29927 bd IFRS in pkt:29927 IFRS in pkt bd - CASPlus · 2017. 11. 13. · Title: 29927 bd IFRS in...

IFRSs in your pocket2009

29927 bd IFRS in pkt:29927 IFRS in pkt bd 29/04/2009 14:49 Page a

ContactsIFRS global office

Global IFRS leaderKen [email protected]

IFRS centres of excellence

Americas

New York MontrealRobert Uhl Robert [email protected] [email protected]

Asia-Pacific

Hong Kong MelbourneStephen Taylor Bruce [email protected] [email protected]

Europe-Africa

Johannesburg LondonGraeme Berry Veronica [email protected] [email protected]

Copenhagen ParisJan Peter Larsen Laurence [email protected] [email protected]

29927 bd IFRS in pkt:29927 IFRS in pkt bd 29/04/2009 14:49 Page b

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ForewordWelcome to the 2009 edition of IFRSs in your Pocket, which brings thebooklet up to date for developments up to the first quarter of 2009.We address the same material that has made this publication a world-widefavourite: background information on the structure and workings of the IASB;analysis of the use of IFRSs around the world; summaries of all currentStandards and Interpretations; and up-to-date details of IASB and IFRIC agenda projects. It is an ideal guide for entities contemplating a move to IFRSs,as well as an update for veterans already reporting under the IFRS framework.

The global financial crisis that began in earnest in 2007 hit the IASB full-forceduring 2008 and continues to dominate its technical agenda in 2009. A high-profile amendment of IAS 39 in October 2008 permitted reclassification ofcertain non-derivative financial assets out of the ‘fair value through profit or loss’category. In addition, a number of other amendments to IFRSs were made,some through the Annual Improvements process and others as separateprojects, many of which are now effective. 1 January 2009 was also the effectivedate of IFRS 8 Operating Segments. The revised IFRS 3 and IAS 27 are effectivefrom 1 July 2009.

The next two years are expected to be almost unprecedented in terms of thevolume of activity related to IFRSs. Significant projects at the discussion paperstage in 2008 and 2009 include financial instruments, financial statementpresentation, leases, post-employment benefits, and revenue recognition. The IASB hopes to complete all further due process steps on these projects bymid-2011. Exposure drafts on other topics have signaled or are expected tosignal significant changes to current practices; in particular consolidation,derecognition, fair value measurement, insurance contracts and income taxes.Planned completion dates for these projects range from late 2009 to mid-2011.Add to this the ongoing repairs and maintenance of IFRSs through the AnnualImprovements process and other minor projects, and it is clear that IFRSscontinue to evolve at a rapid rate.

Not included in the summary above is any effect on the IASB’s agenda thatmight result from calls for action from the Financial Stability Forum, G20, orany of several other global constituents as they seek solutions to the financialcrisis. Financial reporting standards have assumed an unexpected prominencein the past few years – something that is likely to continue. It seems as thoughwe will be living in interesting times for a while longer.

You can keep up to date on later developments in the arena of internationalfinancial reporting via our IAS Plus website www.iasplus.com. We believethat it is the most comprehensive source of news about international financialreporting on the internet – please check in regularly.

Ken WildGlobal IFRS leaderDeloitte Touche Tohmatsu

29927 bd IFRS in pkt:29927 IFRS in pkt bd 29/04/2009 14:49 Page 1

Deloitte’s www.iasplus.com website provides, without charge,comprehensive information about international financial reporting in generaland IASB activities in particular. Unique features include:• daily news about financial reporting globally;• summaries of all Standards, Interpretations and proposals;• many IFRS-related publications available for download;• model IFRS financial statements and checklists;• an electronic library of several hundred IFRS resources;• all Deloitte comment letters to the IASB;• links to nearly 200 global IFRS-related websites;• e-learning modules for each IAS and IFRS;• complete history of adoption of IFRSs around the world;• updates on developments in national accounting standards; and• comparisons between IFRSs and local GAAPs.

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Our IAS Plus website


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ContentsPage

Abbreviations 4

IASB structure 5

Members of the IASB 7

IASB due process 9

IASB contact information 10

Obtaining IASB pronouncements and publications 11

IASB chronology 12

Use of IFRSs around the world 16

Recent pronouncements 30

Summaries of current Standards and related Interpretations 35

Current IASB agenda projects 106

IASB active research topics 111

Interpretations 112

IFRIC current agenda issues 114

Deloitte’s IFRS e-learning 115

Website addresses 116

Subscribe to our IAS Plus Update newsletter 117


Abbreviations CESR Committee of European Securities Regulators

DP Discussion paper

EC European Commission

ED Exposure draft

EEA European Economic Area (EU 27 + 3 countries)

EFRAG European Financial Reporting Advisory Group

EITF Emerging Issues Task Force (of FASB)

EU European Union (27 countries)

FASB Financial Accounting Standards Board (US)

FEE European Accounting Federation

GAAP Generally Accepted Accounting Principle(s)

IAS(s) International Accounting Standard(s)

IASB International Accounting Standards Board

IASC International Accounting Standards Committee (predecessor to the IASB)

IASCF IASC Foundation (parent body of the IASB)

IFRIC International Financial Reporting Interpretations Committee of theIASB, and Interpretations issued by that committee

IFRS(s) International Financial Reporting Standard(s)

IOSCO International Organization of Securities Commissions

NCI Non-controlling interest(s) (previously ‘minority’ interests)

SAC Standards Advisory Council (advisory to the IASB)

SEC Securities and Exchange Commission (US)

SIC Standing Interpretations Committee of the IASC, andInterpretations issued by that committee

SME(s) Small and medium-sized entity(ies)

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IASB structure

IASB structure 5

IASC Foundation22 trustees. Appoint, oversee, raise funds.

International Financial Reporting Interpretations

Committee14 members

Standards AdvisoryCouncil

Approx 40 members

Board 16 members (maximum 3 part-time).

Set technical agenda, approve Standards,exposure drafts and Interpretations.

Working groups formajor agenda projects

Monitoring BoardApprove and oversee trustees

AppointsReports toAdvises

2008-2009 constitution review

The trustees are undertaking a comprehensive review of the structure andconstitution of the IASB. The first part of the review was completed in January 2009 and important amendments to the IASCF constitution wereannounced (effective 1 February 2009), including the formation of aMonitoring Board, the expansion of the IASB from 14 to 16 members (with up to three part-time), and a specified geographical mix for the IASB. The second part of the review (which will cover, among other things, dueprocess, funding, scope of IFRSs, and the SAC), will be concluded during 2009.


Monitoring Board

The primary purpose of the Monitoring Board is to serve as a mechanism forformal interaction between capital markets authorities and the IASCF – theobjective being to facilitate capital market authorities that allow or require theuse of IFRSs in their jurisdictions to effectively discharge their mandatesrelating to investor protection, market integrity and capital formation.

The responsibilities of the Monitoring Board include:

• participating in the process for appointing trustees and approving theappointment of trustees according to the guidelines set out in the IASCF’sconstitution; and

• reviewing and providing advice to the trustees on their fulfilment of theresponsibilities set out in the IASCF’s constitution. The trustees will make anannual written report to the Monitoring Board.

Backgrounds of members: the Monitoring Board comprises the relevantleaders of the European Commission, the Financial Services Agency of Japan,the US Securities and Exchange Commission, the Emerging Markets Committeeof IOSCO, and the Technical Committee of IOSCO. The chairman of the BaselCommittee on Banking Supervision is a non-voting observer.

IASC Foundation

Geographical balance: six trustees from North America; six from Europe; six from the Asia/Oceania region; and four from any area (subject to maintainingoverall geographical balance).

Backgrounds of trustees: the constitution requires an appropriate balance ofprofessional backgrounds, including auditors, preparers, users, academics, andother officials serving the public interest. Two will normally be senior partnersof prominent international accounting firms.

International Accounting Standards Board

Geographical balance: to ensure a broad international diversity, by July 2012there will normally be four members from the Asia/Oceania region; four fromEurope; four from North America; one each from Africa and South America;and two appointed from any area, subject to maintaining overall geographicalbalance.

Backgrounds of Board members: the main qualification for membership inprofessional competence and practical experience. The group is required torepresent the best available combination of technical expertise and diversity ofinternational business and market experience.

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Members of the IASB Sir David Tweedie, Chairman Sir David became the first IASB Chairman on1 January 2001, having served from 1990-2000 as the first full-time Chairmanof the UK Accounting Standards Board. Before that, he was national technicalpartner for KPMG and was a professor of accounting in his native Scotland. He previously worked on international standard-setting issues both as the firstChairman of the G4+1 and as a member of the IASC. Term expires 30 June2011.

Thomas E. Jones, Vice-Chairman As the former Principal Financial Officer ofCiticorp and Chairman of the IASC Board, Tom Jones brings extensiveexperience in standard setting and the preparation of financial statements forfinancial institutions. A British citizen, Mr. Jones has worked in Europe and theUS. Term expires 30 June 2009.

Mary E. Barth As a part-time Board member, Mary Barth, a US citizen, retainsher position as Senior Associate Dean of the Graduate School of Business atStanford University. Professor Barth was previously a partner at ArthurAndersen. Term expires 30 June 2009.

Stephen Cooper Appointed August 2007, initially as a part-time Boardmember, changed to full-time January 2009. Stephen Cooper was ManagingDirector and head of valuation and accounting research at UBS InvestmentBank. He has also been a member of the Corporate Reporting User Forum,and of the IASB’s Analysts’ Representative Group and Financial StatementPresentation working group. Term expires 30 June 2012.

Philippe Danjou Philippe Danjou has previously served as director of theaccounting division of the Autorité des Marches Financiers (AMF), the Frenchsecurities regulator. He was also Executive Director of the French Ordre desExperts Comptables (OEC) from 1982 to 1986, and has acted in variousadvisory roles for European and international accounting and auditing groups.Term expires 30 June 2011.

Jan Engström Jan Engström, a Swedish citizen, has held senior financialand operating positions with the Volvo Group, including serving on themanagement board as Chief Financial Officer and as Chief Executive Officer of Volvo Bus Corporation. Term expires 30 June 2014.

Robert P. Garnett Mr. Garnett was the Executive Vice President of Finance for Anglo American plc, a South African company listed on the London StockExchange. He has worked as a preparer and analyst of financial statements in his native South Africa. He serves as Chairman of IFRIC. Term expires 30 June 2010.

Members of the IASB 7


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Gilbert Gélard Having been a partner at KPMG in his native France, GilbertGélard has extensive experience with French industry. Mr. Gélard speaks eightlanguages and is a former member of the French standard-setting body (CNC).He was also a member of the former IASC Board. Term expires 30 June 2010.

Prabhakar Kalavacherla (‘PK’) Mr. Kalavecherla was appointed to the IASB as a full-time member as of 1 January 2009. He was previously a partner atKPMG LLP, serving as reviewing partner for both IFRS financial statements and filings with the US Securities and Exchange Commission. He has workedextensively in India and in Europe and has specialised in technology andbiotechnology. Mr Kalavacherla is a member of both the Institute of CharteredAccountants of India and the American Institute of Certified Public Accountants.Term expires 30 June 2013.

James J. Leisenring Jim Leisenring has worked on issues related to accountingstandard setting over the past three decades, as the Vice Chairman and lateras Director of International Activities of the FASB in the United States. While atthe FASB, Mr. Leisenring served for several years as the FASB’s observer atmeetings of the former IASC Board. Term expires 30 June 2010.

Warren McGregor Mr. McGregor developed an intimate knowledge ofstandard-setting issues with his work over 20 years at the AustralianAccounting Research Foundation, where he ultimately became the ChiefExecutive Officer. Term expires 30 June 2011.

John T. Smith Mr. Smith was previously a partner at Deloitte & Touche (USA).He was a member of the FASB’s Emerging Issues Task Force, DerivativesImplementation Group, and Financial Instruments Task Force. He served on theIASC Task Force on Financial Instruments and chaired the IASC’s IAS 39Implementation Guidance Committee. He has also been a member of theIASC, SIC and IFRIC. Term expires 30 June 2012.

Tatsumi Yamada Tatsumi Yamada was a partner at the Japanese member firmof PricewaterhouseCoopers. He brings extensive experience of internationalstandard setting as a Japanese member of the former IASC Board between1996 and 2000. Term expires 30 June 2011.

Zhang Wei-Guo From 1997 to 2007, Zhang Wei-Guo was Chief Accountantof the China Securities Regulatory Commission (CSRC). Before joining theCSRC, Dr Zhang was a professor at Shanghai University of Finance andEconomics (SUFE) where he also received his PhD in economics. Term expires30 June 2012.


9IASB due process

IASB due processFormal due process for projects normally, but not necessarily, involves thefollowing steps (steps required by the IASCF constitution are indicated by an asterisk):

• staff are asked to identify and review the issues associated with a potentialagenda topic and to consider the application of the Framework to theissues;

• national accounting requirements and practice are studied, and viewsabout the issues are exchanged with national standard-setters;

• the Standards Advisory Council is consulted about the advisability of addingthe topic to the IASB’s agenda*;

• an advisory group is formed (generally called a ‘working group’) to advisethe IASB and its staff on the project;

• a discussion document is published for public comment (usually called adiscussion paper, which will often include the Board’s preliminary views onsome of the issues in the project);

• an exposure draft approved by at least nine votes of the IASB is publishedfor public comment, including therein any dissenting opinions held by IASBmembers (in exposure drafts, dissenting opinions are referred to as‘alternative views’)*;

• a basis for conclusions is included within the exposure draft;

• all comments received within the comment period on discussiondocuments and exposure drafts are considered*;

• the desirability of holding a public hearing and of conducting field-tests isconsidered and, where appropriate, these steps are undertaken;

• a Standard is approved by at least nine votes of the IASB and any dissentingopinions are included in the published Standard*; and

• a basis for conclusions is included within the final Standard explaining,among other things, the steps in the IASB’s due process and how the IASBhas dealt with comments received on the exposure draft.


