Example accounting policies

Example accounting policies

Get the requirements for properly disclosing the accounting policies to provide the users of your financial statements with useful financial data, in the common language prescribed in the world’s most widely used standards for financial reporting, the IFRS Standards. First there is a section providing guidance on what the requirements are, followed by a comprehensive example, easy to tailor to the specific needs of your company.Example accounting policies

Example accounting policies guidance

Whether to disclose an accounting policy

1. In deciding whether a particular accounting policy should be disclosed, management considers whether disclosure would assist users in understanding how transactions, other events and conditions are reflected in the reported financial performance and financial position. Disclosure of particular accounting policies is especially useful to users where those policies are selected from alternatives allowed in IFRS. [IAS 1.119]

2. Some IFRSs specifically require disclosure of particular accounting policies, including choices made by management between different policies they allow. For example, IAS 16 Property, Plant and Equipment requires disclosure of the measurement bases used for classes of property, plant and equipment and IFRS 3 Business Combinations requires disclosure of the measurement basis used for non-controlling interest acquired during the period.

3. In this guidance, policies are disclosed that are specific to the entity and relevant for an understanding of individual line items in the financial statements, together with the notes for those line items. Other, more general policies are disclosed in the note 25 in the example below. Where permitted by local requirements, entities could consider moving these non-entity-specific policies into an Appendix.

Change in accounting policy – new and revised accounting standards

4. Where an entity has changed any of its accounting policies, either as a result of a new or revised accounting standard or voluntarily, it must explain the change in its notes. Additional disclosures are required where a policy is changed retrospectively, see note 26 for further information. [IAS 8.28]

5. New or revised accounting standards and interpretations only need to be disclosed if they resulted in a change in accounting policy which had an impact in the current year or could impact on future periods. There is no need to disclose pronouncements that did not have any impact on the entity’s accounting policies and amounts recognised in the financial statements. [IAS 8.28]

6. For the purpose of this edition, it is assumed that RePort Co. PLC did not have to make any changes to its accounting policies, as it is not affected by the interest rate benchmark reforms, and the other amendments summarised in Appendix D are only clarifications that did not require any changes. However, this assumption will not necessarily apply to all entities. Where there has been a change in policy, this will need to be explained, see note 26 for further information.

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IFRS 8 Identifying operating segments

IFRS 8 Identifying operating segments – There are four key steps. Entities will need to:

  1. Identify the Chief Operating Decision Maker () (group/team/individual).
  2. Identify their business activities (which may not necessarily earn revenue or incur expenses).
  3. Determine whether discrete financial information is available for the business activities.
  4. Determine whether that information is regularly reviewed by the Read more

Disclosure of operating segments

Disclosure of operating segments – The disclosures regarding operating segments focus on the information that management believes is important when running the business. The disclosure requirements are summarised below.

Information required

Disclosures

General information

  • Factors used to identify the reportable segments. Disclosure of operating segments
  • Types of product/service from which each derives its revenue.

Information about the Read more

What are operating segments?

What are operating segments – Most entities will be able to identify their operating segments easily by reference to the definition. However, when this is not the case, for example if the (Read more

Operating segments Matrix structured entities

Operating segments Matrix structured entities – IFRS 8 10 addresses the issue of matrix structures. It uses the example of an entity where some managers are responsible for product and service lines worldwide, whereas other managers are responsible for specific geographical areas. Operating segments Matrix structured entities

The reviews the operating results of both sets of components, and discrete financial information is available for both. In this situation, the entity should determine which set of … Read more