IFRS 2 Shares to the value of a fixed amount

Variable number of equity instruments or variable exercise price or IFRS 2 Shares to the value of a fixed amount

Shares to the value of of if a variable number of equity instruments to the value of a fixed amount is granted, commonly known as ‘shares to the value of’, then such an arrangement is recorded as an equity-settled share-based payment. IFRS 2 Shares to the value of a fixed amount

A question arises about the measurement of such a grant if the date of delivery of the shares is in the future because there is a service requirement. In general, there are two acceptable approaches in respect of measurement:

  • as a fixed amount of cash that will be
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Introduction IFRS 17 Insurance contracts

Introduction IFRS 17 Insurance contracts – More than 20 years in development, IFRS 17 represents a complete overhaul of accounting for insurance contracts. The new standard applies a current value approach to measuring insurance contracts and recognises profit as insurers provide services and are released from risk. The profit or loss earned from underwriting activities are reported separately from financing activities. Detailed note disclosures explain how items like new business issued, experience in the year, cash receipts and payments, and changes in assumptions affected the performance and the carrying amount of insurance contracts.

IFRS 17 establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts issued, reinsurance contracts held and investment contracts with discretionary participation features an entity Read more

Contractual service margin

Contractual service margin – The fourth element of the building blocks in the general model is the contractual service margin (the CSM). This is a component of the asset or liability for the group of insurance contracts that represents the unearned profit the entity will recognise as it provides services in the future.

Here is how the contractual service margin fits into the general model of measurement of insurance contracts. The general model is based on the following estimation parameters:

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Relationship of Growth ROIC and Cash Flow

Relationship of Growth ROIC and Cash Flow – Disaggregating cash flow into revenue growth and ROIC helps illuminate the underlying drivers of a company’s performance. Say a company’s cash flow was $100 last year and will be $150 next year. This doesn’t tell us much about its economic performance, since the $50 increase in cash flow could come from many sources, including revenue growth, a reduction in capital spending, or a reduction in marketing expenditures.

But if we told you that the company was generating revenue growth of 7 percent per year and would earn a return on invested capital of 15 percent, then you would be able to evaluate its performance. You could, for instance, compare the company’s growth … Read more

Significant financing component

Many transactions contain a significant financing component because the customer pays substantially before or after the goods or services have been provided. This can benefit the entity if the customer is financing the transaction by paying early, or this can benefit the customer if the entity finances the customer by delivering the good or service before payment occurs. Under either circumstance, the entity is required to reflect the effects of the financing component in the transaction price by considering the time value of money (interest element). This requirement ensures that entities recognise revenue at the amount that reflects the cash payment that the customer would have made at the time the goods or services were transferred (cash selling price).

Practical Read more

Example financing component in a contract

Example financing component in a contract- This is an example of the workings of IFRS 15 60 – 64.

A vendor enters into a contract with a customer to build and supply a new machine. Control over the completed machine will pass to the customer in two years’ time (the vendor’s performance obligation will be satisfied at a point in time). The contract contains two payment options. Either the customer can pay CU 5 million in two years’ time when it obtains control of the machine, or the customer can pay CU 4 million on inception of the contract.

The customer decides to pay CU 4 million on inception. Example financing component in a contract Example financing component in a contract

The vendor concludes that … Read more

Measurement basis

Measurement basis – An identified feature of an item being measured (for example, historical cost, fair value or fulfilment value). OR

The result of measuring an asset, a liability or equity, or an item of income or expense, on a specified measurement basis. OR

The process of quantifying, in monetary terms, information about an entity’s assets, liabilities, equity, income and expenses.


Measurement basis describes various measurement bases, the information they provide and factors to consider when selecting a measurement basis. The 2010 Conceptual Framework did not include much guidance on measurement.

In developing the revised Conceptual Framework, the Board considered whether a single measurement basis should be mandated. However, it concluded that different measurement bases could provide useful information to … Read more

Measurement uncertainty

Measurement uncertainty – Uncertainty that arises when the result of applying a measurement basis is imprecise and can be determined only with a range.

Measurement uncertainty arises when a measure cannot be determined directly by observing prices in an active market and must instead be estimated.

The level of measurement uncertainty associated with a particular measurement basis may affect whether information provided by that measurement basis provides a faithful representation of an entity’s financial position and financial performance. A high level of measurement uncertainty does not necessarily prevent the use of a measurement basis that provides relevant information.

However, in some cases the level of measurement uncertainty is so high that information provided by a measurement basis might not provide … Read more

Outcome uncertainty

Outcome uncertainty is uncertainty about the amount or timing of any inflow or outflow of economic benefits that will ultimately result from an asset or liability.

It is different from measurement uncertainty and existence uncertainty. Outcome uncertainty


“Uncertainty” in accounting refers to the difficulty of predicting outcomes because of limited or inexact knowledge. Financial statements often contain estimates and other information based on uncontrollable events that can impact future financial reporting and transactions. Generally accepted accounting standards provide processes by which uncertainty is factored into financial statements. Accountants recognize some uncertainties as inherent in certain financial transactions. The challenge is to recognize uncertainty and apply the information in ways that reflect a more realistic financial picture of a company. … Read more