A restructuring can comprise numerous activities, including termination or relocation of a business, a change in management structure and lay-offs. At a high level, the associated costs are recognized when (1) the program is of such scale that it meets the IFRS definition of a restructuring, and (2) management has an obligation to proceed with the restructuring. In addition, the nature of the costs matters – certain costs cannot be recognized before being incurred, and employment termination costs may need to be recognized earlier than other restructuring costs.
IAS 37 defines a restructuring as a program that materially changes the scope of a business or the manner in which it is conducted. US GAAP uses the term ‘exit activities’, which may be broader than a ‘restructuring’ under IFRS. Understanding the scale of the restructuring is therefore important because not all programs may qualify for cost recognition under IFRS.
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 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.
What Is Fintech or Financial Technology And Its Benefits?
New and fast-growing technologies like Financial Technology or Fintech have the potential benefits to collect and process data in real-time. This transforms how all businesses are working, how products and services are creating in the new economy, and how customers are engaging in this process. Every professional and commercial industry is affecting due by this change in workflows and business processes. The financial and economic sector is no exception.
Financial Technology or Fintech?
Fintech, short for Financial Technology, is a growing field and is now an economic revolution by the tech-savvy. It is the development of new technology to transform traditional institutions such as banks and insurance companies by uplift how they handle their finances and economic services. The process is not only digitizing money but also monetizing data to fit into the digitized world.
FinTech solutions have huge potential benefits for all businesses, especially new and existing small businesses. Small and medium-sized enterprises (SMEs) are essential for economic maturity and employment. However, others may find it difficult to get the financing they need to survive and thrive.
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Nobody wants their business to fail. Although it’s impossible to predict the future with 100% accuracy, a cash flow forecast is a tool that will help you prepare for different possible scenarios in the future.
In a nutshell, cash flow forecasting involves estimating how much cash will be coming in and out of your business within a certain period and gives you a clearer picture of your business’ financial health
What is Cash Flow Forecasting?
Cash flow forecasting is the process of estimating how much cash you’ll have and ensuring you have a sufficient amount to meet your obligations. By focusing on the revenue you expect to generate and the expenses you need to pay, cash flow forecasting can help you better manage your working capital and plan for various positive or difficult scenarios.
A cash flow forecast is composed of three key elements: beginning cash balance, cash inflows (e.g., cash sales, receivables collections), and cash outflows (e.g., expenses for utilities, rent, loan payments, payroll).
Building Out Cash Flow Scenario Models
It’s always good to create best case, worst-case and moderate financial scenarios. Through cash flow forecasting, you’ll be able to see the impact of these three scenarios and implement the suitable course of action. You can use the models to predict what needs to happen especially during difficult and uncertain times.
In situations where variables shift quickly such as during a recession, it is highly recommended to review and update your cash flow forecasts regularly on a monthly or even weekly basis. By monitoring your cash flow forecast closely, you’ll be able to identify warning signs such as declining revenue or increasing expenses.
An Initial Public Offering (IPO) comprises of a privately owned business that wants access the public capital market through the sale of securities (shares in the before IPO privately owned business). Thereby, the business can raise monies more readily than by the retention of profits in order to also grow through acquiring other businesses. Other possible motivations for an IPO include the prestige of ownership of a public company or the desire of major shareholders to exit the company.
Another way that entities may list is through a reverse restructure with an existing non-operating listed entity that has few assets or liabilities (i.e. a shell company) or a Special Purpose Acquisition Company (SPAC).
Special Purpose Acquisition Companies (SPACs) are publicly traded companies formed for the sole purpose of raising capital through an IPO and using the IPO proceeds to acquire one or more unspecified businesses in the future.
The management team that forms the SPAC (the “sponsor”) forms the entity and funds the offering expenses in exchange for founder shares. There are various tax considerations and complexities that can have significant implications both during the SPAC formation process and down the road.
Under these circumstances where a private entity is ‘acquired’ by the listed entity, this is commonly referred to as a back-door listing. Since the listed non-operating entity is not a business, the transaction is not a business combination. Normally such transactions are accounted for similar to reverse acquisitions.
However, because the accounting acquiree is not a business the transaction is considered a share-based payment. That is, the private entity is deemed to have issued shares to obtain control of the listed entity and to the extent their fair value exceeds the fair value of the listed entity’s identifiable net assets an expense will arise.