Sir David Tweedie IASB Chairman [email protected]

Thomas E. Jones IASB Vice Chairman [email protected]

Alan Teixeira Director of TechnicalActivities

[email protected]

Peter Clark Director of Research [email protected]

Gavin Francis Director of CapitalMarkets

[email protected]

Tricia O’Malley(to 30 June 2009)

Director of ImplementationActivities

[email protected]

Paul Pacter Director of Standards forSMEs

[email protected]

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IASB contact informationInternational Accounting Standards Board30 Cannon Street, London EC4M 6XH, United Kingdom

General enquiries

• Telephone: +44-20-7246-6410

• Fax: +44-20-7246-6411

• General e-mail: [email protected]

• Office hours: Monday-Friday 08:30-18:00 London time

• Website: www.iasb.org

Publications department orders and enquiries

• Telephone: +44-20-7332-2730

• Fax: +44-20-7332-2749

• Publications e-mail: [email protected]

• Office hours: Monday-Friday 09:30-17:30 London time

Board Chairman and Vice Chairman, and Technical Directors


11Obtaining IASB pronouncements and publications

Obtaining IASBpronouncements andpublicationsIASB pronouncements can be purchased in printed and electronic formats onthe IASB’s website (see previous page). The IASB has announced that it intendsto put its Standards (including mandatory application guidance, but notimplementation guidance or bases for conclusions) on its website for freedownload starting some time in 2009. Discussion papers and exposure draftsmay be downloaded from the IASB’s website without charge while thecomment period is open.


IASB chronology1973 Agreement to establish IASC is signed by representatives of the

professional accountancy bodies in Australia, Canada, France,Germany, Japan, Mexico, Netherlands, United Kingdom/Irelandand United States.

Steering committees for IASC’s first three projects are appointed.

1975 First final IASs are published: IAS 1(1975) Disclosure of AccountingPolicies, and IAS 2(1975) Valuation and Presentation of Inventoriesin the Context of the Historical Cost System.

1982 IASC Board is expanded to up to 17 members, including 13 countrymembers appointed by the Council of the International Federationof Accountants (IFAC) and up to 4 representatives of organisationswith an interest in financial reporting. IFAC recognises and will lookto IASC as the global accounting standard-setter.

1989 European Accounting Federation (FEE) supports internationalharmonisation and greater European involvement in IASC.IFAC adopts a public-sector guideline to require governmentbusiness enterprises to follow IASs.

1994 IASC Advisory Council is established, with responsibilities foroversight and finances.

1995 European Commission supports the agreement between IASCand International Organization of Securities Commissions (IOSCO)to complete core standards and concludes that IASs should befollowed by European Union multinationals.

1996 US SEC announces its support of IASC’s objective to develop,as expeditiously as possible, accounting standards that could beused in preparing financial statements for the purpose of cross-border offerings.

1997 Standing Interpretations Committee (SIC) is formed. 12 votingmembers. Mission to develop interpretations of IASs for finalapproval by IASC.

Strategy Working Party is formed to make recommendationsregarding the future structure and operation of IASC.

1998 IFAC/IASC membership expands to 140 accountancy bodies in101 countries.

IASC completes the core Standards with approval of IAS 39.

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1999 G7 Finance Ministers and International Monetary Fund urge supportfor IASs to “strengthen the international financial architecture”.

IASC Board unanimously approves restructuring into 14-memberboard (12 full-time) under an independent board of trustees.

2000 IOSCO recommends that its members allow multinational issuers touse IASC standards in cross-border offerings and listings.

Ad hoc nominating committee is formed, chaired by US SECChairman Arthur Levitt, to nominate the trustees who will overseethe new IASB structure.

IASC member bodies approve IASC’s restructuring and a newIASC Constitution.

Nominating committee announces initial trustees.

Trustees name Sir David Tweedie (chairman of the UK AccountingStandards Board) as the first Chairman of restructured IASB.

2001 Members and new name of IASB are announced. IASC Foundation isformed. On 1 April 2001, the new IASB assumes its standard-settingresponsibilities from the IASC. Existing IASs and SICs adopted by IASB.

IASB moves into its new offices at 30 Cannon Street, London.

IASB meets with chairs of its eight liaison national accountingstandard-setting bodies to begin coordinating agendas and settingout convergence goals.

2002 SIC is renamed as the International Financial ReportingInterpretations Committee (IFRIC) with a mandate not only tointerpret existing IASs and IFRSs but also to provide timelyguidance on matters not addressed in an IAS or IFRS.

Europe requires IFRSs for listed companies starting 2005.

IASB and FASB issue joint agreement on convergence.

2003 First final IFRS and first IFRIC draft Interpretation are published.

Improvements project is completed – major revisions to 14 IASs.

2004 Extensive discussions about IAS 39 in Europe, leading to ECendorsement with two sections of IAS 39 ‘carved out’.

Webcasting of IASB meetings begins.

IFRSs 2 through 6 are published.

IFRICs 1 through 5 are published.

13IASB chronology


2005 IASB Board member becomes IFRIC chairman.

Constitutional changes.

US SEC publishes ‘roadmap’ to eliminating IFRS-US GAAPreconciliation.

EC eliminates fair value option IAS 39 ‘carve-out’.

Meetings of Working Groups opened to public.

IFRS 7 is published.

IFRICs 6 and 7 are published (and IFRIC 3 withdrawn).

2006 IASB/FASB update agreement on convergence.

IASB issues statement on working relationships with otherstandard setters.

IASB announces that no new major Standards will be effectivebefore 2009.

IFRS 8 is published.

IFRICs 8 through 12 are published.

2007 IFRIC is expanded from 12 to 14 members.

US SEC drops requirement for reconciliation to US GAAP forforeign IFRS registrants and invites comments on use of IFRSs byUS domestic registrants.

Revisions to IAS 1 and IAS 23 are published.

IFRICs 13 and 14 are published.

Board proposes separate IFRS for small and medium-sized entities(SMEs).

2008 IOSCO issues statement urging entities to clearly state whether theycomply in full with IFRSs as adopted by the IASB.

IASB and FASB accelerate joint projects for completion in mid-2011,in anticipation of adoption of IFRSs by additional jurisdictions,including the US, by around 2014.

American Institute of Certified Public Accountants designates IASB as a recognised standard setter under its ethics rules.

SEC proposes ‘roadmap’ for use of IFRSs by US domestic registrants.

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2008 Amendments to IFRS 1, IFRS 2, IFRS 3, IFRS 7, IAS 1, IAS 27, IAS 32 (cont’d) and IAS 39 are issued.

First Annual Improvements Standard is issued.

IFRICs 16 and 17 are published.

IASB’s response to global financial crisis includes new fair valueguidance; fast-track amendments to IAS 39; acceleration of projectson fair value measurement, consolidation and derecognition;enhanced financial instruments disclosures; and appointment of twoexpert advisory groups.

2009 IASB is expanded to 16 members (including maximum 3 part-time)and geographical mix established.

IASCF forms a Monitoring Board of public authorities.

Revisions to IFRS 7, IAS 39 and IFRIC 9 are issued.

IFRIC 18 is issued.

Response to global financial crisis continues (see 2008).

15IASB chronology


Use of IFRSs around the worldUse of IFRSs for domestic reporting by listed companies as of March 2009. We keep this table up to date, and also have information about the use ofIFRSs by unlisted companies, at www.iasplus.com/country/useias.htm

LocationIFRSs notpermitted

IFRSspermitted

Required for somedomestic

listedcompanies

Required for all

domesticlisted

companies

Abu Dhabi(UAE)

X

Albania No stock exchange. Companies use Albanian GAAP.

Algeria No stock exchange. IFRSs not permitted.

AmericanSamoa

No stock exchange. Companies may use IFRSs.

Anguilla X

Antigua andBarbuda

X

Argentina X

Armenia X

Aruba X

Austria X (a)

Australia X (b)

Azerbaijan X (c)

Bahamas X

Bahrain X

Bangladesh X

Barbados X

Belgium X (a)

BelarusBanks from

2008

Belize No stock exchange. Companies may use IFRSs.

Benin X

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IFRSspermitted


listedcompanies

Required for all

domesticlisted

companies

Bermuda X

Bhutan X

Bolivia X

Bosnia andHerzegovina

All large andmedium-sized

Botswana X

Brazil X From 2010

BruneiDarussalam

No stock exchange. Companies may use IFRSs.

Bulgaria X (a)

Burkina Faso X

Cambodia No stock exchange. Companies may use IFRSs.

Canada From 2011

Cayman Is. X

Chile X

China X

Cote D’Ivoire X

Colombia X

Costa Rica X

Croatia X

Cuba X

Cyprus X (a)

CzechRepublic

X (a)

Denmark X (a)

Dominica X

DominicanRepublic

X

17Use of IFRSs around the world



IFRSspermitted


listedcompanies

Required for all

domesticlisted

companies

Dubai (UAE)Required for

banks

EcuadorPhase-in2010-2012

Egypt X

El Salvador X

EritreaNo stock exchange. IFRSs required for government-ownedand some private sector entities.

Estonia X (a)

Fiji X

Finland X (a)

France X (a)

Gambia No stock exchange. Companies may use IFRSs.

Germany X (a)

Georgia X

Ghana X

Gibraltar X

Greece X (a)

Greenland No stock exchange. Companies may use IFRSs.

Grenada X

Guam No stock exchange. Companies use US GAAP.

Guatemala X

Guyana X

Haiti X

Honduras X

Hong Kong X (d)

Hungary X (a)

Iceland X (a)

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IFRSspermitted


listedcompanies

Required for all

domesticlisted

companies

India X

Indonesia X

Iran X X

Iraq X

Ireland X (a)

IsraelAll except

banks

Italy X (a)

Jamaica X

Japan X

Jordan X

Kazakhstan X

Kenya X

Korea (South)

Korean equivalents of IFRSs permitted for listed companiesother than banks from 2009. Required from 2011.

Kuwait X

Kyrgyzstan X

Laos X

Latvia X (a)

Lebanon X

Liechtenstein X (a)

Lesotho X

Lithuania X (a)

Luxembourg X (a)

Macau No stock exchange. Companies may use IFRSs.

Macedonia X

Malawi X




IFRSspermitted


listedcompanies

Required for all

domesticlisted

companies

Malaysia X

Maldives X

Mali X

Malta X (a)

Mauritania No stock exchange. IFRSs not permitted.

Mauritius X

Mexico X (e)

Moldova X

Mongolia X

Montenegro X

Morocco Non-banks Banks

Mozambique Non-banks Banks

Myanmar X

Namibia X

Netherlands X (a)

NL Antilles X

Nepal X

New Zealand X (b)

Nicaragua X

Niger X

Nigeria X

Norway X (a)

Oman X

Pakistan X

Panama X

Papua NewGuinea

X

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IFRSspermitted


listedcompanies

Required for all

domesticlisted

companies

Paraguay X

Peru X

Philippines X (f)

Poland X (a)

Portugal X (a)

Qatar X

Reunion No stock exchange. Companies may use IFRSs.

Romania X (a)

RussianFederation

Non-banks Banks

Samoa No stock exchange. Companies may use IFRSs.

Saudi Arabia X

Serbia X

Sierra Leone No stock exchange (one is being developed). IFRSs required for all unlisted companies.

Singapore X (f)

SlovakRepublic

X (a)

Slovenia X (a)

South Africa X

Spain X (a)

Sri Lanka X

St Kitts & Nevis

X

Suriname X

Swaziland X

Sweden X (a)

Switzerland X




IFRSspermitted


listedcompanies

Required for all

domesticlisted

companies

Syria X

Taiwan X

Tajikistan X

Tanzania X

Thailand X

Togo X

Trinidad andTobago

X

Tunisia X

Turkey X (g)

Uganda X

Ukraine X

UnitedKingdom

X (a)

United States X (h)

Uruguay X (c)

Uzbekistan X

Vanuatu No stock exchange. Companies may use IFRSs.

Venezuela X

Vietnam X

Virgin Islands(British)

X

Virgin Islands(US)

No stock exchange. Companies use US GAAP.

WestBank/Gaza

X

Yemen No stock exchange. Companies may use IFRSs.

Zambia X

Zimbabwe X

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(a) Audit report and basis of presentation refer to IFRSs as adopted by the EU.

(b) Compliance with IFRSs is stated in a note and audit report.

(c) By law, all companies must follow IFRSs approved by the government, andapproval is not up to date.

(d) Local standards identical to IFRSs, but some effective dates and transitionalprovisions differ.

(e) Plan announced for adoption starting 2012.

(f) Most IFRSs adopted, but some significant modifications were made.

(g) Turkish companies may follow English version of IFRSs, or Turkishtranslation. If the latter, because of the translation delay, audit report andbasis of presentation refer to ‘IFRSs as adopted for use in Turkey’.

(h) SEC permits foreign private issuers to file financial statements preparedusing IFRSs as issued by the IASB without having to include a reconciliationof the IFRS figures to US GAAP.



Use of IFRSs in Europe

European Accounting Regulation effective from 2005

Listed companies To implement a ‘financial reporting strategy’ adopted by the European Commission (EC) in June 2000, the European Union (EU) in2002 approved an Accounting Regulation requiring all EU companies listed ona regulated market (about 8,000 companies in total) to follow IFRSs in theirconsolidated financial statements starting in 2005. The IFRS requirementapplies not only in the 27 EU countries but also in the three EuropeanEconomic Area (EEA) countries. Most large companies in Switzerland (not anEU or EEA member) also use IFRSs.

For the purpose of filings by non-EU companies listed on an EU regulatedmarket, in December 2008, the EC designated the GAAPs of the United States,Japan, China, Canada, South Korea and India to be equivalent to IFRSs as adopted by the EU. (The status of China, Canada, South Korea and Indiawill be re-examined by 31 December 2011.) Companies from other countriesmust use either IFRSs as adopted by the EU or IFRSs as adopted by the IASBstarting 2009.

