How to best account for COVID-19 under IAS 10 Events after the reporting period? The question is whether the COVID-19 crises is an adjusting event of a non-adjusting event for the Financial Statements for the period ended 31 December 2019 that have not been authorised for final distribution to stakeholders or for filing at a chamber of commerce or similar institute.
If it is a non-adjusting event what disclosures does it still require in the financial statements or management report accompanying these financial statements?
In terms of accounting implications, the current consensus is that an entity shall not adjust the amounts recognized in its financial statements (IAS 10 10 Non-adjusting events) as at 31 December … Read more
11 Best fair value measurements under IFRS 13 – Several IFRS standards provide guidance regarding the scope and application of the fair value option for assets and liabilities. Here they are from 1 to 11…….
1 Investments in associates and joint ventures
Investments held by venture capital organizations and the like are exempt from IAS 28’s requirements only when they are measured at fair value through profit or loss in accordance with IFRS 9. Changes in the fair value of such investments are recognized in profit or loss in the period of change.
The IASB acknowledged that fair value information is often readily available in venture capital organizations and entities in similar industries, even for start-up and … Read more
IFRS 13 The best Fair value fundamentals discusses the key concepts in the fair value standards, including the definition of fair value, inputs to fair value measurements, and the fair value hierarchy. It also addresses certain issues associated with the application of these concepts.
IFRS 7 Other price risks Step-by-step – Other price risks is part of the risk disclosures requirements under IFRS 7 Financial Instruments: Disclosures. Other price risks is part of market risk (the other main market risk categories being currency risk and interest rate risk) and is defined as the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer or by factors affecting all similar financial instruments traded in the market. IFRS 7 Other price risks Step-by-step
IFRS 7 Comprehensive Risk disclosures – Management should disclose information that enables users of its financial statements to evaluate the nature and extent of risks arising from financial instruments to which the entity is exposed at the end of the reporting period [IFRS 7 31]. IFRS 7 Comprehensive Risk disclosures
IFRS 7 requires certain disclosures to be presented by category of an instrument based on the IFRS 9 recognition and measurement categories of financial instruments (previously the IAS 39 measurement categories). IFRS 7 Comprehensive Risk disclosures
Certain other disclosures are required by class of financial instrument. For those disclosures an entity must group its financial instruments into classes of similar instruments as appropriate to the … Read more
IFRS 3 Fair value of contingent consideration – Contingent consideration often involves the buyer transferring additional consideration to the seller if certain performance targets are met in the future. This allows the buyer to share the risk associated with the future of the business with the seller by making some of the consideration contingent on future performance. What factors should be considered in determining the fair value of this type of arrangement? IFRS 3 Fair value of contingent consideration
Valuation methods for contingent consideration range from discounted cash flow analyses to more complex Monte Carlo simulations. The terms of the arrangement and the payout structure will influence the type of valuation model the acquirer uses. IFRS 3 … Read more
IFRS 13 Fair value non-performance risks – One of the key challenges for many reporting entities in estimating fair value in accordance with the fair value standards has been determining and incorporating the impact of non-performance risk, including credit risk, into the fair value measurement. Non-performance risk is the risk that an entity will not perform on its obligation. This risk should be incorporated into a fair value measurement using a market-based estimate that follows the framework of the fair value standards and should be measured from the perspective of a market participant. The concept of non-performance risk incorporates credit risk and other risk factors, including regulatory, operational, and commercial risks.
Low credit risk, in the context of IFRS 9, is an indicator assigned to financial instruments deemed to
have low default risk, that is a low likelihood of any credit event
the borrower has a strong capacity to meet contractual cash flow obligations both in the near term.
It is an important and practical definition in IFRS 9 to minimise the accounting for impairments on financial assets for all IFRS reporting entities.
The instrument must be considered to have lower credit risk from a market participant’s perspective. For low risk credit instruments, it is assumed that credit risk has not increased significantly at each reporting date. This means that only 12 month expected credit losses will be … Read more