now.

PART I

THE FINANCIAL STATEMENTS

CHAPTER 1

FINANCIAL STATEMENTS PRESENTATION

What Is Profit or Loss?

Profit or loss is the total of an entity’s revenue and expenses, not including any components of other comprehensive income (see the next question). It is also known as net income.

Total comprehensive income is the combination of profit or loss and other comprehensive income.

What Is Other Comprehensive Income?

Other comprehensive income includes financial items that are not permitted in profit or loss. Items that you should insert in other comprehensive income include:

• Actuarial gains and losses on defined benefit plans (see the Employee Benefits chapter)

• Available-for-sale gains and losses caused by remeasurement (see the Financial Instruments: Recognition and Measurement chapter)

• Cash flow hedge gains and losses, effective portion only (see the Financial Instruments: Recognition and Measurement chapter)

• Changes in the revaluation surplus (see the Property, Plant, and Equipment chapter)

• Foreign currency translation gains and losses (see the Effects of Foreign Exchange Rate Changes chapter)

Reclassification adjustments are amounts reclassified into profit or loss in the current period that had been recognized in other comprehensive income in either the current or previous periods.

What Information Is Included in a Complete Set of Financial Statements?

All of the following should be included in a complete set of financial statements for a reporting period:

Statement	Description
Statement of financial position	Contains all asset, liability, and equity items
Statement of comprehensive income	Contains all income and expense items
Statement of changes in equity	Reconciles changes in equity for the presented periods
Statement of cash flows	Displays all cash inflows and outflows from operating, financing, and investing activities
Notes	Summarizes accounting policies and explanatory information

You should clearly identify these financial statements and distinguish them from other information presented in the same report. It is important to do this, because International Financial Reporting Standards (IFRSs) apply only to financial statements; thus, users will be more likely to understand which documents within the report adhere to specific accounting standards.

You should include in the financial statements a prominent display of the name of the reporting entity (and note any change in it from the preceding reporting period), whether the statements are for a single entity or group of entities, the period covered by the statements, the presentation currency, and the level of rounding used to present amounts. This information usually is presented most easily in column and page headers.

It is not necessary, but useful, for management to also present a financial review that includes such items as the primary factors impacting financial performance, its investment policy, dividend policy, sources of funding, targeted financial ratios, and any other resources not recognized in the financial statements.

What Line Items Do I Include in the Statement of Financial Position?

You should include the following line items, at a minimum, in the statement of financial position:

Assets

• Cash and cash equivalents

• Trade and other receivables

• Investments accounted for using the equity method

• Other financial assets

• Current tax assets

• Investment property

• Inventories

• Biological assets

• Property, plant, and equipment

• Intangible assets

• Assets held for sale

• Deferred tax assets (do not classify as a current asset)

Liabilities

• Trade and other payables

• Provisions

• Current tax liabilities

• Other financial liabilities

• Deferred tax liabilities (do not classify as a current liability)

• Liabilities held for sale

Equity

• Noncontrolling interests

• Issued capital and reserves attributable to owners of the parent

You should add headings and subtotals to this minimum set of information if it will improve a user’s understanding of the financial statements. You should add other line items when their size, nature, or function makes separate presentation relevant to the user.

EXAMPLE 1.1

Katana Cutlery presents its statement of financial position in the following format:

KATANA CUTLERY STATEMENT OF FINANCIAL POSITION

(000s)	as at 12/ 31/x2	as at 12/ 31/x1
ASSETS
Noncurrent assets Property, plant, and equipment
	€551,000	€529,000
Goodwill	82,000	82,000
Other intangible assets	143,000	143,000
Investments in associates	71,000	93,000
Available-for-sale financial assets	121,000	108,000
	968,000	955,000
Current assets
Inventories	139,000	128,000
Trade receivables	147,000	139,000
Other current assets	15,000	27,000
Cash and cash equivalents	270,000	215,000
	571,000	509,000
Total assets	€1,539,000	€1,464,000
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital	€500,000	€500,000
Retained earnings	425,000	350,000
Other components of equity	25,000	19,000
	950,000	869,000
Noncontrolling interests	57,000	38,000
Total equity	1,007,000	907,000
Noncurrent liabilities
Long-term borrowings	85,000	65,000
Deferred tax	19,000	17,000
Long-term provisions	38,000	34,000
Total noncurrent liabilities	142,000	116,000
Current liabilities
Trade and other payables	217,000	198,000
Short-term borrowings	133,000	202,000
Current portion of long-term borrowings	5,000	5,000
Current tax payable	26,000	23,000
Short-term provisions	9,000	13,000
Total current liabilities	390,000	441,000
Total liabilities	532,000	557,000
Total equity and liabilities	€1,539,000	€1,464,000

What Information Should I Disclose in the Statement of Financial Position?

You should provide additional subclassifications of the primary line items required for the statement of financial position, if needed to clarify an entity’s operations, or to be in accordance with the various IFRSs. Examples of these additional classifications are:

• Separate property, plant, and equipment into different asset classifications.

• Separate accounts receivable into amounts receivable from trade customers, related parties, and prepayments.

• Separate inventories into merchandise, supplies, raw materials, work in process, a...