Unlisted companies and separate-company statements EU Member Statesmay extend the IFRS requirement to non-listed companies and to separate-company statements. Nearly all Member States permit some or all non-listedcompanies to use IFRSs in their consolidated statements, and the majoritypermit it in separate statements. Details can be found on www.iasplus.com

Endorsement of IFRSs for use in Europe

Under the EU Accounting Regulation, IFRSs must be individually endorsed foruse in Europe. The endorsement process involves the following steps:

• EU translates the IFRSs into all European languages;

• the private-sector European Financial Reporting Advisory Group (EFRAG)gives its views to the EC;

• the EC’s Standards Advice Review Group (SARG) gives its views to the ECon EFRAG’s recommendations;

• the EC’s Accounting Regulatory Committee makes an endorsementrecommendation; and

• the EC submits the endorsement proposal to the European Parliament’sRegulatory Procedure with Scrutiny Committee and to the 27-memberCouncil of the EU. Both must approve endorsement or the proposal issent back to the EC for further consideration.

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By the end of March 2009, the EC had voted to endorse all IFRSs except therevisions to IFRS 1, IFRS 3, IFRS 7, IAS 27, IAS 32 and IAS 39 issued in 2008and early 2009, and all Interpretations except IFRICs 15, 16, 17 and 18 andthe March 2009 amendments to IFRIC 9 – but with one carve-out from IAS 39Financial Instruments: Recognition and Measurement. The carve-out allowsthe use of fair value hedge accounting for interest rate hedges of coredeposits on a portfolio basis.

Enforcement of IFRSs in Europe

European securities markets are regulated by individual member states, subjectto certain regulations adopted at the EU level. EU-wide regulations include:

• standards adopted by the Committee of European Securities Regulators(CESR), a consortium of national regulators. Standard No. 1 Enforcement ofStandards on Financial Information in Europe sets out 21 high levelprinciples that EU member states should adopt in enforcing IFRSs.Standard No. 2 Coordination of Enforcement Activities adopts guidelinesfor implementing Standard No. 1;

• the Directive on Statutory Audit of Annual Accounts and ConsolidatedAccounts was issued in September 2006. The new Directive replaced the8th Directive and amended the 4th and 7th Directives. Among other things,the Directive adopted International Standards on Auditing throughout theEU and required Member States to form auditor oversight bodies; and

• amendments to EU directives that establish the collective responsibility ofboard members for a company’s financial statements.

In March 2009, a high-level EU study group recommended that the current EUgroups of bank, insurance and securities regulators be transformed into threenew European authorities (the European Banking Authority, the EuropeanSecurities Authority, and the European Insurance Authority) with strongeroversight power and, in some cases, legal powers. These proposals arecurrently under study.

In February 2009, the European Commission approved a plan to provide €5 million of funding to the IASB annually 2011 through 2013.



Use of IFRSs in the United States

SEC recognition of IFRSs

Of the approximately 13,000 companies whose securities are registeredwith the US Securities and Exchange Commission (SEC), over 1,150 are non-UScompanies. Prior to November 2007, if these foreign private issuers submittedIFRS or local GAAP financial statements rather than US GAAP, a reconciliationof net income and net assets to US GAAP figures was required.

In November 2007, the SEC voted to allow foreign private issuers to submitfinancial statements prepared using IFRSs as issued by the IASB without havingto include a reconciliation of the IFRS figures to US GAAP. This new ruleapplies to financial statements covering years ended after 15 November 2007.

In August 2007, the SEC published for public comment a ‘Concept Release’to stimulate debate on whether to allow US domestic issuers to submit IFRSfinancial statements for the purpose of complying with the rules andregulations of the SEC.

In November 2008, the SEC published for public comment a proposed IFRS‘roadmap’. The roadmap outlines milestones that, if achieved, could lead tomandatory transition to IFRSs starting for fiscal years ending on or after15 December 2014. The proposed roadmap would also allow certain entitiesto adopt IFRSs before that date.

IFRS-US GAAP convergence

The Norwalk Agreement

In October 2002, the FASB and the IASB formalised their commitment to theconvergence of US GAAP and IFRSs by issuing a memorandum ofunderstanding (commonly referred to as the ‘Norwalk Agreement’). The twoboards pledged to use their best efforts to:

• make their existing financial reporting standards fully compatible as soonas is practicable; and

• co-ordinate their future work programmes to ensure that, once achieved,compatibility is maintained.

’Compatible‘ does not mean word-for-word identical standards, but ratherthat there are no significant differences between the two sets of standards.

Memorandum of Understanding 2006-2008

In February 2006, the FASB and the IASB released a Memorandum ofUnderstanding (MOU) that identified short- and long-term convergenceprojects with steps and milestones toward achieving convergence. The MOUwas updated in 2008.

26


Short-term projects

The FASB and the IASB set the goal of concluding by 2008 whether majordifferences in a few focussed areas should be eliminated through one ormore short-term projects and, if so, completing or substantially completingwork in those areas. The status of those short-term projects is as follows.

• Projects completed

Joint: Business Combinations

FASB: Fair Value Option

Research and development assets acquired in a businesscombination

IASB: Borrowing Costs

Operating Segments

• Ongoing short-term convergence

FASB: Subsequent Events

Investment Properties

Research and Development

IASB: Joint Arrangements

Income Taxes

• Short-term convergence work deferred

Government Grants

Impairment

Long-term projects

The goal for 2009 for the projects listed below is to have made significantprogress in the areas identified for improvement (IASB status shown inbrackets).

• Conceptual framework (ED on objectives and DP on reporting entity issuedin 2008; DP on measurement planned for 2009; and DP on elements andrecognition planned for 2010).

• Fair value measurement guidance (ED planned for first half of 2009; in 2008, as an interim step, the IASB published guidance developed by anExpert Group).

• Financial statement presentation – Phase B (ED planned for 2010).

• Post-employment benefits (ED planned for second half of 2009).

• Revenue recognition (ED planned for 2010).

• Liabilities and equity (ED planned for second half of 2009).



• Financial instruments – replacement of IAS 39 (ED planned for second half of 2009).

• Derecognition (ED issued in March 2009).

• Consolidation, including Special Purpose Entities (ED issued inDecember 2008).

• Intangible assets (not part of active agenda).

• Leases (DP issued in March 2009).

More specific goals have been set for each individual project.

Use of IFRSs in Canada

Currently, domestic Canadian companies listed in the United States areallowed to use US GAAP for domestic reporting. Foreign issuers in Canada arepermitted to use IFRSs. Canadian entities that are publicly accountable will berequired to apply IFRSs for their fiscal years beginning on or after 1 January2011. Earlier use of IFRSs is permitted on a case-by-case basis with approvalof the relevant securities regulator. Not-for-profit entities and pension plansare excluded and will not be required to adopt IFRSs.

Use of IFRSs elsewhere in the Americas

Chile is phasing in IFRSs for listed companies starting in 2009. Listed companiesand banks in Brazil are required to start using IFRSs in 2010. The MexicanBanking and Securities Commission has announced that all listed companies arerequired to use IFRSs starting in 2012. The accounting professional body inArgentina has adopted a plan, subject to government approval, to require IFRSsfor listed companies starting in 2011, with IFRSs optional for unlisted companies.IFRSs are already required in a number of other Latin American countries,including Ecuador and Venezuela.

Use of IFRSs in Asia-Pacific

Asia-Pacific jurisdictions are taking a variety of approaches towardconvergence of GAAP for domestic listed companies with IFRSs.

Requirement for IFRSs in place of national GAAP

Mongolia requires IFRSs for all domestic listed companies.

All national standards are virtually word-for-word IFRSs

Australia, Hong Kong, Korea (effective 2011, permitted in 2009), New Zealand, and Sri Lanka (effective 2011) are taking this approach.Effective dates and transitions may differ from IFRSs. New Zealand haseliminated some accounting policy options and added some disclosuresand guidance.

28


Nearly all national standards are word-for-word IFRSs

The Philippines and Singapore have adopted most IFRSs word-for-word,but have made some significant modifications.

Some national standards are close to word-for-word IFRSs

India, Malaysia, Pakistan and Thailand have adopted selected IFRSs quiteclosely, but significant differences exist in other national standards, and thereare time lags in adopting new or amended IFRSs. India has announced a planto adopt IFRSs in full as Indian Financial Reporting Standards effective 2011,while Malaysia will adopt IFRSs as Malaysian Financial Reporting Standards by2012 and Pakistan by 31 December 2009.

IFRSs are looked to in developing national GAAP

This is done to varying degrees in Indonesia, Japan, Taiwan and Vietnam, butsignificant differences exist.

In February 2006, China adopted a new Basic Standard and 38 new ChineseAccounting Standards generally consistent with IFRSs with few exceptions.

Japan and Taiwan have begun studying whether to require IFRSs for listedcompanies.

Some domestic listed companies may use IFRSs

This is true in China (companies listed in Hong Kong), Hong Kong (companiesbased in Hong Kong but incorporated elsewhere), Laos and Myanmar.



30

New Standards

None

Amendments to Standards

IAS 39/IFRS 7 Reclassifications of financial assets

New Interpretations

IFRIC 11

IFRIC 12

IFRIC 14

IFRS 2 – Group and Treasury ShareTransactions

Service Concession Arrangements

IAS 19 – The Limit on a DefinedBenefit Asset, Minimum FundingRequirements and their Interaction

Recent pronouncementsEffective for 31 December 2008 year ends


Available for early adoption for 31 December 2008 year ends


New Standards Effective for annual periods beginning on or after

IFRS 8 Operating Segments 1 January 2009

Revised Standards Effective for annual periods beginning on or after

IFRS 1(2008) First-time Adoption of 1 July 2009 International Financial Reporting Standards (restructuring November 2008)

IFRS 3(2008) Business Combinations Prospectively forbusinesscombinations inperiodsbeginning on orafter 1 July 2009Earlierapplicationpermitted – butnot for annualperiodsbeginning before30 June 2007

IAS 1(2007) Presentation of Financial 1 January 2009 Statements

IAS 23(2007) Borrowing Costs 1 January 2009

IAS 27(2008) Consolidated and Separate 1 July 2009 Financial Statements

Note: Transitional provisions are complex, and there are interdependenciesamong Standards. See Standards and Interpretations for details.


Amendments to Standards Effective for annual periods beginning on or after

IFRS 1 Cost of investment on 1 January 2009 first-time adoption

IFRS 2 Vesting conditions and 1 January 2009 cancellations

IFRS 7 Improving disclosures about 1 January 2009 financial instruments

IAS 27 Removal of the cost method 1 January 2009 definition

IAS 32 and IAS 1 Puttable financial instruments 1 January 2009 and obligations arising on liquidation

IAS 39 Eligible hedged items 1 July 2009

32

Improvements to IFRSs (May 2008)* Effective for annual periods beginning on or after

IFRS 5 Plan to sell the controlling 1 July 2009 interest in a subsidiary

IAS 1 Current/non-current 1 January 2009 classification of derivatives

IAS 16 Recoverable amount 1 January 2009

IAS 16/IAS 7 Sale of assets held for rental 1 January 2009

IAS 19 Plan administration costs 1 January 2009

Replacement of term ‘fall due’

Guidance on contingent liabilities

IAS 20 Government loans with a 1 January 2009 below-market rate of interest

IAS 23 Components of borrowing costs 1 January 2009

IAS 27 Measurement in separate 1 January 2009 financial statements

IAS 28 Impairment of investments 1 January 2009 in associates



Improvements to IFRSs (May 2008)* Effective for annual periods beginning on or after

IAS 28/IAS 31/ Required disclosures when 1 January 2009IAS 32/IFRS7 investments in associates and jointly controlled entities are accounted for at fair value through profit or loss

IAS 29 Description of historical cost 1 January 2009 financial statements

IAS 36 Disclosure of estimates used to 1 January 2009 determine recoverable amount

IAS 38 Advertising and promotional 1 January 2009 activities

Unit of production method of amortisation

IAS 39 Reclassifying instruments into 1 January 2009 and out of fair value through profit or loss

Designating and documenting hedges at the segment level

Applicable effective interest rate on cessation of fair value hedge accounting

IAS 40/IAS 16 Property under construction 1 January 2009 or development

IAS 41 Discount rate for fair value 1 January 2009 calculations

Additional biological transformation

*Amendments as a result of Improvements to IFRSs (May 2008) identified bythe IASB as resulting in accounting changes for presentation, recognition ormeasurement purposes have been included above. Amendments related toterminology or editorial changes only, which the IASB expects to have no orminimal effect on accounting, have not been included in this list. Refer toindividual Standards and Interpretations and www.iasplus.com for moreinformation.


Available for adoption after 2008 year ends

Amendments to Standards Effective for annual periods beginning on or after

IAS 19 Curtailments and negative 1 January 2009 past service costs

IAS 39 and IFRIC 9 Reassessment of embedded Ending on or derivatives after 30 June

2009

New Interpretations Effective for annual periods beginning on or after

IFRIC 13 Customer Loyalty Programmes 1 July 2008

IFRIC 15 Agreements for the Construction 1 January 2009 of Real Estate

IFRIC 16 Hedges of a Net Investment 1 October 2009 in a Foreign Operation

IFRIC 17 Distributions of Non-cash 1 July 2009 Assets to Owners

IFRIC 18 Transfers of Assets from Transfers of Customers assets from customers on or after 1 July 2009

34


Summaries of currentStandards and relatedInterpretationsOn pages 35 to 105, the requirements of all International Financial ReportingStandards in issue at 31 March 2009 are summarised, as well as the Preface toIFRSs and the Framework for the Preparation and Presentation of FinancialStatements.

These summaries are intended as general information and are not a substitutefor reading the entire Standard or Interpretation.

