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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Consolidated financial statements

The financial statements of a group in which the assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are presented as those of a single economic entity. The detailed ‘mechanics’ of the consolidation process vary from one group to another, depending on the group’s structure, history and financial reporting systems. IFRS 10 and much of the literature on consolidation are based on a traditional approach to consolidation under which the financial statements (or, more commonly in practice, group ‘reporting packs’) of group entities are aggregated and then adjusted on each reporting date.

Financing activities

Financing activities - Activities that result in changes in the size and composition of the contributed capital and borrowings of the entity.

First IFRS financial statements

The first annual financial statements in which an entity adopts International Financial Reporting Standards (IFRSs), by an explicit and unreserved statement of compliance with IFRSs. 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 must be produced to outline the assessment and sufficient evidence must be provided to evidence that the application of the exemption is appropriate.

Investments in Associates 1st and best read

Investments in Associates 1st and best read – Just as a starter, two definitions!

Associate: An entity, including an unincorporated entity such as a partnership, over which an investor has significant influence and which is neither a subsidiary nor an interest in a joint venture. Investments in Associates 1st and best read

Significant influence: The power to participate in the financial and operating policy decisions of the investee but it is not control or joint control over those policies. Investments in Associates 1st and best read

What are investments in associates?

A holding of 20% or more of the voting power (directly or through subsidiaries) will indicate significant influence unless it can be clearly demonstrated otherwise. If the … Read more

Investments material associates disclosures

Investments material associates disclosuresInvestments material associates disclosures – The subject of investments material associates disclosures may be aggregated for interests in similar entities, with the method of aggregation being disclosed (aggregation being consolidation). A quantitative and qualitative analysis, taking into account the different risk and return characteristics of each entity, is made in order to determine the aggregation level. IFRS 12 gives the following examples of aggregation levels: by nature of activities, by industry or by geography. [IFRS 12.4, B2–B6]

However, as a minimum, information is given separately for interests in subsidiaries, joint ventures, joint operations, associates and unconsolidated structured entities. [IFRS 12.B4–B6]

IFRS 12 emphasises that it’s necessary for financial statement preparers to strike a balance between … Read more

Disclosures material joint ventures

Disclosures material joint ventures – The disclosures may be aggregated for interests in similar entities, with the method of aggregation being disclosed (aggregation resembling/replacing consolidation). A quantitative and qualitative analysis, taking into account the different risk and return characteristics of each entity, is made in order to determine the aggregation level. IFRS 12 gives the following examples of aggregation levels: by nature of activities, by industry or by geography. [IFRS 12.4, B2–B6]

However, as a minimum, information is given separately for interests in subsidiaries, joint ventures, joint operations, associates and unconsolidated structured entities. [IFRS 12.B4–B6]

Note a) [IFRS 12 B14(a)]


IFRS 12 indicates that the amounts included in the summarised financial information are Read more