Emissions over Time – The 1 Best read

27/02/2024 by 75385885

Emissions over Time

The GHG Protocol is designed to enable reporting entities to track and report consistent and comparable emissions data over time. The first step to tracking emissions over time is the establishment of a base year. A base year is a benchmark against which subsequent emissions can be compared to create meaningful comparisons over time and may be used for setting GHG reduction targets.

To comply with the GHG Protocol principles of relevance and consistency, a reporting entity is required to establish and report a base year for its Scope 1 and Scope 2 GHG emissions. A base year is only required for Scope 3 emissions when Scope 3 performance is tracked or a Scope 3 reduction target has been set. That is the case whether the entity is reporting under the Corporate Standard or the Scope 3 Standard (see below How to apply the Corporate Standard, Scope 2 Guidance and Scope 3 Standard?).

How to apply the Corporate Standard, Scope 2 Guidance and Scope 3 Standard?
An entity reporting under the Corporate Standard is not required to disclose Scope 3 emissions. As a result, there are three options under the GHG Protocol for reporting Scope 3 emissions, as described in the following table, which is based on Table 1.1 in the Scope 3 Standard:
Option	Description	Applicable GHG criteria
1	A reporting entity reports its Scope 1 and Scope 2 GHG emissions and either (1) no Scope 3 emissions or (2) Scope 3 emissions from activities that are not aligned with any of the prescribed Scope 3 categories (the latter is very rare).	Corporate Standard Scope 2 Guidance
2	A reporting entity reports its Scope 1 and Scope 2 GHG emissions and some, but not all, relevant and material Scope 3 GHG emissions in accordance with the Scope 3 calculation guidance but not with the Scope 3 Standard.	Corporate Standard Scope 2 Guidance Scope 3 Guidance
3	A reporting entity reports its Scope 1 and Scope 2 GHG emissions and all relevant and material categories of Scope 3 GHG emissions	Corporate Standard Scope 2 Guidance Scope 3 Standard Scope 3 Guidance

Consider this!

The GHG Protocol encourages reporting entities to begin reporting GHG emissions information and improve the completeness and precision of that information over time.

While the GHG Protocol requires a company to establish and report a base year for its Scope 1 and Scope 2 emissions, a reporting entity that recently started to report GHG emissions information and has not established an emissions reduction target may choose not to set a base year until the precision and completeness of their emissions inventory have improved.

In this situation, the reporting entity should disclose that a base year has not yet been established and the reason for not establishing a base year.

EBITDA – 1 Best complete read

12/04/2023 by 75385885

EBITDA – Earnings before interest taxes depreciation and amortisation

– is a measure of a company’s overall financial performance and is used as an alternative to simple earnings or net income in some circumstances. Earnings before interest, taxes, depreciation and amortisation, however, can be misleading because it strips out the cost of capital investments like property, plant, and equipment.

This metric also excludes expenses associated with debt by adding back interest expense and taxes to earnings. Nonetheless, it is a more precise measure of corporate performance since it is able to show earnings before the influence of accounting and financial deductions. EBITDA

Simply put, Earnings before interest, taxes, depreciation and amortisation is a measure of profitability. While there is no legal requirement for companies to disclose their EBITDA (here also written as EBIT-DA), according to the U.S. generally accepted accounting principles (US GAAP) or International Financial Reporting Standards (IFRS), it can be worked out and reported using information found in a company’s financial statements.

The earnings, tax, and interest figures are found on the income statement, while the depreciation and amortisation figures are normally found in the notes to operating profit or on the cash flow statement. The usual shortcut to calculate EBITDA is to start with operating profit, also called earnings before interest and tax (EBIT) and then add back depreciation and amortisation.

https://www.merriam-webster.com/dictionary/EBITDA

Origins of EBITDA

Employee benefits accounting policies

21/09/202117/05/2021 by 75385885

Employee benefits accounting policies

This is a separated part of the example accounting policies, it is separated because of the size of this note and the specific nature of employee benefits.

Example accounting policies – Introduction

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. Here is a section providing guidance on what the requirements are, below a comprehensive example is provided, easy to tailor to the specific needs of your company.