The text has been updated for recent amendments to IFRSs even where theseare effective for 2009 and subsequent accounting periods. For informationabout previous versions of Standards, please refer to previous editions of IFRSsin your pocket.

‘Effective date’ means the effective date of the last comprehensive revision ofthe Standard or Interpretation, not necessarily original issuance .

Preface to International Financial Reporting Standards

Adoption Adopted by the IASB in May 2002.

Summary Covers, among other things:

• the objectives of the IASB;

• the scope of IFRSs;

• due process for developing Standards andInterpretations;

• equal status of ‘black letter’ and ‘grey letter’paragraphs;

• policy on effective dates; and

• use of English as the official language.

Current Standards and Interpretations 35


Framework for the Preparation and Presentation ofFinancial Statements

Adoption Approved by the IASC Board in April 1989.

Adopted by the IASB in April 2001.

All of the requirements of the Framework arecurrently under reconsideration as part of the jointIASB/FASB Conceptual Framework project.

Summary • Defines the objective of general purposefinancial statements. The objective is to provideinformation about the financial position,performance and changes in financial positionof an entity that is useful to a wide range ofusers in making economic decisions.

• Identifies the qualitative characteristics thatmake information in financial statementsuseful. The Framework identifies four principalqualitative characteristics: understandability,relevance, reliability and comparability.

• Defines the basic elements of financialstatements and the concepts for recognisingand measuring them in financial statements.Elements directly related to financial positionare assets, liabilities and equity. Elementsdirectly related to performance are incomeand expenses.

IFRS 1 First-time Adoption of International FinancialReporting Standards

Effective date First IFRS financial statements for a periodbeginning on or after 1 January 2004.

Amendments (January 2008) relating to cost of aninvestment on first-time adoption are effective1 January 2009, with earlier application permitted.

Restructured Standard (November 2008) iseffective 1 July 2009 (no revision of technicalcontent).

36


Objective To prescribe the procedures when an entity adoptsIFRSs for the first time as the basis for preparing itsgeneral purpose financial statements.

Summary Overview for an entity that adopts IFRSs for thefirst time (by an explicit and unreserved statementof compliance with IFRSs) in its annual financialstatements for the year ended 31 December 2008.

• Select accounting policies based on IFRSs inforce at 31 December 2008.

• Prepare at least 2008 and 2007 financialstatements and restate retrospectively theopening statement of financial position byapplying the IFRSs in force at 31 December2008, except for those matters dealt with inspecific exemptions in IFRS 1:

– the opening statement of financial positionis prepared at 1 January 2007 at the latest(but may be earlier if the entity elects topresent more than one year of comparativeinformation under IFRSs);

– the opening statement of financial positionis presented in the entity’s first IFRS financialstatements (therefore, three statements offinancial position); and

– if a 31 December 2008 adopter reportsselected financial data (but not full financialstatements) on an IFRS basis for periodsprior to 2007, in addition to full financialstatements for 2007 and 2008, that doesnot change the fact that its opening IFRSstatement of financial position is as at1 January 2007.

Interpretations None.

Useful Deloitte First-time adoption: A guide to IFRS 1publication

Currently under revision. Will be available fordownload atwww.iasplus.com/dttpubs/pubs.htm



IFRS 2 Share-based Payment

Effective date Annual periods beginning on or after 1 January2005.

Amendments (January 2008) to clarify thedefinition of vesting conditions and theaccounting treatment of cancellations by thecounterparty to a share-based arrangement areeffective 1 January 2009, with earlier applicationpermitted.

Objective To prescribe the accounting for transactions inwhich an entity receives or acquires goods orservices either as consideration for its equityinstruments or by incurring liabilities for amountsbased on the price of the entity’s shares or otherequity instruments of the entity.

Summary • All share-based payment transactions arerecognised in the financial statements, usinga fair value measurement basis.

• An expense is recognised when the goods orservices received are consumed.

• IFRS 2 applies to both public and non-publicentities. However, if the fair value of equityinstruments of non-public entities cannot bemeasured reliably, intrinsic value measurementsare used.

• In principle, transactions in which goods orservices are received from non-employees asconsideration for equity instruments of theentity are measured at the fair value of thegoods or services received. Only if the fair valueof the goods or services cannot be measuredreliably is the fair value of the equityinstruments granted used.

• For transactions with employees and othersproviding similar services, the entity measuresthe fair value of the equity instruments granted,because it is typically not possible to estimatereliably the fair value of employee servicesreceived.

38


• For transactions measured at the fair value ofthe equity instruments granted (such astransactions with employees), fair value isestimated at grant date.

• For transactions measured at the fair value ofthe goods or services received, fair value isestimated at the date of receipt of those goodsor services.

• For goods or services measured by reference tothe fair value of the equity instruments granted,in general, vesting conditions (other thanmarket conditions) are not taken into accountwhen estimating the fair value of the shares oroptions at the relevant measurement date (as specified above). Instead, vesting conditionsare taken into account by adjusting the numberof equity instruments included in themeasurement of the transaction amount sothat, ultimately, the amount recognised forgoods or services received as consideration forthe equity instruments granted is based on thenumber of equity instruments that eventuallyvest.

• The January 2008 amendments restrict thedefinition of vesting condition to include onlyservice conditions and performance conditions,and amend the definition of performanceconditions to require the completion of aservice period in addition to specifiedperformance targets.

• The fair value of equity instruments granted isbased on market prices, if available, and takesinto account the terms and conditions onwhich those equity instruments were granted.In the absence of market prices, fair value isestimated using a valuation model to estimatewhat the price of those equity instrumentswould have been on the measurement date inan arm’s length transaction betweenknowledgeable, willing parties. IFRS 2 does notspecify which particular valuation model shouldbe used.



Interpretations IFRIC 8 Scope of IFRS 2

IFRIC 8 clarifies that IFRS 2 applies to share-basedpayment transactions in which the entity cannotspecifically identify some or all of the goods orservices received.

IFRIC 11 IFRS 2 – Group and Treasury ShareTransactions

IFRIC 11 clarifies the application of IFRS 2 tocertain share-based payment arrangementsinvolving the entity’s own equity instrumentsand to arrangements involving equity instrumentsof the entity’s parent.

Useful Deloitte Share-based payments: A guide to IFRS 2publication

2nd edition (June 2007). Guidance on applyingIFRS 2 to many common share-based paymenttransactions. Available for download atwww.iasplus.com/dttpubs/pubs.htm

IFRS 3(2008) Business Combinations

Effective date IFRS 3(2008) issued January 2008, replacingIFRS 3(2004).

Effective for business combinations in periodsbeginning on or after 1 July 2009. Earlierapplication permitted – but not for periodsbeginning before 30 June 2007.

See previous editions of IFRSs in your pocket for asummary of the requirements of IFRS 3(2004).

Core principle An acquirer of a business recognises the assetsacquired and liabilities assumed at theiracquisition-date fair values and disclosesinformation that enables users to evaluate thenature and financial effects of the acquisition.

Summary • A business combination is a transaction orevent in which an acquirer obtains control ofone or more businesses. A business is definedas an integrated set of activities and assets thatis capable of being conducted and managedfor the purpose of providing a return directlyto investors or other owners, members orparticipants.

40


• IFRS 3 does not apply to the formation of ajoint venture, combinations of entities orbusinesses under common control, nor to theacquisition of an asset or a group of assets thatdo not constitute a business.

• The acquisition method is used for all businesscombinations.

• Steps in applying the acquisition method.

1. Identification of the ‘acquirer’ – thecombining entity that obtains control of theacquiree.

2. Determination of the ‘acquisition date’ – thedate on which the acquirer obtains controlof the acquiree.

3. Recognition and measurement of theidentifiable assets acquired, the liabilitiesassumed and any non-controlling interest(NCI) in the acquiree.

4. Recognition and measurement of goodwillor a gain from a bargain purchase.

• Assets and liabilities are measured at theiracquisition-date fair values (with a limitednumber of specified exceptions). An entity mayelect to measure NCI either at (a) fair value or(b) the NCI’s proportionate share of the fairvalue of the identifiable net assets of theacquiree (option available on a transaction-by-transaction basis).

• Goodwill is measured as the differencebetween:

– the aggregate of (a) the acquisition-datefair value of the consideration transferred,(b) the amount of any NCI, and (c) in abusiness combination achieved in stages(see below), the acquisition-date fair valueof the acquirer’s previously-held equityinterest in the acquiree; and

– the net of the acquisition-date amounts ofthe identifiable assets acquired and theliabilities assumed (measured in accordancewith IFRS 3).

41Current Standards and Interpretations


• If the difference above is negative, the resultinggain is recognised as a bargain purchase inprofit or loss.

• For business combinations achieved in stages,if the acquirer increases an existing equityinterest so as to achieve control of the acquiree,the previously-held equity interest is remeasuredat acquisition-date fair value and any resultinggain or loss is recognised in profit or loss.

• If the initial accounting for a businesscombination can be determined onlyprovisionally by the end of the first reportingperiod, the combination is accounted for usingprovisional values. Adjustments to provisionalvalues relating to facts and circumstances thatexisted at the acquisition date are permittedwithin one year. No adjustments after one yearexcept to correct an error in accordance withIAS 8.

• Consideration for the acquisition includes theacquisition-date fair value of contingentconsideration. Changes to contingentconsideration classified as a liability resultingfrom events after the acquisition date aregenerally recognised in profit or loss.

• All acquisition-related costs (e.g. finder’s fees,professional or consulting fees, costs of internalacquisition department) are recognised in profitor loss except for costs to issue debt or equitysecurities, which are generally recognised inaccordance with IAS 39 and IAS 32 respectively.

• Expanded guidance on some specific aspects ofbusiness combinations, including:

– business combinations achieved without thetransfer of consideration;

– reverse acquisitions;

– identifying intangible assets acquired;

– pre-existing relationships between theacquirer and the acquiree (e.g. reacquiredrights); and

– the reassessment of the acquiree’scontractual arrangements at the acquisitiondate.

42



Useful Deloitte Business combinations and changes in publication ownership interests: A guide to the revised

IFRS 3 and IAS 27

Publication supplementing the IASB’s ownguidance for applying these Standards andaddressing practical implementation issues.Available for download atwww.iasplus.com/dttpubs/pubs.htm

IFRS 4 Insurance Contracts


Objective To prescribe the financial reporting for insurancecontracts until the IASB completes the secondphase of its project on insurance contracts.

Summary • Insurers are exempted from applying the IASBFramework and certain existing IFRSs.

• Catastrophe reserves and equalisationprovisions are prohibited.

• Requires a test for the adequacy of recognisedinsurance liabilities and an impairment test forreinsurance assets.

• Insurance liabilities may not be offset againstrelated reinsurance assets.

• Accounting policy changes are restricted.

• New disclosures are required.

• Financial guarantee contracts are in the scopeof IAS 39, unless the issuer had previously(prior to initial adoption of IFRS 4) assertedexplicitly that it regards such contracts asinsurance contracts and has used accountingapplicable to insurance contracts. In suchcircumstances, the issuer may elect to applyeither IAS 39 or IFRS 4.




44

IFRS 5 Non-current Assets Held for Sale and DiscontinuedOperations


Amendments resulting from Improvements to IFRSs(May 2008) regarding situations where an entityplans to sell the controlling interest in a subsidiaryare effective 1 July 2009, with earlier applicationpermitted provided that IAS 27 (as amended inMay 2008) is applied from the same date.

Objective To prescribe the accounting for non-current assetsheld for sale, and the presentation and disclosureof discontinued operations.

Summary • Introduces the classification ‘held for sale’(available for immediate sale and disposalwithin 12 months is highly probable) and theconcept of a disposal group (a group of assetsto be disposed of in a single transaction,including any related liabilities also transferred).

• Non-current assets or disposal groups held forsale are measured at the lower of carryingamount and fair value less costs to sell.

• Such non-current assets held for sale (whetherindividually or as part of a disposal group) arenot depreciated.

• A non-current asset classified as held for sale,and the assets and liabilities in a disposal groupclassified as held for sale, are presentedseparately in the statement of financial position.

• The May 2008 amendments require that assetsand liabilities of a subsidiary be classified asheld for sale if the parent is committed to aplan involving loss of control of the subsidiary,regardless of whether the entity will retain anon-controlling interest after the sale.


• A discontinued operation is a component of anentity that either has been disposed of or isclassified as held for sale and (a) represents aseparate major line of business or majorgeographical area of operations, (b) is part ofa single co-ordinated plan to dispose of aseparate major line of business or geographicalarea of operations, or (c) is a subsidiaryacquired exclusively with a view to resale.

• An entity presents as a single amount in thestatement of comprehensive income the sum ofthe profit or loss from discontinued operationsfor the period and the gain or loss arising onthe disposal of discontinued operations (or onthe reclassification of the assets and liabilities ofdiscontinued operations as held for sale).Therefore, the statement of comprehensiveincome is effectively divided into two sections –continuing operations and discontinuedoperations.


Useful Deloitte Assets held for sale and discontinued publication operations: A guide to IFRS 5

Published March 2008. Guidance on applyingIFRS 5. Available for download atwww.iasplus.com/dttpubs/pubs.htm

IFRS 6 Exploration for and Evaluation of Mineral Resources


Objective To prescribe the financial reporting for theexploration for and evaluation of mineral resourcesuntil the IASB completes a comprehensive projectin this area.



Summary • Does not require or prohibit any specificaccounting policies for the recognition andmeasurement of exploration and evaluationassets. An entity is permitted to continue to useits existing accounting policies provided thatthey comply with the requirements of paragraph10 of IAS 8, i.e. that they result in informationthat is relevant to the economic decision-making needs of users and that is reliable.

• Grants a temporary exemption from applyingparagraphs 11 and 12 of IAS 8 – which specifya hierarchy of sources of IFRS GAAP in theabsence of a specific Standard.

