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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Combined financial statements

Combined financial statements: 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).

Enhancing qualitative characteristic

Comparability, verifiability, timeliness and understand-ability are qualitative characteristics that enhance the usefulness of information that both is relevant and provides a faithful representation of what it purports to represent. The enhancing qualitative characteristics may also help determine which of two ways should be used to depict a phenomenon if both are considered to provide equally relevant information and an equally faithful representation of that phenomenon.

IFRS 7 Market risk disclosures

Market risk - The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.

IAS 34 Interim financial statements

IAS 34 Interim financial statements provide all there is to know for producing Interim financial statements, what, where, when and what is in them.

Objective

IAS 34 prescribes the guidelines for an entity regarding the preparation of interim financial statements by providing information about the minimum contents of interim financial reports along with the recognition and measurement principles for such financial reports. These interim financial reports will provide the most recent activities, circumstances and financial affairs of the reporting entity

Scope

IAS 34 does not define, which entity is required to publish the interim financial reports, the time period after the end of interim period within which these financial reports should be published and how frequently these should be published.Read more

First time adoption IFRS Introduction

First time adoption IFRS IntroductionFirst time adoption IFRS Introduction – It is not only about IFRS 1 when an entity prepares its first IFRS financial statements, but also about some other IFRS because IFRS 1 references to these IFRS standards. Therefore, entities will need to consider the following standards in their first time adoption review process:

IFRS 1 sets out detailed rules that entities must follow when adopting IFRS for the first time. The standard also sets out a number of exemptions that may be applied when adopting IFRS.

If an entity wishes to apply either of these exemptions a full audit trail Read more

In compliance with International Financial Reporting Standards

In compliance with International Financial Reporting Standards – Any entity asserting that a set of financial statements is in compliance with IFRS complies with all applicable standards and related interpretations, and makes an explicit and unreserved statement of compliance in the notes to the financial statements. Compliance with IFRS encompasses disclosure as well as recognition and measurement requirements. [IAS 1 16] In compliance with International Financial Reporting Standards

A few examples of such a compliance statement are provided here: In compliance with International Financial Reporting Standards

In compliance with International Financial Reporting Standards

Source: Unilever Annual Report and Accounts 2018

BP Plc Annual Report and Form 20 F 2010 Statement of compliance with IFRS

Source BP Annual report and Form 20-F 2018 In compliance with International Financial Reporting Standards

The IASB does not carry out any inquiry or enforcement … Read more