Employee benefits Guidance

Presentation and measurement of annual leave obligations

RePort Plc has presented its obligation for accrued annual leave within current employee benefit obligations. However, it may be equally appropriate to present these amounts either as provisions (if the timing and/or amount of the future payments is uncertain, such that they satisfy the definition of ‘provision’ in IAS 37) or as other payables.

For measurement purposes, we have assumed that RePort Plc has both annual leave obligations that are classified as short-term benefits and those that are classified as other long-term benefits under the principles in IAS 19. The appropriate treatment will depend on the individual facts and circumstances and the employment regulations in the respective countries.(IAS19(8),(BC16)-(BC21))

To be classified and measured as short-term benefits, the obligations must be expected to be settled wholly within 12 months after the end of the annual reporting period in which the employee has rendered the related services. The IASB has clarified that this must be assessed for the annual leave obligation as a whole and not on an employee-by-employee basis.

Share-based payments – expense recognition and grant date

Share-based payment expenses should be recognised over the period during which the employees provide the relevant services. This period may commence prior to the grant date. In this situation, the entity estimates the grant date fair value of the equity instruments for the purposes of recognising the services received during the period between service commencement date and grant date.(IFRS2(IG4))

Startup valuation

20/09/202110/06/2021 by 75385885

Startup valuation

If every business starts with an idea, young companies can range the spectrum. Some are unformed, at least in a commercial sense, where the owner of the business has an idea that he or she thinks can fill an unfilled need among consumers.

Others have inched a little further up the scale and have converted the idea into a commercial product, albeit with little to show in terms of revenues or earnings. Still others have moved even further down the road to commercial success, and have a market for their product or service, with revenues and the potential, at least, for some profits.

Since young companies tend to be small, they represent only a small part of the overall economy. However, they tend to have a disproportionately large impact on the economy for several reasons.

The real meaning of Integrated reporting

14/09/2021 by 75385885

The real meaning of integrated reporting

Integrated reporting is more than only aimed at informing interested stakeholders about performance achieved against targets, the vision and strategy adopted to serve the stakeholders’ interests, and other factors that can influence business performance in future.

Clearly regulations require companies to exercise transparency. However, a more fundamental reason for reporting lies in accountability: a company needs to account for the impact it has on the stakeholders it relates to. Not exercising such transparency would impose serious risks, including high financing costs to compensate for a lack of transparency or governance or, ultimately, losing the license to operate. By contrast, a transparent approach would not only improve reputation, but also would bind stakeholders such as employees to the company’s objectives.

The reason for including environmental and social factors in reporting

In today’s world companies play a significant role in shaping the future of society. Awareness of this has risen significantly over the last decades, resulting in changed attitudes towards the role business is expected to play.

It also resulted in changes in the views of business leaders about the role they want to play.

Business these days is seen more than ever as the agent of a wide group of stakeholders. Unlike the old paradigm that ‘the business of business is business’, companies accept wider accountability in current times towards the stakeholders whose interests they impact – no longer can companies focus only on the interests of those with a financial interest.

This wider accountability implies that companies have to fulfil the (information) needs of those who provide them with integrated reporting other economic resources such as labour, space, air or natural resources and those who enter into transactions with the organization such as customers. Therefore a company’s current performance and future ability to continue operations and achieve business growth needs to be evaluated on the basis of a comprehensive set of factors that influence these.

Acquisitions and mergers as per IFRS 3

14/09/2021 by 75385885

Acquisitions and mergers

Acquisitions and mergers are becoming more and more common as entities aim to achieve their growth objectives. IFRS 3 ‘Business Combinations’ contains the requirements for these transactions, which are challenging in practice.

This narrative sets out how an entity should determine if the transaction is a business combination, and whether it is within the scope of IFRS 3.

Identifying a business combination

IFRS 3 refers to a ‘business combination’ rather than more commonly used phrases such as takeover, acquisition or merger because the objective is to encompass all the transactions in which an acquirer obtains control over an acquiree no matter how the transaction is structured. A business combination is defined as a transaction or other event in which an acquirer (an investor entity) obtains control of one or more businesses.

An entity’s purchase of a controlling interest in another unrelated operating entity will usually be a business combination (see case below).