• Requires an impairment test when there is anindication that the carrying amount ofexploration and evaluation assets exceedsrecoverable amount. Also, exploration andevaluation assets are tested for impairmentbefore reclassification of those assets asdevelopment assets.

• Allows impairment to be assessed at a levelhigher than the ‘cash-generating unit’ underIAS 36, but measures impairment in accordancewith IAS 36 once it is assessed.

• Requires disclosure of information thatidentifies and explains amounts arising fromexploration and evaluation of mineralresources.


IFRS 7 Financial Instruments: Disclosures


Amendments (October 2008) regarding disclosuresfor reclassifications of financial assets are effectiveon or after 1 July 2008.

Amendments (March 2009) introducing a three-level fair value hierarchy for disclosing fair valuesand enhanced liquidity risk disclosures are effective1 January 2009, with early adoption permitted.

46


Objective To prescribe disclosures that enable financialstatement users to evaluate the significance offinancial instruments to an entity, the nature andextent of their risks, and how the entity managesthose risks.

Summary • Requires disclosure of information about thesignificance of financial instruments for anentity’s financial position and performance.These include:

– disclosures relating to the entity’s financialposition – including information aboutfinancial assets and financial liabilities bycategory; special disclosures when the fairvalue option is used; reclassifications;derecognitions; pledges of assets;embedded derivatives; and breaches ofterms of agreements;

– disclosures relating to the entity’sperformance in the period – includinginformation about recognised income,expenses, gains and losses; interest incomeand expense; fee income; and impairmentlosses; and

– other disclosures – including informationabout accounting policies; hedgeaccounting; and the fair values of each classof financial asset and financial liability.

• Requires disclosure of information about thenature and extent of risks arising from financialinstruments:

– qualitative disclosures about exposures toeach class of risk and how those risks aremanaged; and

– quantitative disclosures about exposures toeach class of risk, separately for credit risk,liquidity risk and market risk (includingsensitivity analyses).




Useful Deloitte iGAAP 2008: Financial instruments: IAS 32, publication IAS 39 and IFRS 7 explained

4th edition (May 2008). Guidance on how toapply these complex Standards, includingillustrative examples and interpretations.Information atwww.iasplus.com/dttpubs/pubs.htm

IFRS 8 Operating Segments

Effective date Annual periods beginning on or after 1 January2009, with earlier application permitted.Supersedes IAS 14 Segment Reporting from dateof application.

See previous editions of IFRSs in your pocket for asummary of the requirements of IAS 14.

Core principle An entity shall disclose information to enable usersof its financial statements to evaluate the natureand financial effects of the business activities inwhich it engages and the economic environmentsin which it operates.

Summary • Applies to the consolidated financial statementsof a group with a parent (and to the separateor individual financial statements of an entity):

– whose debt or equity instruments are tradedin a public market; or

– that files, or is in the process of filing, its(consolidated) financial statements with asecurities commission or other regulatoryorganisation for the purpose of issuing anyclass of instruments in a public market.

• An operating segment is a component of anentity:

– that engages in business activities fromwhich it may earn revenues and incurexpenses (including revenues and expensesrelating to transactions with othercomponents of the same entity);

48


– whose operating results are regularlyreviewed by the entity’s chief operatingdecision maker to make decisions aboutresources to be allocated to the segmentand assess its performance; and

– for which discrete financial information isavailable.

• Guidance is provided on which operatingsegments are reportable (generally 10%thresholds).

• At least 75% of the entity’s revenue must beincluded in reportable segments.

• Does not define segment revenue, segmentexpense, segment result, segment assets orsegment liabilities, nor does it require segmentinformation to be prepared in conformity withthe accounting policies adopted for the entity’sfinancial statements.

• Some entity-wide disclosures are requiredeven when an entity has only one reportablesegment. These include information about eachproduct and service or groups of products andservices.

• Analyses of revenues and certain non-currentassets by geographical area are required fromall entities – with an expanded requirement todisclose revenues/assets by individual foreigncountry (if material), irrespective of the entity’sorganisation.

• There is also a requirement to discloseinformation about transactions with majorexternal customers (10% or more of the entity’srevenue).




IAS 1(2007) Presentation of Financial Statements

Effective date Annual periods beginning on or after 1 January2009, with earlier application permitted.Supersedes IAS 1(2003) from date of application.

See previous editions of IFRSs in your pocket for asummary of the requirements of IAS 1(2003).

Amendments (February 2008) regardingdisclosures for puttable financial instruments andobligations arising on liquidation are effective1 January 2009, with earlier application permitted.

Amendments resulting from Improvements toIFRSs (May 2008) regarding the current/non-currentclassification of derivatives are effective 1 January2009, with earlier application permitted.

Objective To set out the overall framework for presentinggeneral purpose financial statements, includingguidelines for their structure and the minimumcontent.

Summary • Fundamental principles established for thepreparation of financial statements, includinggoing concern assumption, consistency inpresentation and classification, accrual basis ofaccounting, and materiality.

• Assets and liabilities, and income and expenses,are not offset unless offsetting is permitted orrequired by another IFRS.

• Comparative prior-period information ispresented for amounts shown in the financialstatements and notes.

• Financial statements are generally preparedannually. If the end of the reporting periodchanges, and financial statements arepresented for a period other than one year,additional disclosures are required.

• A complete set of financial statementscomprises:

– a statement of financial position;

– a statement of comprehensive income;

– a statement of changes in equity;

50


– a statement of cash flows;

– notes; and

– (only when an accounting policy has beenapplied retrospectively or items in thefinancial statements have been restated orreclassified) a statement of financial positionas at the beginning of the earliestcomparative period. (Therefore, in theselimited circumstances, generally threestatements of financial position.)

• Entities may use titles for the individual financialstatements other than those used above.

• Specifies minimum line items to be presented inthe statement of financial position, statementof comprehensive income and statement ofchanges in equity, and includes guidance foridentifying additional line items. IAS 7 providesguidance on line items to be presented in thestatement of cash flows.

• In the statement of financial position, current/non-current distinction is used for assets andliabilities unless presentation in order of liquidityprovides reliable and more relevant information.

• The May 2008 amendments state that financialinstruments classified as held for trading inaccordance with IAS 39 are not always requiredto be presented as current assets/liabilities.

• The statement of comprehensive incomeincludes all items of income and expense – (i.e. all ‘non-owner’ changes in equity)including (a) components of profit or loss and(b) other comprehensive income (i.e. items ofincome and expense that are not recognised inprofit or loss as required or permitted by otherIFRSs) These items may be presented either:

– in a single statement of comprehensiveincome (in which there is a sub-total forprofit or loss); or

– in a separate income statement (displayingcomponents of profit or loss) and a statementof comprehensive income (beginning withprofit or loss and displaying components ofother comprehensive income).



• Analysis of expenses recognised in profit orloss may be presented by nature or by function.If presented by function, specific disclosures by nature are required in the notes.

• The statement of changes in equity presents:

– total comprehensive income for the period;

– the effects on each component of equity ofretrospective application or retrospectiverestatement in accordance with IAS 8;

– transactions with owners in their capacityas owners; and

– for each component of equity, areconciliation between the opening andclosing balances, separately disclosing eachchange.

• Specifies minimum note disclosures whichinclude information about:

– accounting policies followed;

– the judgements that management has madein the process of applying the entity’saccounting policies that have the mostsignificant effect on the amounts recognisedin the financial statements; and

– capital structure and compliance with capitalrequirements.

• An appendix to IAS 1 includes illustrativefinancial statements other than the statementof cash flows (see IAS 7).

Interpretations SIC-29 Service Concession Arrangements:Disclosure

Disclosure is required if an entity agrees to provideservices that give the public access to majoreconomic or social facilities.

Useful Deloitte IAS 1(2007) Presentation of Financial publications Statements: A compliance checklist

Separate presentation and disclosure checklistsetting out the disclosures required by the revisedIAS 1.

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IFRS model financial statements

Illustrating the layout of financial statements, andthe presentation and disclosure requirements ofIFRSs. Available for download atwww.iasplus.com/fs/fs.htm

IAS 2 Inventories


Objective To prescribe the accounting treatment forinventories, including cost determination andexpense recognition.

Summary • Inventories are stated at the lower of cost andnet realisable value (NRV).

• Costs include purchase cost, conversion cost(materials, labour and overheads), and othercosts to bring inventory to its present locationand condition, but not foreign exchangedifferences.

• For inventory items that are notinterchangeable, specific costs are attributed tothe specific individual items of inventory.

• For interchangeable items, cost is determinedon either a First In First Out (FIFO) or weightedaverage basis. Last In First Out (LIFO) is notpermitted.

• When inventories are sold, the carrying amountis recognised as an expense in the period inwhich the related revenue is recognised.

• Write-downs to NRV are recognised as anexpense in the period of the write-down.Reversals arising from an increase in NRV arerecognised as a reduction of the inventoryexpense in the period in which they occur.




IAS 7 Statement of Cash Flows

Effective date Periods beginning on or after 1 January 1994.Title amended by IAS 1(2007), effective 1 January2009.

Amendments resulting from Improvements toIFRSs (May 2008) relating to cash flows arisingfrom sales of assets held for rental are effective1 January 2009, with earlier application permitted(see IAS 16).

Objective To require the presentation of information abouthistorical changes in an entity’s cash and cashequivalents by means of a statement of cash flowsthat classifies cash flows during the periodaccording to operating, investing and financingactivities.

Summary • The statement of cash flows analyses changesin cash and cash equivalents during a period.

• Cash equivalents include investments that areshort-term (less than three months from dateof acquisition), readily convertible to a knownamount of cash, and subject to an insignificantrisk of changes in value. Generally excludeequity investments.

• Cash flows from operating, investing andfinancing activities are separately reported.

• Cash flows arising from operating activities arereported using either the direct (recommended)or the indirect method.

• Cash flows arising from taxes on income areclassified as operating unless they can bespecifically identified with financing or investingactivities.

• The exchange rate used for translation oftransactions denominated in a foreign currencyand the cash flows of a foreign subsidiary is therate in effect at the date of the cash flows.

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• Aggregate cash flows relating to obtaining orlosing control of subsidiaries or otherbusinesses are presented separately andclassified as investing activities, with specifiedadditional disclosures.

• Investing and financing transactions that do notrequire the use of cash are excluded from thestatement of cash flows, but separatelydisclosed.

• Illustrative statements of cash flows areincluded in appendices to IAS 7.


IAS 8 Accounting Policies, Changes in AccountingEstimates and Errors


Objective To prescribe the criteria for selecting and changingaccounting policies, together with the accountingtreatment and disclosure of changes in accountingpolicies, changes in estimates, and errors.

Summary • Hierarchy for selection of accounting policies:

– IASB Standards and Interpretations, takinginto account any relevant IASBimplementation guidance;

– in the absence of a directly applicable IFRS,look to the requirements in IFRSs dealingwith similar and related issues; and thedefinitions, recognition criteria andmeasurement concepts for assets, liabilities,income and expenses in the Framework forthe Preparation and Presentation ofFinancial Statements; and

– management may also consider the mostrecent pronouncements of other standard-setting bodies that use a similar conceptualframework to develop accounting standards,other accounting literature, and acceptedindustry practices.



• Accounting policies are applied consistently tosimilar transactions.

• An accounting policy is changed only ifrequired by an IFRS, or if the change results inreliable and more relevant information.

• If a change in accounting policy is required byan IFRS, the pronouncement’s transitionalrequirements are followed. If none arespecified, or if the change is voluntary, the newaccounting policy is applied retrospectively byrestating prior periods unless restatement isimpracticable, in which case the policy isapplied prospectively from the start of theearliest period practicable.

• Changes in accounting estimates (e.g. changein useful life of an asset) are accounted for inthe current year, or future years, or both(no restatement).

• All material errors are corrected by restatingcomparative prior period amounts and, if theerror occurred before the earliest periodpresented, by restating the opening statementof financial position.


IAS 10 Events after the Reporting Period

Effective date Annual periods beginning on or after 1 January2005. Title amended by IAS 1(2007), effective1 January 2009.

Objective To prescribe:

• when an entity should adjust its financialstatements for events after the end of thereporting period; and

• disclosures about the date when the financialstatements were authorised for issue, andabout events after the end of the reportingperiod.

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Summary • Events after the end of the reporting periodare those events, both favourable andunfavourable, that occur between the end ofthe reporting period and the date when thefinancial statements are authorised for issue.

• Adjusting events – the financial statements areadjusted to reflect those events that provideevidence of conditions that existed at the end ofthe reporting period (such as the resolution of acourt case after the end of the reporting period).

• Non-adjusting events – the financial statementsare not adjusted to reflect events that aroseafter the end of the reporting period (such as adecline in market prices after year end, whichdoes not change the valuation of investmentsat the end of the reporting period). The natureand impact of such events are disclosed.

• Dividends proposed or declared on equityinstruments after the end of the reportingperiod are not recognised as a liability at theend of the reporting period. Disclosure isrequired.

• Financial statements are not prepared on agoing concern basis if events after the end ofthe reporting period indicate that the goingconcern assumption is not appropriate.

• An entity discloses the date its financialstatements are authorised for issue.


IAS 11 Construction Contracts

Effective date Periods beginning on or after 1 January 1995.

Objective To prescribe the accounting treatment for revenueand costs associated with construction contracts inthe financial statements of the contractor.

Summary • Contract revenue comprises the amount agreedin the initial contract together with variations incontract work, claims, and incentive paymentsto the extent that it is probable that they willresult in revenues and can be measured reliably.



• Contract costs comprise costs that relatedirectly to the specific contract, costs that areattributable to general contract activity and thatcan be allocated to the contract, together withother costs that are specifically chargeable tothe customer under the terms of the contract.

• Where the outcome of a construction contractcan be estimated reliably, revenue and costs arerecognised by reference to the stage ofcompletion of contract activity (the percentageof completion method of accounting).

