Overview IFRS 10 Consolidated Financial Statements

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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 Read more

The 2 essential types of share-based payments

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The 2 essential types of share-based payments – Snapshot

Share-based payments are classified based on whether the entity’s obligation is to deliver its own equity instruments (equity-settled) or cash or other assets (cash-settled).

1. Equity-settled share-based payments

For equity-settled transactions, an entity recognises a cost and a corresponding entry in equity.

Measurement is based on the grant-date fair value of the equity instruments granted.

Market and non-vesting conditions are reflected in the initial measurement of fair value, with no subsequent true-up for differences between expected and actual outcome.

The estimate of the number of equity instruments for which the service and non-market performance conditions are expected to be satisfied is revised during the vesting period such that Read more

High level overview IFRS 3 Business Combinations

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HIGH LEVEL OVERVIEW IFRS 3 BUSINESS COMBINATIONS

Scope High level overview 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

A business combination is: A transaction or event in which acquirer obtains control over a business (e.g. acquisition of shares or net assets, legal mergers, reverse acquisitions).

Definition of a “Business”

A business is:

  • Integrated set of activities and assets
  • Capable of being conducted and managed to provide return
  • Returns include dividends and cost savings.

High level overview IFRS 3 Business Combinations Read more

Principal versus agent considerations

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Principal versus agent considerations – If an arrangement involves three or more parties, an entity will have to determine whether it is acting as a principal or an agent in order to determine the amount of revenue to which it is entitled. For example, technology entities may offer a platform to sell virtual or digital goods on behalf of a third party or they may contract with an advertising agency to deliver advertising content to a website or mobile application.

When the entity is the principal in the contract, the revenue recognised is the gross amount (i.e., the amount to which the entity expects to be entitled as the principal). When the entity is the agent, the … Read more

Determine the transaction price

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Determine the transaction price – This part relates to a complete explanation of IFRS 15 Revenue from contracts with customers in respect of Engineering & Construction contracts, see Revenue from Engineering & Construction contracts. Determine the transaction price


The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties. This amount is meant to reflect the amount to which the entity has rights under the present contract, which may differ from the contractual price (e.g., if the entity intends to offer a price concession). The consideration promised in a contract may include … Read more

Identify the performance obligations in the contract

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Identify the performance obligations in the contract – This part relates to a complete explanation of IFRS 15 Revenue from contracts with customers in respect of Engineering & Construction contracts, see Revenue from Engineering & Construction contracts. Identify the performance obligations in the contract


Once an entity has identified the contract with a customer, it evaluates the contractual terms and its customary business practices to identify all the promised goods or services within the contract and determine which of those promised goods or services (or bundles of promised goods or services) will be treated as separate performance obligations.

IFRS 15 identifies several activities common to engineering & construction entities that are considered promised goods and services, … Read more

Transition to new IFRS 15 Disclosures

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Transition to new IFRS 15 Disclosures Transition to new IFRS 15 Disclosures – Disclosures for IFRS 15 Revenue from contracts with customers in respect of transition options:

Requirements: Transition to new IFRS 15 Disclosures

IFRS paragraphNarrative
IAS 1:117(b)Disclose accounting policies that are relevant to understanding the financial statements (i.e. those for material items).
IFRS 15:119Disclose information about performance obligations in contracts with customers, including a description of all of the following:
  1. When the entity typically satisfies its performance obligations (for example, upon shipment, upon delivery, as services are rendered or upon completion of service), including when performance obligations are satisfied in a bill-and-hold arrangement;
  2. The significant payment terms (for example, when payment is typically due, whether the contract has a
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Control without a majority of voting rights

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Control without a majority of voting rights Control without a majority of voting rights is a more special case of structuring the investments of investors in companies. IFRS 10 confirms that an investor with the majority of an investee’s voting rights controls an investee in most circumstances. In the absence of other relevant factors the majority vote holder has control if: Control without a majority of voting rights

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Agency relationships in consolidation

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Agency relationships in consolidation – An investor with decision making rights has to determine whether it is a principal or an agent. An ‘agent’ is defined as ‘a party primarily engaged to act on behalf and for the benefit of another party or parties (the principal(s)) and therefore does not control the investee when it exercises its decision making authority’.

Thus, sometimes a principal’s power may be held and exercisable by an agent, but on behalf of the principal. An investor that is an agent does not control an investee when it exercises decision making rights delegated to it. Agency relationships in consolidation

Principal versus Agent Agency relationships in consolidation

To determine whether a decision maker is … Read more

Arrangements with multiple parties

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Arrangements with multiple parties – Identifying the customer can be more challenging when there are multiple parties involved in a transaction. The analysis should include understanding the substance of the relationship of all parties involved in the transaction. Arrangements with multiple parties

Arrangements with three or more parties, particularly if there are separate contracts with each of the parties, require judgment to evaluate the substance of those relationships. Management will need to assess which parties are customers and whether the contracts meet the criteria to be combined when applying the guidance in IFRS 15.

An entity needs to assess whether it is the principal or an agent in an arrangement that involves multiple parties. Has the entity … Read more