Overview IFRS 10 Consolidated Financial Statements

Overview IFRS 10 Consolidated Financial StatementsShort – To establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities Overview IFRS 10 Consolidated Financial Statements

Longer – IFRS 10 replaces the part of IAS 27 Consolidated and Separate Financial Statements that addresses accounting for subsidiaries on consolidation. What remains in IAS 27 after the implementation of IFRS 10 is the accounting treatment for subsidiaries, jointly controlled entities and associates in their separate financial statements. Contingent consideration Contingent consideration Contingent consideration Contingent consideration Contingent consideration

The aim of IFRS 10 is to establish a single control model that is applied to all entities including special purpose entities. The changes require those dealing with the implementation of IFRS 10 to exercise Read more

Identified asset

Identified asset, a term from IFRS 16 Leases. Let’s see what it is all about….

An asset is identifiable if it either:

  1. Is separable, i.e., is capable of being separated or divided from the entity and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract, identifiable asset or liability, regardless of whether the entity intends to do so; or
  2. Arises from binding arrangements (including rights from contracts or other legal rights), regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

Note: Even though the definition given requires an intangible asset to be identifiable to distinguish it from goodwill, any goodwill recognised in an acquisition is an … Read more

General model of measurement of insurance contracts

General model of measurement of insurance contracts – Insurance contracts may be highly complex bundles of interdependent rights and obligations and combine features of a financial instrument and features of a service contract. As a result, insurance contracts can provide their issuers with different sources of income – e.g. underwriting profit, fees from asset management services and financial income from spread business (when insurers earn a margin on invested assets) – often all within the same contract. [IFRS 17 IN5, IFRS 17 BC18]

The general measurement model introduced by IFRS 17 provides a comprehensive and coherent framework that provides information reflecting the many different features of insurance contracts and the ways in which the issuers of insurance contracts earn income … Read more

Measurement of contracts with participation features

Measurement of contracts with participation features – Entities that issue participating contracts (referred to in the standard as contracts with participation features) provide policyholders with a financial return on the premiums they pay by sharing the performance of underlying items with policyholders. Participating contracts can include cash flows with different characteristics, for example:

  • Cash flows that do not vary with returns from underlying items, e.g., death benefits and financial guarantees Measurement of contracts with participation features
  • Cash flows that vary with returns from underlying items — either via a contractual link to the returns on underlying items or through an entity’s right to exercise discretion in determining payments to policyholders Measurement of contracts with participation features

The cash flows of Read more

Potential voting rights

Potential voting rights Potential voting rights – An investor may hold instruments that (if exercised or converted), give the investor power to direct the relevant activities. These are called ‘potential voting rights’ and may be held through ownership of the following types of instrument:

  • share options and warrants Potential voting rights
  • convertible bonds Potential voting rights
  • convertible preference shares. Potential voting rights

Potential voting rights can contribute to control of an investee in combination with current voting rights, or even confer control on their own. However, IFRS 10 requires an assessment to determine whether potential voting rights are substantive. IFRS 10 has no bright lines and so judgment will be required.

IFRS 10’s ‘substantive’ assessment takes into account both:

  • the general guidance
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Private sector participation in public infrastructure

Private sector participation in public infrastructure – There are a wide variety of arrangements in operation globally whereby government or government agencies enter into contractual service arrangements to attract private sector participation in the development, financing, operation and maintenance of infrastructure for public services.

IFRIC 12 is concerned with the accounting by private sector operators for “public-to-private” service concession arrangements (which are also know by a variety of other titles, including “service concession” “build-operate-transfer” or “rehabilitate-operate-transfer” arrangements). These arrangements typically involve a private sector operator constructing (or upgrading) the infrastructure used to provide the public service, and then operating and maintaining the infrastructure for a specified period of time.

However, the Interpretation does not apply to all such arrangements. Its Read more

Practical ability

The reference to the “practical ability” to reassess the risk is intended to differentiate from a pure formal legal right to do so, but where practical facts and circumstances actually prevent the entity from doing so. For example, it might be practically impossible to assess the risk due to any or all of the following:

  • inaccessibility of the item bearing the risk;
  • moral reasons;
  • significant cost; or
  • significant business dangers.

It is not the expectation that the entity does not intend to apply the reassessment but only the expectation that, even if it wishes to do so, it would not be able due to practical reasons.

IFRS 17 B64 notes that practicable ability exists if the entity can reprice the Read more

Lease of retail space

Lease of retail space – When is a lease a lease and capitalised in the balance sheet and when is a contract a rental contract not a lease and expensed through profit or loss and disclosed as off-balance sheet commitments. Want to assess a no lease, look here and below a case is provided of a lease. Lease of retail space Lease of retail space

The case: Lease of retail space Lease of retail space

Customer enters into a contract with a property owner (Supplier) to use Retail Unit A for a five-year period. Retail Unit A is part of a larger retail space with many retail units.

Customer is granted the right to use Retail Unit A. Supplier can

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Not a lease Concession space

Not a lease Concession space – This is  a case to obtain an intriguing understanding of the concept of IFRS Leases. Easily understand the definition and characteristics of a lease contract. Looking at the definition of a lease an entity has to assess whether, throughout the period of use (= lease period), the lessee has met the following two rights:

  1. the right to obtain substantially all of the economic benefits from the use of the identified asset, and
  2. the right to direct the use of the identified asset.

A few particularities: Not a lease Concession space Not a lease Concession space Not a lease Concession space

  1. A supplier’s right to substitute an asset is substantive if two options are
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