• If the outcome cannot be estimated reliably, noprofit is recognised. Instead, contract revenueis recognised only to the extent that contractcosts incurred are expected to be recovered,and contract costs are expensed as incurred.

• If it is probable that total contract costs willexceed total contract revenue, the expectedloss is recognised immediately.

Interpretations Refer to IAS 18 for a summary of IFRIC 15Agreements for the Construction of Real Estate.

IAS 12 Income Taxes

Effective date Periods beginning on or after 1 January 1998.Certain revisions effective for periods beginning onor after 1 January 2001.

Objective To prescribe the accounting treatment for incometaxes.

To establish the principles and provide guidance inaccounting for the current and future taxconsequences of:

• the future recovery (settlement) of carryingamounts of assets (liabilities) recognised in anentity’s statement of financial position; and

• transactions and other events of the currentperiod that are recognised in an entity’sfinancial statements.

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Summary • Current tax liabilities and assets are recognisedfor current and prior period taxes, measured atthe rates applicable for the period.

• A temporary difference is a difference betweenthe carrying amount of an asset or liability andits tax base.

• Deferred tax liabilities are recognised for thefuture tax consequences of all taxabletemporary differences with three exceptions:

– where the deferred tax liability arises fromthe initial recognition of goodwill;

– the initial recognition of an asset/liabilityother than in a business combination which,at the time of the transaction, does notaffect either the accounting or the taxableprofit; and

– differences arising from investments insubsidiaries, branches and associates andinterests in joint ventures where the entity isable to control the timing of the reversal ofthe difference and it is probable that thereversal will not occur in the foreseeablefuture.

• A deferred tax asset is recognised fordeductible temporary differences, unused taxlosses, and unused tax credits, to the extentthat it is probable that taxable profit will beavailable against which the deductibletemporary differences can be utilised, withthe following exceptions:

– a deferred tax asset arising from the initialrecognition of an asset/liability, other than ina business combination, which, at the timeof the transaction, does not affect theaccounting or the taxable profit; and

– assets arising from deductible temporarydifferences associated with investments insubsidiaries, branches and associates, andinterests in joint ventures are recognisedonly to the extent that it is probable that thetemporary difference will reverse in theforeseeable future and taxable profit will beavailable to utilise the difference.



• Deferred tax liabilities (assets) are measured atthe tax rates expected to apply when theliability is settled or the asset is realised, basedon tax rates/laws that have been enacted orsubstantively enacted by the end of thereporting period.

• Deferred tax assets and liabilities are notdiscounted.

• Current and deferred tax are recognised asincome or expense in profit or loss except tothe extent that the tax arises from:

– a transaction or event that is recognisedoutside profit or loss (whether in othercomprehensive income or directly in equity);or

– a business combination.

• Deferred taxes asset and liabilities are presentedas non-current items in the statement offinancial position.

Interpretations SIC 21 Income Taxes – Recovery of RevaluedNon-Depreciable Assets

The measurement of a deferred tax liability orasset arising from the revaluation of a non-depreciable asset is based on the taxconsequences from the sale of the asset ratherthan through use.

SIC 25 Income Taxes – Changes in the TaxStatus of an Entity or its Shareholders

The current and deferred tax consequences ofchanges in tax status are included in profit or lossfor the period unless those consequences relate totransactions or events that were recognisedoutside profit or loss.

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IAS 16 Property, Plant and Equipment


Amendments resulting from Improvements toIFRSs (May 2008) relating to the accounting forsales of assets held for rental and the definition ofrecoverable amount are effective 1 January 2009,with earlier application permitted.

Objective To prescribe the principles for the initialrecognition and subsequent accounting forproperty, plant and equipment.

Summary • Items of property, plant, and equipment arerecognised as assets when it is probable thatthe future economic benefits associated withthe asset will flow to the entity, and the costof the asset can be measured reliably.

• Initial recognition is at cost, which includes allcosts necessary to get the asset ready for itsintended use. If payment is deferred, interestis recognised.

• Subsequent to acquisition, IAS 16 allows achoice of accounting model:

– cost model: the asset is carried at cost lessaccumulated depreciation and impairment;or

– revaluation model: the asset is carried at arevalued amount, which is fair value atrevaluation date less subsequentdepreciation and impairment.

• Under the revaluation model, revaluations arecarried out regularly. All items of a given classare revalued.

– Revaluation increases are credited to equity.

– Revaluation decreases are charged firstagainst the revaluation surplus in equityrelated to the specific asset, and any excessagainst profit or loss.



• When the revalued asset is disposed of, therevaluation surplus in equity remains in equityand is not reclassified to profit or loss.

• Components of an asset with differing patternsof benefits are depreciated separately.

• Depreciation is charged systematically over theasset’s useful life. The depreciation methodreflects the pattern of benefit consumption.The residual value is reviewed at least annuallyand is the amount the entity would receivecurrently if the asset were already of the ageand condition expected at the end of its useful life. Useful life is also reviewed annually.If operation of an item of property, plant andequipment (e.g. an aircraft) requires regularmajor inspections, when each major inspectionis performed, its cost is recognised in thecarrying amount of the asset as a replacement,if the recognition criteria are satisfied.

• Impairment of property, plant and equipment isassessed under IAS 36.

• All exchanges of property, plant and equipmentare measured at fair value, including exchangesof similar items, unless the exchange transactionlacks commercial substance or the fair value ofneither the asset received nor the asset given upis reliably measurable.

• The May 2008 amendments require thatentities that routinely sell items of property,plant and equipment that they have previouslyheld for rental to others should transfer suchassets to inventories at their carrying amountwhen they cease to be rented. The proceedsfrom the sale of such assets should berecognised as revenue in accordance withIAS 18.

Cash payments to manufacture or acquire suchassets and cash receipts from rental and sale ofsuch assets are to be included within operatingactivities.

Interpretations Refer to IAS 18 for a summary of IFRIC 18Transfers of Assets from Customers.

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IAS 17 Leases


Objective To prescribe, for lessees and lessors, theappropriate accounting policies and disclosuresfor finance and operating leases.

Summary • A lease is classified as a finance lease if ittransfers substantially all risks and rewardsincidental to ownership. Examples:

– lease covers substantially all of the asset’slife; and/or

– present value of lease payments issubstantially equal to the asset’s fair value.

• All other leases are classified as operating leases.

• A lease of both land and buildings is split intoland and building elements. Land element isgenerally an operating lease. Building elementis an operating or finance lease based on thecriteria in IAS 17. However, separatemeasurement of the land and buildingselements is not required if the lessee’s interestin both land and buildings is classified as aninvestment property under IAS 40 and the fairvalue model is adopted.

• Finance leases – Lessee’s Accounting:

– asset and liability are recognised at thelower of the present value of minimum leasepayments and the fair value of the asset;

– depreciation policy is as for owned assets;and

– finance lease payments are apportionedbetween interest expense and reduction inliability.

• Finance leases – Lessor’s Accounting:

– receivable is recognised at an amount equalto the net investment in the lease;

– finance income is recognised based on apattern reflecting a constant periodic rate ofreturn on the lessor’s net investment; and



– manufacturer or dealer lessors recogniseselling profit or loss consistent with thepolicy for outright sales.

• Operating leases – Lessee’s Accounting:

– lease payments are recognised as anexpense in profit or loss on a straight-linebasis over the lease term, unless anothersystematic basis is more representative ofthe pattern of benefit.

• Operating leases – Lessor’s Accounting:

– assets held for operating leases arepresented in the lessor’s statement offinancial position according to the nature ofthe asset and are depreciated in accordancewith the lessor’s depreciation policy forsimilar assets; and

– lease income is recognised on a straight-linebasis over the lease term, unless anothersystematic basis is more representative ofthe pattern of benefit.

• Lessors add initial direct costs to the carryingamount of the leased asset and spread themover the lease term (immediate expensingprohibited).

• Accounting for sale and leaseback transactionsdepends on whether these are essentiallyfinance or operating leases.

Interpretations SIC 15 Operating Leases – Incentives

Lease incentives (such as rent-free periods) arerecognised by both the lessor and the lessee as areduction of rental income and expense,respectively, over the lease term.

SIC 27 Evaluating the Substance ofTransactions Involving the Legal Formof a Lease

If a series of transactions involves the legal form ofa lease and can only be understood with referenceto the series as a whole, then the series isaccounted for as a single transaction.

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IFRIC 4 Determining whether an Arrangementcontains a Lease

IFRIC 4 addresses arrangements that do not takethe legal form of a lease but which convey rightsto use assets in return for a payment or a series ofpayments. An arrangement that meets thefollowing criteria is, or contains, a lease that isaccounted for in accordance with IAS 17, bothfrom the lessee and lessor perspectives:

• the fulfilment of the arrangement dependsupon a specific asset (either explicitly orimplicitly in the arrangement); and

• the arrangement conveys the right to controlthe use of the underlying asset. IFRIC 4provides further guidance to identify whenthis situation exists.

IAS 18 Revenue


Objective To prescribe the accounting treatment for revenuearising from sales of goods, rendering of servicesand from interest, royalties and dividends.

Summary • Revenue is measured at the fair value of theconsideration received/receivable.

• Revenue is generally recognised when it isprobable that the economic benefits will flowto the entity, and when the amount of revenuecan be measured reliably, and when thefollowing conditions are met:

– from sale of goods: when significant risksand rewards have been transferred to buyer,seller has lost effective control, and cost canbe reliably measured.

– from rendering of services: percentage ofcompletion method.

– for interest, royalties, and dividends.

Interest – using the effective interest methodas set out in IAS 39.



Royalties – on an accrual basis in accordancewith the substance of the agreement.

Dividends – when shareholder’s right toreceive payment is established.

• If a transaction has multiple components (suchas sale of goods with an identifiable amountfor subsequent servicing), the recognitioncriteria are applied separately to thecomponents.

Interpretations SIC 31 Revenue – Barter Transactions InvolvingAdvertising Services

Revenue from barter transactions involvingadvertising services is recognised only if substantialrevenue is also received from non-bartertransactions.

IFRIC 13 Customer Loyalty Programmes(effective 1 July 2008)

Award credits granted to customers as part of asales transaction are accounted for as a separatelyidentifiable component of the sales transaction(s),with the consideration received or receivableallocated between the award credits and the othercomponents of the sale.

IFRIC 15 Agreements for the Construction ofReal Estate (effective 1 January 2009)

The construction of real estate is a constructioncontract within the scope of IAS 11 only whenthe buyer is able to specify the major structuralelements of the design before construction beginsand/or major structural changes once constructionis in progress. If this criterion is not satisfied, therevenue should be accounted for in accordancewith IAS 18.

IFRIC 15 provides further guidance on determiningwhether the entity is providing goods onrendering services in accordance with IAS 18.

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IFRIC 18 Transfers of Assets from Customers(effective for transfers on or after1 July 2009)

IFRIC 18 deals with circumstances where an entityreceives from a customer an item of property,plant, and equipment that the entity must thenuse either to connect the customer to a networkor to provide the customer with ongoing access toa supply of goods or services.

IFRIC 18 provides guidance on when a recipientshould recognise such assets in their financialstatements. Where recognition is appropriate, thedeemed cost of the asset is its fair value on thedate of transfer.

IFRIC 18 also provides guidance on the pattern ofrevenue recognition arising on the transfer of theasset.

IAS 19 Employee Benefits

Effective date Periods beginning on or after 1 January 1999.Later revisions effective for various periods from1 January 2001 to 1 January 2006.

Amendments resulting from Improvements to IFRSs(May 2008) relating to plan administration costs,replacement of the term ‘fall due’, and guidance oncontingent liabilities are effective from 1 January2009, with earlier application permitted.Amendments relating to curtailments and negativepast service cost are effective for changes inbenefits that occur on or after 1 January 2009.

Objective To prescribe the accounting and disclosure foremployee benefits, including short-term benefits(wages, annual leave, sick leave, annual profit-sharing, bonuses and non-monetary benefits);pensions; post-employment life insurance andmedical benefits; other long-term employeebenefits (long-service leave, disability, deferredcompensation, and long-term profit-sharing andbonuses); and termination benefits.



Summary • Underlying principle: the cost of providingemployee benefits is recognised in the periodin which the entity receives services from theemployee, rather than when the benefits arepaid or payable.

• Short-term employee benefits (payable within12 months) are recognised as an expense in theperiod in which the employee renders theservice. Unpaid benefit liability is measured atundiscounted amount.

• Profit-sharing and bonus payments arerecognised only when the entity has a legal orconstructive obligation to pay them and thecosts can be reliably estimated.

• Post-employment benefit plans (such aspensions and health care) are categorised aseither defined contribution plans or definedbenefit plans.

• For defined contribution plans, expenses arerecognised in the period in which thecontribution is payable.

• For defined benefit plans, a liability isrecognised in the statement of financialposition equal to the net of:

– the present value of the defined benefitobligation (the present value of expectedfuture payments required to settle theobligation resulting from employee service inthe current and prior periods);

– deferred actuarial gains and losses anddeferred past service cost; and

– the fair value of any plan assets at the endof the reporting period.

• Actuarial gains and losses may be(a) recognised immediately in profit or loss,(b) deferred up to a maximum, with any excessamortised in profit or loss (the ‘corridorapproach’), or (c) recognised immediately inother comprehensive income.

• Plan assets include assets held by a long-termemployee benefit fund and qualifying insurancepolicies.

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• For group plans, the net cost is recognised inthe separate financial statements of the entitythat is legally the sponsoring employer unless acontractual agreement or stated policy forallocating the cost exists.

• Long-term employee benefits are recognised andmeasured in the same way as post-employmentbenefits under a defined benefit plan. However,unlike defined benefit plans, actuarial gains andlosses and past service cost are alwaysrecognised immediately in profit or loss.