Case – Straightforward business combination

Entity T is a clothing manufacturer and has traded for a number of years. Entity T is deemed to be a business.

On 1 January 2020, Entity A pays CU 2,000 to acquire 100% of the ordinary voting shares of Entity T. No other type of shares has been issued by Entity T. On the same day, the three main executive directors of Entity A take on the same roles in Entity T.

Consider this…..

Entity A obtains control on 1 January 2020 by acquiring 100% of the voting rights. As Entity T is a business, this is a business combination in accordance with IFRS 3.

However, a business combination may be structured, and an entity may obtain control of that structure, in a variety of ways.

Employee share purchase plans

08/07/2021 by 75385885

In an ESPP, the employees are usually entitled to buy shares at a discounted price. The terms and conditions can vary significantly and some ESPPs include option features. (IFRS 2.IG17)

In my view, the predominant feature of the share-based payment arrangement determines the accounting for the entire fair value of the grant. That is, depending on the predominant features, a share purchase plan is either a true ESPP or an option plan.

All of the terms and conditions of the arrangement should be considered when determining the type of equity instruments granted and judgement is required. The determination is important because the measurement and some aspects of the accounting for each are different (see below).

Options are characterised by the right, but not the obligation, to buy a share at a fixed price. An option has a value (i.e. the option premium), because the option holder has the benefit of any future gains and has none of the risks of loss beyond any option premium paid. The value of an option is determined in part by its duration and by the expected volatility of the share price during the term of the option.

In my view, the principal characteristic of an ESPP is the right to buy shares at a discount to current market prices. ESPPs that grant short-term fixed purchase prices do not have significant option characteristics because they do not allow the grant holder to benefit from volatility. I believe that ESPPs that provide a longer-term option to buy shares at a specified price are, in substance, option plans, and should be accounted for as such. (IFRS 2.B4-B41)

Examples of other option features that may be found in ESPPs are: (IFRS 2.IG17)

ESPPs with look-back features, whereby the employees are able to buy shares at a discount, and choose whether the discount is applied to the entity’s share price at the date of the grant or its share price at the date of purchase;
ESPPs in which the employees are allowed to decide after a significant period of time whether to participate in the plan; and
ESPPs in which employees are permitted to cancel their participation before or at the end of a specified period and obtain a refund of any amounts paid into the plan.

Equity – 2 understand it all at best

06/07/2021 by 75385885

Equity

There are, at least, two ways to discuss equity:

Equity is the residual interest in the assets of the entity after deducting all its liabilities, or
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

But also:

For the purposes of IFRS 3, equityinterests is used broadly to mean ownership interests of investor-owned entities and owner, member or participant interests of mutual entities.
The equity method is a method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the investor’s share of the investee’s net assets. The investor’s profit or loss includes its share of the investee’s profit or loss and the investor’s other comprehensive income includes its share of the investee’s other comprehensive income.
An equity-settled share-based payment transaction is a share-based payment transaction in which the entity:
1. receives goods or services as consideration for its own equity instruments (including shares or share options), or
2. receives goods or services but has no obligation to settle the transaction with the supplier.

1. Equity the residual interest in the assets of the entity after deducting all its liabilities

1. Statement of Financial Position

Assets

Equity and liabilities

1. Non-current assets

2. Current assets

Help

A – TOTAL ASSETS [1 + 2] = B

3. Non-current liabilities (including Provisions)

4. Current liabilities (including Provisions)

5. Equity [1 + 2 -/- 3 -/- 4]

Help

B – TOTAL EQUITY AND LIABILITIES [3 + 4 + 5] = A

Disclosure non-financial assets and liabilities example

05/07/2021 by 75385885

Disclosure non-financial assets and liabilities example

The guidance for this disclosure example is provided here.

8 Non-financial assets and liabilities

This note provides information about the group’s non-financial assets and liabilities, including:

specific information about each type of non-financial asset and non-financial liability
- property, plant and equipment (note 8(a))
- leases (note 8(b))
- investment properties (note 8(c))
- intangible assets (note 8(d))
- deferred tax balances (note 8(e))
- inventories (note 8(f))
- other assets, including assets classified as held for sale (note 8(g))
- employee benefit obligations (note 8(h))
- provisions (note 8(i))
accounting policies
information about determining the fair value of the assets and liabilities, including judgements and estimation uncertainty involved (note 8(j)).