Disclosure of key judgements
Determining the appropriate accounting treatment of a reverse restructure with an existing non-operating listed entity that has few assets or liabilities (i.e. a shell company) or a SPAC often involves judgements. Therefore entities need to ensure that they comply with the disclosure requirements of IAS 1 Presentation of Financial Statements (‘IAS 1’), specifically paragraph 122.
The key objective of IFRS 16 is to ensure that lessees recognise assets and liabilities for their major leases.
1. Lessee accounting model
A lessee applies a single lease accounting model under which it recognises all leases on-balance sheet, unless it elects to apply the recognition exemptions (see recognition exemptions for lessees in the link). A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make payments. [IFRS 16.22]
are closely related industries that in their core refer to the financial service of managing assets by means of financial instruments and/or other investments with the aim of increasing the invested assets.
An asset manager is a financial professional who analyses, collects and handles a client’s financial portfolio. Asset managers focus on specific asset investments, such as real estate, exchange-traded funds, stocks or fixed-income securities. An asset manager’s goal is to increase returns from client investments and restructure them when needed to gain their clients more profit.
An investment manager is a general term for a financial professional who uses risk assessment to ensure their clients receive a profitable return on their investments. Their duties include tax planning, estate planning, retirement planning, philanthropy and education. The main goal of an investment manager is to generate a steady flow of profit through investment strategies for their clients.
A primary difference between asset managers and investment managers is their customer base. Asset managers typically work with individuals or businesses that have extensive amounts of money, while investment managers often work with individuals or businesses with any size of income.
The two most significant IFRS accounting matters for asset management or investment management entities are:
Timing of revenue and profit recognition
Valuation of investments (assets) the entity holds or invests on behalf of its customers
The following discussion captures a number of the more significant GAAP differences under both the impairment standards. It is important to note that the discussion is not inclusive of all GAAP differences in this area.
The significant differences and similarities between U.S. GAAP and IFRS related to accounting for investment property are summarized in the following tables.
Unlike IFRS Standards, there is no specific definition of ‘investment property’; such property is accounted for as property, plant and equipment unless it meets the criteria to be classified as held-for-sale.
‘Investment property’ is property (land or building) held by the owner or lessee to earn rentals or for capital appreciation, or both.
Unlike IFRS Standards, there is no guidance on how to classify dual-use property. Instead, the entire property is accounted for as property, plant and equipment.
A portion of a dual-use property is classified as investment property only if the portion could be sold or leased out under a finance lease. Otherwise, the entire property is classified as investment property only if the portion of the property held for own use is insignificant.
Unlike IFRS Standards, ancillary services provided by a lessor do not affect the treatment of a property as property, plant and equipment.
If a lessor provides ancillary services, and such services are a relatively insignificant component of the arrangement as a whole, then the property is classified as investment property.
Like IFRS Standards, investment property is initially measured at cost as property, plant and equipment.
Investment property is initially measured at cost.
Unlike IFRS Standards, subsequent to initial recognition all investment property is measured using the cost model as property, plant and equipment.
Subsequent to initial recognition, all investment property is measured under either the fair value model (subject to limited exceptions) or the cost model.
If the fair value model is chosen, then changes in fair value are recognised in profit or loss.
Unlike IFRS Standards, there is no requirement to disclose the fair value of investment property.
Disclosure of the fair value of all investment property is required, regardless of the measurement model used.
Similar to IFRS Standards, subsequent expenditure is generally capitalised if it is probable that it will give rise to future economic benefits.
Subsequent expenditure is capitalised only if it is probable that it will give rise to future economic benefits.
Unlike IFRS Standards, investment property is accounted for as property, plant and equipment, and there are no transfers to or from an ‘investment property’ category.
Transfers to or from investment property can be made only when there has been a change in the use of the property.
IFRS vs US GAAP Investment property IFRS vs US GAAP Investment property IFRS vs US GAAP Investment property
Here are 5 Comprehensive cash flow accounting events with special presentation and/or disclosure requirements under IAS 7. They are:
1 IFRS 9 Classification of cash flows arising from a derivative used in an economic hedge
Consequential amendments were not made to IAS 7 as a result of the introduction of, and subsequent changes to, IFRS 9 Financial Instruments.
A related issue which often arises in practice is the classification of cash flows that arise from a derivative that, although used economically to hedge exposures, is not designated in an IFRS 9 qualifying hedge relationship. The same issue arises under IAS 39, for those insurers that meet the criteria for, and have chosen to apply, the temporary exemption from the application … Read more