• Termination benefits are recognised when theentity is demonstrably committed toterminating one or more employees before thenormal retirement date or to providingtermination benefits as a result of an offermade to encourage voluntary redundancy.

Interpretations IFRIC 14 IAS 19 – The Limit on a DefinedBenefit Asset, Minimum FundingRequirements and their Interaction

IFRIC 14 addresses three issues:

• when refunds or reductions in futurecontributions should be regarded as ‘available’in the context of paragraph 58 of IAS 19;

• how a minimum funding requirement mightaffect the availability of reductions in futurecontributions; and

• when a minimum funding requirement mightgive rise to a liability.



IAS 20 Accounting for Government Grants and Disclosureof Government Assistance


Objective To prescribe the accounting for, and disclosure of,government grants and other forms ofgovernment assistance.

Amendments resulting from Improvements toIFRSs (May 2008) are effective prospectively togovernment loans received in periods beginningon or after 1 January 2009, with earlier applicationpermitted.

Summary • Government grants are recognised only whenthere is reasonable assurance that the entitywill comply with the conditions attached tothe grants, and the grants will be received. Non-monetary grants are usually recognised atfair value, although recognition at nominalvalue is permitted.

• Grants are recognised in profit or loss over theperiods necessary to match them with therelated costs.

• Income-related grants are either presentedseparately as income or as a deduction inreporting the related expense.

• Asset-related grants are either presented asdeferred income in the statement of financialposition, or deducted in arriving at the carryingamount of the asset.

• Repayment of a government grant is accountedfor as a change in accounting estimate withdifferent treatment for income- and asset-related grants.

• May 2008 amendments require that the benefitof government loans with a below-market rateof interest be accounted for as a governmentgrant – measured as the difference betweenthe initial carrying amount of the loandetermined in accordance with IAS 39 and theproceeds received.

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Interpretations SIC 10 Government Assistance – No SpecificRelation to Operating Activities

Government assistance to entities that is aimed atencouragement or long-term support of businessactivities either in certain regions or industrysectors is treated as a government grant underIAS 20.

IAS 21 The Effects of Changes in Foreign Exchange Rates


Objective To prescribe the accounting treatment for anentity’s foreign currency transactions and foreignoperations.

Summary • First, the entity’s functional currency isdetermined (i.e. the currency of the primaryeconomic environment in which the entityoperates).

• Then all foreign currency items are translatedinto the functional currency:

– transactions are recognised on the date thatthey occur using the transaction-dateexchange rate for initial recognition andmeasurement;

– at the end of subsequent reporting periods:

– non-monetary items carried at historicalcost continue to be measured usingtransaction-date exchange rates;

– monetary items are retranslated using theclosing rate; and

– non-monetary items carried at fair valueare measured at valuation-date exchangerates.



• Exchange differences arising on settlement ofmonetary items and on translation of monetaryitems at a rate different than when initiallyrecognised are included in profit or loss, withone exception. Exchange differences arising onmonetary items that form part of the reportingentity’s net investment in a foreign operationare recognised in the consolidated financialstatements that include the foreign operation inother comprehensive income. Such differencesare reclassified from equity to profit or loss ondisposal of the net investment.

• The results and financial position of an entitywhose functional currency is not the currencyof a hyperinflationary economy are translatedinto a different presentation currency using thefollowing procedures:

– assets and liabilities for each statement offinancial position presented (includingcomparatives) are translated at the closingrate at the date of that statement offinancial position;

– income and expenses for each periodpresented (including comparatives) aretranslated at exchange rates at the dates ofthe transactions; and

– all resulting exchange differences arerecognised as other comprehensive income.

• Special rules for translating into a presentationcurrency the results and financial position ofan entity whose functional currency ishyperinflationary.

Interpretations SIC 7 Introduction of the Euro

Explains how to apply IAS 21 when the Euro wasfirst introduced, and when new EU members jointhe Eurozone.

Refer to IAS 39 for a summary of IFRIC 16 Hedgesof a Net Investment in a Foreign Operation.

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IAS 23(2007) Borrowing Costs

Effective date Annual periods beginning on or after 1 January2009, with earlier application permitted.Supersedes previous versions of IAS 23 from dateof application.

See previous editions of IFRSs in your pocket for asummary of the requirements of the previousversion of IAS 23 – principal difference is that itallowed an option to expense all borrowng costs asincurred.

Amendments resulting from Improvements toIFRSs (May 2008) relating to components ofborrowing costs are effective 1 January 2009,with earlier application permitted.

Objective To prescribe the accounting treatment forborrowing costs.

Summary • Borrowing costs directly attributable to theacquisition, construction or production of aqualifying asset are capitalised as part of thecost of that asset, but only when it is probablethat these costs will result in future economicbenefits to the entity, and the costs can bemeasured reliably. All other borrowing coststhat do not satisfy the conditions forcapitalisation are expensed when incurred.

• A qualifying asset is one that necessarily takesa substantial period of time to get it ready forits intended use or sale. Examples includemanufacturing plants, investment propertiesand some inventories.

• To the extent that an entity borrows fundsspecifically for the purpose of obtaining aqualifying asset, the amount of borrowing costseligible for capitalisation is the actual borrowingcosts incurred during the period less anyinvestment income on the temporaryinvestment of those borrowings.



• If funds are borrowed generally and used forthe purpose of obtaining the qualifying asset,a capitalisation rate (weighted average ofborrowing costs applicable to the generaloutstanding borrowings during the period)is applied to expenditure incurred during theperiod, to determine the amount of borrowingcosts eligible for capitalisation. The amount ofborrowing costs capitalised during a periodshould not exceed the amount of borrowingcosts incurred during that period.


IAS 24 Related Party Disclosures


Objective To ensure that financial statements draw attentionto the possibility that the financial position andresults of operations may have been affected bythe existence of related parties.

Summary • Related parties are parties that control or havesignificant influence over the reporting entity(including parent entities, owners and theirfamilies, major investors, and key managementpersonnel) and parties that are controlled orsignificantly influenced by the reporting entity(including subsidiaries, joint ventures, associates,and post-employment benefit plans).

• The Standard requires disclosure of:

– relationships involving control, even whenthere have been no transactions;

– related party transactions; and

– management compensation (including ananalysis by type of compensation).

• For related party transactions, disclosure isrequired of the nature of the relationship andof sufficient information to enable anunderstanding of the potential effect of thetransactions.

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• Examples of related party transactionsdisclosable under the Standard:

– purchases or sales of goods;

– purchases or sales of assets;

– rendering or receiving of services;

– leases;

– transfers of research and development;

– transfers under licence agreements;

– transfers under finance arrangements(including loans and equity contributions);

– provision of guarantees or collateral; and

– settlement of liabilities on behalf of theentity or by the entity on behalf of anotherparty.


IAS 26 Accounting and Reporting by Retirement BenefitPlans


Objective To specify the measurement and disclosureprinciples for the financial reports of retirementbenefit plans.

Summary • Sets out the reporting requirements for bothdefined contribution and defined benefit plans,including a statement of net assets available forbenefits and disclosure of the actuarial presentvalue of promised benefits (split betweenvested and non-vested).

• Specifies the need for actuarial valuation of thebenefits for defined benefits and the use of fairvalues for plan investments.




IAS 27(2008) Consolidated and Separate FinancialStatements

Effective date Revised IAS 27 issued January 2008 supersedesIAS 27(2003) for annual periods beginning on orafter 1 July 2009. Earlier application permitted –but only if IFRS 3(2008) is applied from the samedate (therefore, effectively, not permitted forperiods beginning before 30 June 2007).

See earlier editions of IFRSs in your pocket for asummary of the requirements of IAS 27(2003).

Amendments resulting from Improvements toIFRSs (May 2008) relating to measurement inseparate financial statements of investments insubsidiaries, jointly controlled entities andassociates held for sale are effective 1 January2009.

Amendments to remove the definition of the costmethod are effective 1 January 2009, with earlierapplication permitted.

Objective To prescribe:

• requirements for preparing and presentingconsolidated financial statements for a groupof entities under the control of a parent;

• how to account for changes in the level ofownership of interests in subsidiaries, includingthe loss of control of a subsidiary; and

• how to account for investments in subsidiaries,jointly controlled entities and associates inseparate financial statements.

Summary • A subsidiary is an entity controlled by anotherentity, the parent. Control is the power togovern the operating and financial policies.

• Consolidated financial statements are financialstatements of a group (parent and subsidiaries)presented as those of a single economic entity.

• When a parent-subsidiary relationship exists,consolidated financial statements are required.

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• Consolidated financial statements include allsubsidiaries. No exemption for ‘temporarycontrol’ or ‘different lines of business’ or’subsidiary that operates under severe long-term funds transfer restrictions’. However, if, onacquisition, a subsidiary meets the criteria to beclassified as held for sale under IFRS 5, it isaccounted for under that Standard.

• Intragroup balances, transactions, income andexpenses are eliminated in full.

• All entities in the group use the sameaccounting policies.

• The end of the reporting period of a subsidiarycannot be more than three months differentfrom the end of the reporting period of thegroup.

• Non-controlling interests (NCI) are reported inequity in the statement of financial positionseparately from the equity of the owners of theparent. Total comprehensive income isallocated between NCI and the owners of theparent even if this results in the NCI having adeficit balance.

• Partial disposal of an investment in a subsidiarywhile control is retained is accounted for as anequity transaction with owners, and no gain orloss is recognised.

• Acquisition of a further ownership interest in asubsidiary after obtaining control is accountedfor as an equity transaction and no gain, loss oradjustment to goodwill is recognised.

• Partial disposal of an investment in a subsidiarythat results in loss of control triggersremeasurement of the residual holding to fairvalue. Any difference between fair value andcarrying amount is a gain or loss on the disposal,recognised in profit or loss. Thereafter, applyIAS 28, IAS 31 or IAS 39, as appropriate, to theresidual holding.

• In the parent’s separate financial statements:investments in subsidiaries, associates and jointventures (other than those that are classified asheld for sale under IFRS 5) are accounted foreither at cost or as investments under IAS 39.



Interpretations SIC-12 Consolidation – Special Purpose Entities

An entity consolidates a special purpose entity(SPE) when, in substance, it controls the SPE. SIC-12 provides indicators of control.

Useful Deloitte Business combinations and changes in publication ownership interests: A guide to the revised

IFRS 3 and IAS 27

Publication supplementing the IASB’s guidance forapplying these Standards and addressing practicalimplementation issues. Available for download atwww.iasplus.com/dttpubs/pubs.htm

IAS 28 Investments in Associates

Effective date Annual periods beginning on or after 1 January2005 (1 July 2009 for consequential amendmentsarising from IAS 27(2008)).

Amendments resulting from Improvements toIFRSs (May 2008):

• require disclosures when investments inassociates are accounted for at fair valuethrough profit or loss; and

• clarify requirements regarding impairmentof investments in associates.

The amendments are effective 1 January 2009.

Objective To prescribe the investor’s accounting forinvestments in associates over which it hassignificant influence.

Summary • Applies to all investments in which an investorhas significant influence unless the investor is aventure capital firm, mutual fund or unit trust,and it elects to measure such investments atfair value through profit or loss under IAS 39.

• Interests in associates that are classified as heldfor sale in accordance with IFRS 5 areaccounted for in accordance with thatStandard.

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• Otherwise, the equity method is used for allinvestments in associates over which the entityhas significant influence.

• Rebuttable presumption of significant influenceif investment held, directly and indirectly, ismore than 20% of associate.

• Under the equity method, the investment isinitially recorded at cost. It is subsequentlyadjusted by the investor’s share of theinvestee’s post acquisition change in net assets.

• Investor’s statement of comprehensive incomereflects its share of the investee’s post-acquisition profit or loss.

• Associate’s accounting policies are the same asthose of the investor.

• The end of the reporting period of an associatecannot be more than three months differentfrom the investor’s end of the reporting period.

• Even if consolidated financial statements arenot prepared (e.g. because the investor has nosubsidiaries) equity accounting is used.However, the investor does not apply the equitymethod when presenting ’separate financialstatements’ as defined in IAS 27. Instead, theinvestor accounts for the investment either atcost or as an investment under IAS 39.

• Impairment is assessed in accordance withIAS 36. The impairment indicators in IAS 39also apply. The May 2008 amendments clarifythat an investment in an associate is treated asa single asset for impairment testing.

• The amendments resulting from IAS 27(2008)address the accounting treatment whensignificant influence over an associate is lost.On loss of significant influence, the investmentis remeasured to its fair value at that date, withthe gain or loss recognised in profit or loss.Thereafter, IAS 39 is applied to the remainingholding.




IAS 29 Financial Reporting in Hyperinflationary Economies


Amendments resulting from Improvements toIFRSs (May 2008) relating to the description ofhistorical cost financial statements are effective1 January 2009, with earlier application permitted.

Objective To provide specific guidance for entities reportingin the currency of a hyperinflationary economy, sothat the financial information provided ismeaningful.

Summary • The financial statements of an entity thatreports in the currency of a hyperinflationaryeconomy are stated in terms of the measuringunit current at the end of the reporting period.

• Comparative figures for prior period(s) arerestated into the same current measuring unit.

• Generally an economy is hyperinflationarywhen there is 100% inflation over 3 years.

Interpretations IFRIC 7 Applying the Restatement Approachunder IAS 29

When the economy of an entity’s functionalcurrency becomes hyperinflationary, the entityapplies the requirements of IAS 29 as though theeconomy had always been hyperinflationary.

IAS 31 Interests in Joint Ventures

Effective date Annual periods beginning on or after 1 January2005 (1 July 2009 for consequential amendmentsarising from IAS 27(2008)).

Amendments resulting from Improvements toIFRSs (May 2008) clarifying the required disclosureswhen interests in jointly controlled entities areaccounted for at fair value through profit or lossare effective 1 January 2009, with earlierapplication permitted.

