What happened in the reporting period

What happened in the reporting period

There is no requirement to disclose a summary of significant events and transactions that have affected the company’s financial position and performance during the period under review (or simply what happened in the reporting period). However, information such as this could help readers understand the entity’s performance and any changes to the entity’s financial position during the year and make it easier finding the relevant information. However, information such as this could also be provided in the (unaudited) operating and financial review rather than the (audited) notes to the financial statements.

Covid-19
At the time of writing, the biggest impact on the financial statements of entities all around the world is related to the COVID-19 pandemic. Most entities will be affected by this in one form or another and should discuss the impact prominently in their financial statements. However, as the events are still unfolding, this publication is not providing any illustrative examples or guidance. See how to account for Covid-19 to get an up-to-date discussion.

Going concern disclosures [IAS1.25]
When preparing financial statements, management shall make an assessment of an entity’s ability to continue as a going concern. Financial statements shall be prepared on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so.

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IFRS 5 Non-current assets Held for Sale and Discontinued Operations

 

IFRS 5 Non-current assets Held for Sale and Discontinued Operations

at a glance – here it is the ultimate summary:

IFRS 5

Source: https://www.bdo.global/en-gb/services/audit-assurance/ifrs/ifrs-at-a-glance

Definitions
Cash-generating unit – The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Discontinued operation – A component of an entity that either has been disposed of or is classified as held for sale and either:
  • Represents a separate major line of business or geographical area
  • Is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations
  • Is a subsidiary acquired exclusively with a view to resale.
SCOPE
  • Applies to all
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IAS 36 Other impairment issues

IAS 36 Other impairment issues – When looking at the step-by-step IAS 36 impairment approach it comes down to the following broadly organised steps: IAS 36 How Impairment test

  • What?? – Determining the scope and structure of the impairment review, explained here,
  • If and when? – Determining if and when a quantitative impairment test is necessary, explained here,
  • IAS 36 How Impairment test or understanding the mechanics of the impairment test and how to recognise or reverse any impairment loss, if necessary, which is explained here

IAS 36 Other impairment issues discusses other common application issues encountered when applying IAS 36, including those related to:

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IAS 36 How Impairment test

IAS 36 How Impairment test is all about this – When looking at the step-by-step IAS 36 impairment approach it comes down to the following broadly organised steps: IAS 36 How Impairment test

  • What?? – Determining the scope and structure of the impairment review, explained here,
  • If and when? – Determining if and when a quantitative impairment test is necessary, explained here,
  • IAS 36 How Impairment test or understanding the mechanics of the impairment test and how to recognise or reverse any impairment loss, if necessary. Which is explained in this section…

The objective of IAS 36 Impairment of assets is to outline the procedures that an entity applies to ensure that its assets’ carrying values are not … Read more

High level overview IFRS 3 Business Combinations

HIGH LEVEL OVERVIEW IFRS 3 BUSINESS COMBINATIONS

A summary on one page and more detail for reference

The overview

Scope & Identifying a business combination
A business combination is:
Transaction or event in which acquirer obtains control over a business (e.g. acquisition of shares or net assets, legal mergers, reverse acquisitions).High level overview IFRS 3 Business Combinations High level overview IFRS 3 Business Combinations IFRS 3 Business Combinations
IFRS 3 does not apply to:
  • The accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself.
  • Acquisition of an asset or group of assets that is not a business.
  • A combination of entities or businesses under common control.
Definition of “control of an
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Leveraged buyout IFRS 3 best reporting

Leveraged buyout IFRS 3 best reporting – In corporate finance, a leveraged buyout (LBO) is a transaction where a company is acquired using debt as the main source of consideration. These transactions typically occur when a private equity (PE) firm borrows as much as they can from a variety of lenders (up to 70 or 80 percent of the purchase price) and funds the balance with their own equity. Leveraged buyout IFRS 3 best reporting

1 The process and business reason

The use of leverage (debt) enhances expected returns to the private equity firm. By putting in as little of their own money as possible, PE firms can achieve a large return on equity (ROE) and internal rate of return … Read more

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. The detailed ‘mechanics’ of the consolidation process vary from one group to another, depending on the group’s structure, history and financial reporting systems. IFRS 10 and much of the literature on consolidation are based on a traditional approach to consolidation under which the financial statements (or, more commonly in practice, group ‘reporting packs’) of group entities are aggregated and then adjusted on each reporting date.

Customer relationships valuation

Introduction

Customer relationships valuation is based on valuation model. Here such a valuation model is presented to value customer contracts and the related customer relationship and the non-contractual customer relationships, as per IFRS 3 Business Combinations.

References (to familiarise yourself with the subject):

Customer contracts and the related customer relationships
– Non-contractual customer relationships
Order or production backlog

What are the inputs to the model?

Revenue

Revenue – represents revenue from existing customer relationships for existing products. Includes contractual and non-contractual relationships (even those without current backlog or Read more

Overview of the amendments IFRS 3

Overview of the amendments IFRS 3 – In May 2019 amendments to IFRS 3 Business Combinations were published by IASB.

IFRS 3 continues to adopt a market participant’s perspective to determine whether an acquired set of activities and assets is a business. The amendments: clarify the minimum requirements for a business; remove the assessment of whether market participants are capable of replacing any missing elements; add guidance to help entities assess whether an acquired process is substantive; narrow the definitions of a business and of outputs; and introduce an optional fair value concentration test. Overview of the amendments IFRS 3 Business Combinations

Minimum requirements to be a businessOverview of the amendments IFRS 3  Overview of the amendments IFRS 3 Business Combinations

In the IASB’s … Read more

Accounting treatment acquisition of a business or assets

acquisition of a business or assetsAccounting treatment acquisition of a business or assets – An entity has to determine whether a transaction or other event is a business combination, which requires that the assets acquired and liabilities assumed constitute a business. If the assets acquired are not a business, the reporting entity shall account for the transaction or other event as an asset acquisition.

Whether the simplified (optional) concentration tests is applied or a detailed assessment applying the normal requirements in IFRS 3 is applied, in IFRS 3 (simplified in May 2019) the result of the assessment of what was acquired is the acquirer obtained control over a business (business combination or business acquisition) or a (group of similar) identifiable asset(s) (asset acquisition). Accounting treatment Read more