Accounting Policies to First IFRS FS – An entity must use the same accounting policies in its opening IFRS statement of financial position and throughout all periods presented in its first IFRS financial statements. Those accounting policies must comply with each IFRSs effective at the end of its first IFRS reporting period, unless there is a mandatory exception to retrospective application or an optional exemption from the requirements of IFRSs.
An Initial Coin Offering (‘ICO’) is a form of fundraising that harnesses the power of cryptographic assets and blockchain-based trading. Similar to a crowdfunding campaign, an ICO allocates (issues or promises to issue) digital token(s) instead of shares to the parties that provided contributions for the development of the digital token. These ICO tokens typically do not represent an ownership interest in the entity, but they often provide access to a platform (if and when developed) and can often be traded on a crypto exchange. The population of ICO tokens in an ICO is generally set at a fixed amount.
It should be noted that ICOs might be subject to local securities law, and significant regulatory considerations might apply.
Each ICO is bespoke and will have unique terms and conditions. It is critical for issuers to review the whitepaper (A whitepaper is a concept paper authored by the developers of a platform, to set out an idea and overall value proposition to prospective investors. The whitepaper commonly outlines the development roadmap and key milestones that the development team expects to meet) or underlying documents accompanying the ICO token issuance, and to understand what exactly is being offered to investors/subscribers. In situations where rights and obligations arising from a whitepaper or their legal enforceability are unclear, legal advice might be needed, to determine the relevant terms.
– provides a narrative providing guidance on users of financial statements’ needs to present financial disclosures in the notes to the financial statements grouped in more logical orders. But there is and never will be a one-size fits all.
Here it has been decided to separately disclose financial assets and liabilities and non-financial assets and liabilities, because of the distinct different nature of these classes of assets and liabilities and the resulting different types of disclosures, risks and tabulations.
Disclosure financial assets and liabilities guidance
Disclosing financial assets and liabilities (financial instruments) in one note
Users of financial reports have indicated that they would like to be able to quickly access all of the information about the entity’s financial assets and liabilities in one location in the financial report. The notes are therefore structured such that financial items and non-financial items are discussed separately. However, this is not a mandatory requirement in the accounting standards.
Accounting policies, estimates and judgements
For readers of Financial Statements it is helpful if information about accounting policies that are specific to the entityand about significant estimates and judgements is disclosed with the relevant line items, rather than in separate notes. However, this format is also not mandatory. For general commentary regarding the disclosures of accounting policies refer to note 25. Commentary about the disclosure of significant estimates and judgements is provided in note 11.
Scope of accounting standard for disclosure of financial instruments
IFRS 7 does not apply to the following items as they are not financial instruments as defined in paragraph 11 of IAS 32:
prepayments made (right to receive future good or service, not cash or a financial asset)
tax receivables and payables and similar items (statutory rights or obligations, not contractual), or
contract liabilities (obligation to deliver good or service, not cash or financial asset).
While contract assets are also not financial assets, they are explicitly included in the scope of IFRS 7 for the purpose of the credit risk disclosures. Liabilities for sales returns and volume discounts (see note 7(f)) may be considered financial liabilities on the basis that they require payments to the customer. However, they should be excluded from financial liabilities if the arrangement is executory. the Reporting entity Plc determined this to be the case. [IFRS 7.5A]
Classification of preference shares
Preference shares must be analysed carefully to determine if they contain features that cause the instrument not to meet the definition of an equity instrument. If such shares meet the definition of equity, the entity may elect to carry them at FVOCI without recycling to profit or loss if not held for trading.
Leveraged buyout IFRS 3 best reporting – In corporate finance, a leveraged buyout (LBO) is a transaction where a company is acquired using debt as the main source of consideration. These transactions typically occur when a private equity (PE) firm borrows as much as they can from a variety of lenders (up to 70 or 80 percent of the purchase price) and funds the balance with their own equity. Leveraged buyout IFRS 3 best reporting
1 The process and business reason
The use of leverage (debt) enhances expected returns to the private equity firm. By putting in as little of their own money as possible, PE firms can achieve a large return on equity (ROE) and internal rate of return … Read more
The 2 essential types of share-based payments – Snapshot
Share-based payments are classified based on whether the entity’s obligation is to deliver its own equity instruments (equity-settled) or cash or other assets (cash-settled).
1. Equity-settled share-based payments
For equity-settled transactions, an entity recognises a cost and a corresponding entry in equity.
Measurement is based on the grant-date fair value of the equity instruments granted.
Market and non-vesting conditions are reflected in the initial measurement of fair value, with no subsequent true-up for differences between expected and actual outcome.
The estimate of the number of equity instruments for which the service and non-market performance conditions are expected to be satisfied is revised during the vesting period such that the cumulative amount … Read more
Employee services are recognised as expenses, unless they qualify for recognition as assets, with a corresponding increase in equity.
Employee service costs are recognised over the vesting period from the service commencement date until vesting date.
Employee services are measured indirectly with reference to the fair value of the equity instruments granted; this is done by applying the modified grant-date method. If, in rare circumstances, the fair value of the equity instruments granted cannot be measured reliably, then the intrinsic value method is applied.
Under the modified grant-date method, the grant-date fair value of the equity instruments granted is determined once at grant date, which may be after the service commencement date.
Overview IFRS 2 Determination of the vesting period
Employee service costs are recognised in profit or loss over the vesting period from the service commencement date until vesting date. The following topics are of importance in IFRS 2 Determination of the vesting period
Service commencement date and grant date
The ‘vesting period’ is the period during which all of the specified vesting conditions are to be satisfied in order for the employees to be entitled unconditionally to the equity instrument. Normally, this is the period between grant date and the vesting date (see IFRS 2 Definitions).
However, services are recognised when they are received and grant date may occur after the employees have begun rendering services. Grant date is … Read more
IFRS 2 Fair value of equity instruments granted – Share-based payment transactions with employees are measured with reference to the fair value of the equity instruments granted (IFRS 2.11).
The fair value of a equity instrument granted is determined as follows (IFRS 2.16-17):
If market prices are available for the actual equity instruments granted – i.e. shares or share options with the same terms and conditions – then the estimate of fair value is based on these market prices. IFRS 2 Fair value of equity instruments granted
If market prices are not available for the equity instruments granted, then the fair value of equity instruments granted is estimated using a valuation technique.