IFRS 15 Quick overview Revenue from contracts with customers

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IFRS 15 Quick overview Revenue from contracts with customers – the easy way to obtain an solid overview.

What is the objective of IFRS 15?

To establish principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer.

How does IFRS 15 meet this objective?

The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Practical expedient

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Leveraged buyout IFRS 3 best reporting

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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 … Read more

Consolidated financial statements

IFRS 10 Definition of 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.

ParentAn entity that controls one or more entities.

The other types of financial statements are unconsolidated financial statements (or company accounts) and combined financial statements.

Single economic entity concept

The concept of a single economic entity is illustrated in the example below:

Example – Single economic entity concept

A subsidiary buys an asset from a third party for CU 100. It subsequently sells the asset on to its parent for CU 130. The subsidiary records a profit

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11 Best fair value measurements under IFRS 13

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11 Best fair value measurements under IFRS 13 – Several IFRS standards provide guidance regarding the scope and application of the fair value option for assets and liabilities. Here they are from 1 to 11…….

1 Investments in associates and joint ventures

Investments held by venture capital organizations and the like are exempt from IAS 28’s requirements only when they are measured at fair value through profit or loss in accordance with IFRS 9. Changes in the fair value of such investments are recognized in profit or loss in the period of change.

The IASB acknowledged that fair value information is often readily available in venture capital organizations and entities in similar industries, even for start-up and … Read more

The modified historical cost convention

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IFRS requires financial statements to be prepared on the modified historical cost convention basis, with a growing emphasis on fair value. ‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date – i.e. an exit price. [IFRS 13 9]

The carrying amounts of the following assets and liabilities are based on fair value measurements subsequent to initial recognition.

  • Derivatives, financial assets, and financial liabilities classified as held-for-trading or designated as at fair value through profit or loss, and financial assets classified as available-for-sale are measured at fair value. The modified historical cost convention
  • Biological
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Property plant and equipment Example

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Property plant and equipment Example – Accounting policy example

Property plant and equipment is stated at cost, less accumulated depreciation and accumulated impairment losses. The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of any decommissioning obligation, if any, and, for assets that necessarily take a substantial period of time to get ready for their intended use, directly attributable finance costs.

The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given … Read more

Impairment Example

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Impairment Example – Accounting example

Impairment of property, plant and equipment, intangible assets, and goodwill

The group assesses assets or groups of assets, called cash-generating units (CGUs), for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or CGU may not be recoverable; for example, changes in the group’s business plans, changes in the group’s assumptions about commodity prices, low plant utilization, evidence of physical damage or, for oil and gas assets, significant downward revisions of estimated reserves or increases in estimated future development expenditure or decommissioning costs. If any such indication of impairment exists, the group makes an estimate of the asset’s or CGU’s recoverable amount. Individual assets are … Read more

Reclassification adjustments

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Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in the current or previous periods.[IAS 1 92]

Recycling (the reclassification from equity (through other comprehensive income) to profit or loss)
Recycling is the process where gains or losses are reclassified from equity to profit or loss as an accounting adjustment. In other words gains or losses are first recognised in other comprehensive income and then in a later accounting period also recognised in the profit or loss. In this way the gain or loss is reported in the total comprehensive income of two accounting periods and in colloquial terms is said to be … Read more

Other comprehensive income

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Other comprehensive income comprises items of income and expense (including reclassification adjustments) that are not recognised in profit or loss as required or permitted by other IFRSs.

IFRS in respect of the classification of gains or losses in other comprehensive income or profit or loss/profit and loss is directed by the notion that all gains and losses that are not defined as a component of other comprehensive income are by definition part of profit or loss.

All components of ‘profit or loss’ and of ‘other comprehensive income’ are summarised as ‘Total comprehensive income’. Total comprehensive income is the change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions … Read more