Overview IFRS 10 Consolidated Financial Statements

Overview IFRS 10 Consolidated Financial StatementsShort – To establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities Overview IFRS 10 Consolidated Financial Statements

Longer – IFRS 10 replaces the part of IAS 27 Consolidated and Separate Financial Statements that addresses accounting for subsidiaries on consolidation. What remains in IAS 27 after the implementation of IFRS 10 is the accounting treatment for subsidiaries, jointly controlled entities and associates in their separate financial statements. Contingent consideration Contingent consideration Contingent consideration Contingent consideration Contingent consideration

The aim of IFRS 10 is to establish a single control model that is applied to all entities including special purpose entities. The changes require those dealing with the implementation of IFRS 10 to exercise Read more

IAS 8 Best summary policies estimates and errors

IAS 8 Best summary policies estimates and errors comprises a high level summary of the three items in this standard:

  1. Accounting policies,
  2. Accounting Estimates
  3. Errors

1. Accounting policies

Definition:

Accounting policies are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements.

Selection and application of accounting policies:

  • If a standard or interpretation deals with a transaction, use that standard or interpretation
  • If no standard or interpretation deals with a transaction, judgment should be applied. The following sources should be referred to, to make the judgement:
    • Requirements and guidance in other standards/interpretations dealing with similar issues
    • Definitions, recognition criteria in the framework
    • May use other GAAP that use a
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IFRS 7 Financial instruments Disclosures High level summary

Scope IFRS 7 Financial instruments Disclosures High level summary

IFRS 7 applies to all recognised and unrecognised financial instruments (including contracts to buy or sell non-financial assets) except:

  • Interests in subsidiaries, associates or joint ventures, where IAS 27/28 or IFRS 10/11 permit accounting in accordance with IAS 39/IFRS 9
  • Assets and liabilities resulting from IAS 19
  • Insurance contracts in accordance with IFRS 4 (excluding embedded derivatives in these contracts if IAS 39/IFRS 9 require separate accounting)
  • Financial instruments, contracts and obligations under IFRS 2, except contracts within the scope of IAS 39/IFRS 9
  • Puttable instruments (IAS 32.16A-D).

Disclosure requirements: Significance of financial instruments in terms of the financial position and performance

Statement of financial position

Statement of

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Combined financial statements

Combined financial statements: represents the combination of two or more legal entities or businesses that may or may not be part of the same group, but do not by themselves meet the definition of a group under IFRS 10 Consolidated Financial Statements – i.e. a parent and all of its subsidiaries. At a simplistic level, preparing combined financial statements involves adding together two or more legal entities and eliminating any inter-company transactions – e.g. intercompany profits, revenue and expenses, receivables and payables and equity (e.g. unrealised gains and losses).

Combined financial statements Combined financial statements Combined financial statements Combined financial statements Combined financial statements Combined financial statements Combined financial statements Combined financial statements Combined financial statements Combined financial statements Combined financial statements Combined financial statements

 

 

These activities are typically under common control, BUT do not comprise an existing legal entity or group and are presented as a single reporting entity.

For some combined financial … Read more

9 Best practical Impairment related company loans

9 Best practical Impairment related company loans – What are related company loans?

Technically not the most difficult question one would think, BUT………

Entities must first consider whether the loan is within the scope of IFRS 9 or another standard. This is because IFRS 9: 2.1(a) scopes out ‘interests in subsidiaries, associates and joint ventures’ that are accounted for in accordance with IAS 27 Separate Financial Statements or IAS 28 Investments in Associates and Joint Ventures i.e. at cost less impairment or using the equity method.

In many cases, it will be clear that the loan is a debt instrument that falls within the scope of IFRS 9 but some scenarios may require a more detailed analysis.

IFRS 9 replaced Read more

IFRS 9 Proper accounting for Related Company Loans

IFRS 9 Proper accounting for Related Company Loans – IFRS 9 Financial Instruments makes no distinction between unrelated third party and related party transactions. Entities that prepare stand-alone financial statements are required to apply the full provisions of the standard to all transactions within its scope.

This means related company loan receivables must be classified and measured in accordance with the requirements of IFRS 9, including where relevant, applying the Expected Credit Loss (ECL) model for impairment. IFRS 9 Proper accounting for Related Company Loans

Applying IFRS 9 to related company loans can present a number of application challenges as they are often advanced on terms that are not arms-length or sometimes advanced on an informal basis without any terms … Read more

Consolidated financial statements

IFRS 10 Definition of consolidated financial statements

The financial statements of a group in which the assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are presented as those of a single economic entity.

ParentAn entity that controls one or more entities.

The other types of financial statements are unconsolidated financial statements (or company accounts) and combined financial statements.

Single economic entity concept

The concept of a single economic entity is illustrated in the example below:

Example – Single economic entity concept

A subsidiary buys an asset from a third party for CU 100. It subsequently sells the asset on to its parent for CU 130. The subsidiary records a profit

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Specified upgrades for software contracts

Specified upgrades for software contracts – Entities may provide customers with the right to specified upgrades or enhancements as part of a software arrangement. Under IFRS 15, entities will need to evaluate whether the rights to receive specified upgrades or enhancements are promised goods or services and potentially separate performance obligations. If the specified upgrade is a separate performance obligation, a portion of the transaction price is allocated to it and revenue recognition is deferred until the specified upgrade is provided. Specified upgrades for software contracts

Specified upgrades for software contracts Some entities may account for a specified upgrade or enhancement as a separate identifiable component under current IFRS and allocate revenue to it, while others may account for it together with other components. … Read more

Unspecified additional software products

Unspecified additional software products – As part of a contract with a customer, a software entity may license software today and promise to deliver unspecified additional software products in the future. For example, the software entity may agree to deliver all new products to be introduced in a family of products over the next two years. Unspecified additional software products may be treated as a separately identifiable component under current IFRS by some entities.

If so, the amount allocated to the component is recognised as revenue over the period that the products are provided. Other entities may account for the unspecified additional software products together with the related licence as a single component. The timing of revenue recognition, in those … Read more