What happened in the reporting period

What happened in the reporting period

There is no requirement to disclose a summary of significant events and transactions that have affected the company’s financial position and performance during the period under review (or simply what happened in the reporting period). However, information such as this could help readers understand the entity’s performance and any changes to the entity’s financial position during the year and make it easier finding the relevant information. However, information such as this could also be provided in the (unaudited) operating and financial review rather than the (audited) notes to the financial statements.

Covid-19
At the time of writing, the biggest impact on the financial statements of entities all around the world is related to the COVID-19 pandemic. Most entities will be affected by this in one form or another and should discuss the impact prominently in their financial statements. However, as the events are still unfolding, this publication is not providing any illustrative examples or guidance. See how to account for Covid-19 to get an up-to-date discussion.

Going concern disclosures [IAS1.25]
When preparing financial statements, management shall make an assessment of an entity’s ability to continue as a going concern. Financial statements shall be prepared on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so.

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Beware of COVID 19 Rent concessions IFRS accounting

Beware of COVID 19 Rent concessions IFRS accounting

IFRS 16 amendments Corona Rent concessions provide relief to lessees in accounting for rent concessions.

IFRS 16 Rent concession amendments in a nutshell

The lessee perspective

The amendments to IFRS 16 add an optional practical expedient that allows lessees to bypass assessing whether a rent concession that meets the following criteria is a lease modification:

  • it is a direct consequence of COVID-19; Beware of COVID 19 Rent concessions IFRS accounting
  • the revised lease consideration is substantially the same as, or less than, the original lease consideration;
  • any reduction in the lease payments applies to payments originally due on or before June 30, 2021; and
  • there is no substantive change to the other terms and conditions of the lease.

Lessees who elect this practical expedient account for qualifying rent concessions in the same way as changes under IFRS 16 that are not lease modifications. The accounting will depend on the nature of the concession, but one outcome might be to recognize negative variable lease payments in the period in which the lessor agrees to an unconditional forgiveness of lease payments.

Lessees are required to apply the practical expedient consistently to similar leases and similar concessions. They must also disclose if they elected the practical expedient and for which concessions, as well as the amount recognized in profit and loss in the reporting period to reflect changes in lease payments that arise from rent concessions to which they have applied the practical expedient.

The amendments are effective for reporting periods beginning after June 1, 2020, with early application permitted.

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IAS 36 How Impairment test

IAS 36 How Impairment test is all about this – When looking at the step-by-step IAS 36 impairment approach it comes down to the following broadly organised steps: IAS 36 How Impairment test

  • What?? – Determining the scope and structure of the impairment review, explained here,
  • If and when? – Determining if and when a quantitative impairment test is necessary, explained here,
  • IAS 36 How Impairment test or understanding the mechanics of the impairment test and how to recognise or reverse any impairment loss, if necessary. Which is explained in this section…

The objective of IAS 36 Impairment of assets is to outline the procedures that an entity applies to ensure that its assets’ carrying values are not … Read more

The Statement of Cash Flows

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 on the statement. Read more

IFRS 16 Right to direct the use of the identified asset

IFRS 16 Right to direct the use of the identified asset

Requiring a customer to have the right to direct the use of an identified asset is a change from IFRIC 4. A contract may have met IFRIC 4’s control criterion if, for example, the customer obtained substantially all of the output of an underlying asset and met certain price-per-unit-of-output criteria even though the customer did not have the right to direct the use of the identified asset as contemplated by IFRS 16. Under IFRS 16, such arrangements would no longer be considered leases [IFRS 16 B24]

A customer has the right to direct the use of an identified asset throughout the period of use when either: IFRS Read more

Main FS Statements Insurance contracts

Main FS Statements Insurance contracts – These examples of the main Financial Statements statements demonstrate the requirements in respect of presentation and disclosure according to IFRS 17 Insurance contracts. They also includeMain FS Statements Insurance contracts the requirements (introduced or amended) in respect of presentation and disclosure according to IFRS 9 Financial instruments and IFRS 7 Financial instruments: Disclosures.

It is prepared for illustrative purposes only and should be used in conjunction with the relevant financial reporting standards and any other reporting pronouncements and legislation applicable in specific jurisdictions. Main FS Statements Insurance contracts

Presentation of insurance service result Main FS Statements Insurance contracts

 

IFRS 17 83,
85,
B120 – B127

Clarifications:

Insurance revenue reflects the consideration to which the

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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. Introduction IFRS 17 Insurance contracts

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. Introduction IFRS 17 Insurance contracts

IFRS 17 establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts issued, reinsurance contracts Read more

Implementation IFRS 16 Leases Air France KLM

Implementation IFRS 16 Leases Air France KLMImplementation IFRS 16 Leases Air France KLM – In the Registration Document 2018 including the annual financial report by AIR FRANCE KLM GROUP the Group implemented IFRS 16 and IFRS 15 and IFRS 9. Here are some excerpts from the document to illustrate the effects:

[Air France KLM – 2018 Registration document – page 220]

note 2. Restatement of 2017 Financial statements

Since January 1, 2018, the Air France – KLM Group has applied the following three new standards:

IFRS 9 “Financial Instruments”

  • IFRS 15 “Revenue Recognition from Contracts with Customers”

This standard came into force on January 1, 2018.

In accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”, the standard has been applied retrospectively Read more

Consolidation Assess control over an investment

Consolidation Assess control over an investmentIFRS 10 Consolidation Assess control over an investment is the key to consolidate a investee entity or not. Whether a subsidiary or a consolidated structured entity.

Voting rights in subsidiaries

In many cases, when decision-making is controlled by voting rights, and those voting rights entitle an entity to returns (e.g., voting shares), it is clear that whoever holds a majority of those voting rights controls the investee. However, in other cases (such as for structured entities, or when there are potential voting rights, or less than a majority of voting rights), it may not be so clear. Consolidation Assess control over an investment

Contractual relations for consolidated structured entities

In those instances, further analysis is needed and the factors … Read more

What can the Statement of Cash Flows tell you?

What can the Statement of Cash Flows tell you – The statement of cash flows, as its name implies, summarises a company’s cash flows for a period of time. The statement of cash flows explains how a company’s cash was generated during the period and how that cash was used. Even if the statement of cash flows seems to be a replacement for the income statement, the two statements have distinct objectives.

The income statement measures the results of operations for a period of time. Net income is the reporting entity’s best estimate representing a company’s economic performance for a period. The income statement provides details as to how the retained earnings account changed during a period and ties together, Read more