IAS 8 Best summary policies estimates and errors

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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


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
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Fair value measurement

Fair Value Measurement can present significant challenges for preparers of financial statements, particularly because it involves using judgment and estimation. Further, it is the market participant view that shapes fair value, so preparers need to monitor whether the valuation models and assumptions they use for financial reporting appropriately reflect those of market participants.

Fair Value Measurement under IFRS 13:Fair value measurement

  1. defines fair value;
  2. sets out in a single IFRS a framework for measuring fair value; and
  3. requires disclosures about fair value measurements.

The definition of fair value focuses on assets and liabilities because they are a primary subject of accounting measurement. In addition, IFRS 13 is applied to an entity’s own equity instruments measured at fair value.

The … Read more

The Statement of Cash Flows

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A Historical Perspective on the Statement of Cash Flows

In 1987, the Financial Accounting Standards Board (FASB) issued an accounting standard, FASB Statement no. 95, requiring that the statement of cash flows be presented as one of the three primary financial statements. Previously, companies had been required to present a statement of changes in financial position, often called the funds statement. In 1971, APC Opinion no. 19 made the funds statement a required financial statement although many companies had begun reporting funds flow information several years earlier.

The funds statement provided useful information, but it had several limitations. First, APB Opinion no. 19 allowed considerable flexibility in how funds could be defined and how they were reported Read more

Investments in Joint Ventures Overview

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Investments in Joint Ventures Overview that is what this is……

An entity with joint control of an investee shall account for its investment in a joint venture using the equity method except when that investment qualifies for exemption in IAS 28. Investments in Joint Ventures Overview

The exemptions include:Investments in Joint Ventures Overview

  • if the entity is a parent that is exempt from preparing consolidated financial statements by the scope exception in paragraphs 4(a) of IFRS 10 Consolidated Financial Statements; or Investments in Joint Ventures Overview
  • all of the following apply: Investments in Joint Ventures Overview
    1. the entity is a wholly-owned subsidiary, or is a partially-owned subsidiary of another entity and its other owners, including those
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IFRS 13 Adjusted net asset method

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IFRS 13 Adjusted net asset method and the asset accumulation method are both generally accepted business valuation methods of the asset-based business valuation approach.

First, the valuation expert typically starts with the subject company’s GAAP-based balance sheet. The valuation expert will use the balance sheet dated closest to the analysis valuation date. Preferably, the valuation expert will use the company’s balance sheet that was prepared just before the analysis valuation date. IFRS 13 Adjusted net asset method

Second, the valuation expert identifies and separates (for further analysis) any non-operating or excess assets reported on the balance sheet. Such assets may include vacant land or other assets held for investment purposes. Such assets may also include those … Read more

Measurement of contracts with participation features

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Measurement of contracts with participation features – Entities that issue participating contracts (referred to in the standard as contracts with participation features) provide policyholders with a financial return on the premiums they pay by sharing the performance of underlying items with policyholders. Participating contracts can include cash flows with different characteristics, for example:

  • Cash flows that do not vary with returns from underlying items, e.g., death benefits and financial guarantees Measurement of contracts with participation features
  • Cash flows that vary with returns from underlying items — either via a contractual link to the returns on underlying items or through an entity’s right to exercise discretion in determining payments to policyholders Measurement of contracts with participation features

The Read more

How to work with APMs

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How to work with APMs – Alternative performance measures (APM) have a twofold use; directors monitor the financial and economic performance through APMs, and reporting entities heavily rely on APMs to communicate results to their financial statement users. APMs should normally be consistent with the performance indicators used by directors. However, regulatory restrictions or confidentiality issues may prevent directors from disclosing all of the types of performance indicators used. Furthermore, complexity in calculation or use of non-financial information could also prevent directors from publicly disclosing certain types of APMs.

How to work with Alternative performance measuresHow to work with APMs

A structured way to organize an entity’s APM process may involve the following four steps:

  1. Identify the relevant APMs for
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What are Alternative performance measures?

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What are Alternative performance measures -What are Alternative performance measures – Alternative performance measures (APMs) may supplement Generally Accepted Accounting Principles (GAAP) reporting, and often represent an effective way of communicating important entity specific developments.

However, APMs need to be defined using appropriate descriptions and disclosures to avoid the risk of misleading the users of the financial reports.

Regulators in many jurisdictions have issued guidelines for the use of APMs that are helpful benchmarks when developing communication strategies and preparing financial reports. Entities can use these guidelines, both for compliance purposes and to facilitate effective communication.


Financial statements are the cornerstone of financial reporting for entities. In addition to GAAP measures, management often uses a variety of other financial measures to Read more

Treatment of lease liabilities

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Treatment of lease liabilities- The recognition of right-of-use assets with corresponding lease liabilities raises the question of whether and how the lease liabilities associated with the right-of-use assets should be considered when performing impairment assessments.

The treatment of lease liabilities may differ in practice depending on whether the recoverable amount is based on the assets’ fair value less cost of disposal (FVLCD) or value in use (VIU).

In general, liabilities are ignored when performing an impairment test of a cash generating unit (CGU), meaning that the starting point would be that both the carrying amount of the lease liabilities and the respective future lease payments would be ignored when determining the … Read more