8(a) Property, plant and equipment

Amounts in CU’000	Freehold land	Buildings	Furniture, fittings and equipment	Machinery and vehicles	Assets under construction	Total
At 1 January 2019
Cost or fair value	11,350	28,050	27,510	70,860	–	137,770
Accumulated depreciation	–	–	-7,600	-37,025	–	-44,625
Net carrying amount	11,350	28,050	19,910	33,835	–	93,145

Movements in 2019
Exchange differences	–	–	-43	-150	–	-193
Revaluation surplus	2,700	3,140	–	–	–	5,840
Additions	2,874	1,490	2,940	4,198	3,100	14,602
Assets classified as held for sale and other disposals	-424	–	-525	-2,215	–	3,164
Depreciation charge	–	-1,540	-2,030	-4,580	–	8,150
Closing net carrying amount	16,500	31,140	20,252	31,088	3,100	102,080

At 31 December 2019
Cost or fair value	16,500	31,140	29,882	72,693	3,100	153,315
Accumulated depreciation	–	–	-9,630	-41,605	–	-51,235
Net carrying amount	16,500	31,140	20,252	31,088	3,100	102,080

Movements in 2020
Exchange differences	–	–	-230	-570	–	-800
Revaluation surplus	3,320	3,923	–	–	–	7,243
Acquisition of subsidiary	800	3,400	1,890	5,720	–	11,810
Additions	2,500	2,682	5,313	11,972	3,450	25,917
Assets classified as held for sale and other disposals	-550	–	-5,985	-1,680	–	-8,215
Transfers	–	–	950	2,150	-3,100	–
Depreciation charge	–	-1,750	-2,340	-4,380	–	-8,470
Impairment loss (ii)	–	-465	-30	-180	–	-675
Closing net carrying amount	22,570	38,930	19,820	44,120	3,450	128,890

At 31 December 2020
Cost or fair value	22,570	38,930	31,790	90,285	3,450	187,025
Accumulated depreciation	–	–	-11,970	-46,165	–	-58,135
Net carrying amount	22,570	38,930	19,820	44,120	3,450	128,890

(i) Non-current assets pledged as security

Refer to note 24 for information on non-current assets pledged as security by the group.

(ii) Impairment loss and compensation

The impairment loss relates to assets that were damaged by a fire – refer to note 4(b) for details. The whole amount was recognised as administrative expense in profit or loss, as there was no amount included in the asset revaluation surplus relating to the relevant assets. [IAS 36.130(a)]

Example Disclosure financial instruments

05/07/2021 by 75385885

Example Disclosure financial instruments

The guidance for this example disclosure financial instruments is found here.

7 Financial assets and financial liabilities

This note provides information about the group’s financial instruments, including:

an overview of all financial instruments held by the group
specific information about each type of financial instrument
accounting policies
information about determining the fair value of the instruments, including judgements and estimation uncertainty involved.

The group holds the following financial instruments: [IFRS 7.8]

Amounts in CU’000	Notes	2020	2019
Financial assets
Financial assets at amortised cost
– Trade receivables	7(a)	15,662	8,220
– Other financial assets at amortised cost	7(b)	4,598	3,471
– Cash and cash equivalents	7(e)	55,083	30,299
Financial assets at fair value through other comprehensive income (FVOCI)	7(c)	6,782	7,148
Financial assets at fair value through profit or loss (FVPL)	7(d)	13,690	11,895
Derivative financial instruments
– Used for hedging	12(a)	2,162	2,129
		97,975	63,162
Example Disclosure financial instruments
Financial liabilities
Liabilities at amortised cost
– Trade and other payables¹	7(f)	13,700	10,281
– Borrowings	7(g)	97,515	84,595
– Lease liabilities	8(b)	11,501	11,291
Derivative financial instruments
– Used for hedging	12(a)	766	777
– Held for trading at FVPL	12(a)	610	621
		124,092	107,565

The group’s exposure to various risks associated with the financial instruments is discussed in note 12. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets mentioned above. [IFRS 7.36(a), IFRS 7.31, IFRS 7.34(c)]