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Objective To prescribe the accounting treatment required forinterests in joint ventures (JVs), regardless of thestructure or legal form of the JV activities.

Summary • Applies to all investments in which an investorhas joint control except jointly controlledentities where the investor is a venture capitalfirm, mutual fund or unit trust, and it elects oris required to measure such investments at fairvalue through profit or loss under IAS 39.

• The key characteristic of a JV is a contractualarrangement to share control. JVs may beclassified as jointly controlled operations, jointlycontrolled assets or jointly controlled entities.There are different recognition principles foreach type of JV.

• Jointly controlled operations: venturerrecognises the assets it controls, and expensesand liabilities it incurs, and its share of incomeearned, in both its separate and consolidatedfinancial statements.

• Jointly controlled assets: venturer recognises itsshare of the joint assets, any liabilities that ithas incurred directly, and its share of anyliabilities incurred jointly with the otherventurers, income from the sale or use of itsshare of the output of the joint venture, itsshare of expenses incurred by the joint venture,and expenses incurred directly in respect of itsinterest in the joint venture. These rules applyto both separate and consolidated financialstatements.

• Jointly controlled entities: two accountingpolicy choices are permitted:

– proportionate consolidation: under thismethod the venturer’s statement of financialposition includes its share of the assets thatit controls jointly and its share of theliabilities for which it is jointly responsible.Its statement of comprehensive incomeincludes its share of the income andexpenses of the jointly controlled entity; and

– the equity method, as described in IAS 28.



• Interests in jointly controlled entities that areclassified as held for sale in accordance withIFRS 5 are accounted for in accordance withthat Standard.

• Even if consolidated financial statements arenot prepared (e.g. because the venturer has nosubsidiaries), proportionate consolidation/equity accounting is used for jointly controlledentities. However, in the venturer’s ’separatefinancial statements’ as defined in IAS 27,interests in jointly controlled entities areaccounted for either at cost or as investmentsunder IAS 39.

• The amendments resulting from IAS 27(2008)address the accounting treatment when jointcontrol over a jointly controlled entity is lost.On loss of joint control, the investment isremeasured to its fair value at that date, withthe gain or loss recognised in profit or loss.Thereafter, IAS 28 or IAS 39, as appropriate, isapplied to the remaining holding.

Interpretations SIC 13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers

Recognition of proportionate share of gains orlosses on contributions of non-monetary assets toa jointly controlled entity in exchange for an equityinterest in that entity is generally appropriate.

IAS 32 Financial Instruments: Presentation

Effective date Annual periods beginning on or after 1 January2005. Disclosure provisions superseded onadoption of IFRS 7, effective 1 January 2007.

Amendments (February 2008) dealing withputtable financial instruments and obligationsarising on liquidation are effective 1 January 2009,with earlier application permitted.

Objective To prescribe principles for classifying andpresenting financial instruments as liabilities orequity, and for offsetting financial assets andliabilities.

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Summary • Issuer’s classification of an instrument either asa liability or an equity instrument:

– based on substance, not form, of theinstrument;

– classification is made at the time of issueand is not subsequently altered;

– an instrument is a financial liability if theissuer may be obligated to deliver cash oranother financial asset or the holder has aright to demand cash or another financialasset. An example is mandatorilyredeemable preference shares;

– an instrument that does not give rise to sucha contractual obligation is an equityinstrument; and

– interest, dividends, gains and losses relatingto an instrument classified as a liability arereported as income or expense asappropriate.

• The 2008 amendments (effective 2009 withearlier application permitted) provide thatputtable instruments and instruments thatimpose on the entity an obligation to deliver apro-rata share of net assets only on liquidationthat (a) are subordinate to all other classes ofinstruments and (b) meet additional criteria, areclassified as equity instruments even thoughthey would otherwise meet the definition of aliability.

• At issue, an issuer classifies separately the debtand equity components of a single compoundinstrument such as convertible debt.

• A financial asset and a financial liability areoffset and the net amount reported when, andonly when, an entity has a legally enforceableright to set off the amounts, and intends eitherto settle on a net basis or simultaneously.

• Cost of treasury shares is deducted from equity,and resales of treasury shares are equitytransactions.



• Costs of issuing or reacquiring equityinstruments are accounted for as a deductionfrom equity, net of any related income taxbenefit.

Interpretations IFRIC 2 Members’ Shares in Co-operativeEntities and Similar Instruments

These are liabilities unless the co-op has thelegal right not to redeem on demand. Theserequirements may also be impacted by the2008 amendments (see above).



IAS 33 Earnings per Share


Objective To prescribe principles for determining andpresenting earnings per share (EPS) amounts inorder to improve performance comparisonsbetween different entities in the same period andbetween different accounting periods for thesame entity. Focus of IAS 33 is on thedenominator of the EPS calculation.

Summary • Applies to publicly-traded entities, entities inthe process of issuing such shares, and anyother entity voluntarily presenting EPS.

• An entity presents basic and diluted EPS:

– for each class of ordinary share that has adifferent right to share in profit for theperiod;

– with equal prominence;

– for all periods presented.

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• If an entity presents only a statement ofcomprehensive income, EPS is reported in thatstatement. If it presents both a statement ofcomprehensive income and a separate incomestatement, EPS is reported only in the separateincome statement.

• EPS is reported for profit or loss attributable toequity holders of the parent entity, for profit orloss from continuing operations attributable toequity holders of the parent entity, and for anydiscontinued operations (this last item can be inthe notes).

• In consolidated financial statements, EPSreflects earnings attributable to the parent’sshareholders.

• Dilution is a reduction in EPS or an increase inloss per share on the assumption thatconvertible instruments are converted, thatoptions or warrants are exercised, or thatordinary shares are issued when specifiedconditions are met.

• Basic EPS calculation:

– earnings numerator: after deduction of allexpenses including tax, and after deductionof non-controlling interests and preferencedividends; and

– denominator: weighted average number ofshares outstanding during the period.

• Diluted EPS calculation:

– earnings numerator: the profit for the periodattributable to ordinary shares is increasedby the after-tax amount of dividends andinterest recognised in the period in respectof the dilutive potential ordinary shares(such as options, warrants, convertiblesecurities and contingent insuranceagreements), and adjusted for any otherchanges in income or expense that wouldresult from the conversion of the dilutivepotential ordinary shares;



– denominator: adjusted for the number ofshares that would be issued on theconversion of all of the dilutive potentialordinary shares into ordinary shares; and

– anti-dilutive potential ordinary shares areexcluded from the calculation.


IAS 34 Interim Financial Reporting


Statements included in an interim financial reportare affected by the 2007 revisions to IAS 1(effective 1 January 2009).

Objective To prescribe the minimum content of an interimfinancial report and the recognition andmeasurement principles for an interim financialreport.

Summary • IAS 34 applies only when an entity is requiredor elects to publish an interim financial report inaccordance with IFRSs.

• Local regulators (not IAS 34) mandate:

– which entities should publish interimfinancial reports;

– how frequently; and

– how soon after the end of an interim period.

• An interim financial report is a complete orcondensed set of financial statements for aperiod shorter than an entity’s full financialyear.

• Minimum components of a condensed interimfinancial report are:

– condensed statement of financial position;

– condensed statement of comprehensiveincome presented either as a condensedsingle statement or a condensed separateincome statement and a condensedstatement of comprehensive income;

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– condensed statement of changes in equity;

– condensed statement of cash flows; and

– selected explanatory notes.

• Prescribes the comparative periods for whichinterim financial statements are required to bepresented.

• Materiality is based on interim financial data,not forecasted annual amounts.

• The notes in an interim financial report providean explanation of events and transactionssignificant to understanding the changes sincethe last annual financial statements.

• Same accounting policies as annual.

• Revenue and costs are recognised when theyoccur, not anticipated or deferred.

• Change in accounting policy – restatepreviously reported interim periods.

Interpretations IFRIC 10 Interim Financial Reporting andImpairment

Where an entity has recognised an impairmentloss in an interim period in respect of goodwill oran investment in either an equity instrument or afinancial asset carried at cost, that impairment isnot reversed in subsequent interim financialstatements nor in annual financial statements.

Useful Deloitte Interim financial reporting: A guide to IAS 34

3rd edition (March 2009). Guidance on therequirements of the Standard, model interimfinancial report and compliance checklist.Available for download atwww.iasplus.com/dttpubs/pubs.htm


publication


IAS 36 Impairment of Assets

Effective date Applies to goodwill and intangible assets acquiredin business combinations for which the agreementdate is on or after 31 March 2004, and to all otherassets prospectively for periods beginning on orafter 31 March 2004.

Amendments resulting from Improvements toIFRSs (May 2008) requiring disclosure of estimatesused to determine recoverable amount of cash-generating units containing goodwill orintangible assets with indefinite useful lives areeffective 1 January 2009, with earlier applicationpermitted.

Objective To ensure that assets are carried at no more thantheir recoverable amount, and to prescribe howrecoverable amount is calculated.

Summary • IAS 36 applies to all assets except inventories(see IAS 2), assets arising from constructioncontracts (see IAS 11), deferred tax assets (seeIAS 12), assets arising from employee benefits(see IAS 19), financial assets (see IAS 39),investment property measured at fair value(see IAS 40), and biological assets related toagricultural activity measured at fair value lessestimated point-of-sale costs (see IAS 41).

• An impairment loss is recognised when thecarrying amount of an asset exceeds itsrecoverable amount.

• An impairment loss is recognised in profit orloss for assets carried at cost; and treated as arevaluation decrease for assets carried atrevalued amount.

• Recoverable amount is the higher of an asset’sfair value less costs to sell and its value in use.

• Value in use is the present value of estimatedfuture cash flows expected to arise from thecontinuing use of an asset, and from itsdisposal at the end of its useful life.

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• Discount rate is the pre-tax rate that reflectscurrent market assessments of the time valueof money and the risks specific to the asset.The discount rate used does not reflect risks forwhich future cash flows have been adjustedand is the rate of return that investors wouldrequire if they were to choose an investmentthat would generate cash flows equivalent tothose expected from the asset.

• At the end of each reporting period, assets arereviewed to look for any indication that anasset may be impaired. If impairment isindicated, the asset’s recoverable amount iscalculated.

• Goodwill and other intangibles with indefiniteuseful lives are tested for impairment at leastannually, and recoverable amount calculated.

• If it is not possible to determine the recoverableamount for an individual asset, then therecoverable amount of the asset’s cash-generating unit is determined. The impairmenttest for goodwill is performed at the lowestlevel within the entity at which goodwill ismonitored for internal management purposes,provided that the unit or group of units towhich goodwill is allocated is not larger than anoperating segment under IFRS 8 (or, prior tothe adoption of IFRS 8, a segment underIAS 14).

• Reversal of prior years’ impairment losses ispermitted in certain instances (prohibited forgoodwill).

Interpretations Refer to IAS 34 for a summary of IFRIC 10 InterimFinancial Reporting and Impairment.



IAS 37 Provisions, Contingent Liabilities and Contingent Assets

Effective date Periods beginning on or after 1 July 1999.

Objective To ensure that appropriate recognition criteria andmeasurement bases are applied to provisions,contingent liabilities and contingent assets, and toensure that sufficient information is disclosed in thenotes to the financial statements to enable users tounderstand their nature, timing and amount.

Summary • A provision is recognised only when a pastevent has created a legal or constructiveobligation, an outflow of resources is probable,and the amount of the obligation can beestimated reliably.

• The amount recognised as a provision is thebest estimate of the settlement amount at theend of the reporting period.

• Provisions are reviewed at the end of eachreporting period to adjust for changes inestimate.

• Provisions are utilised only for original purposes.

• Examples of provisions may include onerouscontracts, restructuring provisions, warranties,refunds and site restoration.

• Planned future expenditure, even whereauthorised by the board of directors orequivalent governing body, is excluded fromrecognition, as are accruals for self-insuredlosses, general uncertainties, and other eventsthat have not yet taken place.

• A contingent liability arises when:

– there is a possible obligation to beconfirmed by a future event that is outsidethe control of the entity; or

– a present obligation may, but probably willnot, require an outflow of resources; or

– a sufficiently reliable estimate of the amountof a present obligation cannot be made (thisis rare).

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• Contingent liabilities require disclosure only (norecognition). If the possibility of outflow isremote, then no disclosure.

• A contingent asset arises when the inflow ofeconomic benefits is probable, but not virtuallycertain, and occurrence depends on an eventoutside the control of the entity.

• Contingent assets require disclosure only. If therealisation of income is virtually certain, therelated asset is not a contingent asset andrecognition is appropriate.

Interpretations IFRIC 1 Changes in Existing Decommissioning,Restoration and Similar Liabilities

Provisions are adjusted for changes in the amountor timing of future costs and for changes in themarket-based discount rate.

IFRIC 5 Rights to Interests Arising fromDecommissioning, Restoration andEnvironmental Funds

IFRIC 5 deals with the accounting, in the financialstatements of the contributor, for interests indecommissioning, restoration and environmentalrehabilitation funds established to fund some or allof the costs of decommissioning assets or toundertake environmental rehabilitation.

IFRIC 6 Liabilities arising from Participating in aSpecific Market – Waste Electrical andElectronic Equipment (WE&EE)

IFRIC 6 provides guidance on the accounting forliabilities for waste management costs. Specifically,it considers the appropriate trigger for recognitionof an obligation to contribute to the costs ofdisposing of waste equipment based on the entity’sshare of the market in a measurement period. TheInterpretation concludes that the event that triggersliability recognition is participation in the marketduring a measurement period.



IAS 38 Intangible Assets

Effective date Applies to intangible assets acquired in businesscombinations for which the agreement date is onor after 31 March 2004, and to all other intangibleassets prospectively for periods beginning on orafter 31 March 2004.

Amendments resulting from Improvements toIFRSs (May 2008) regarding:

• unit of production method of amortisation; and

• advertising and promotional activities.

Amendments are effective 1 January 2009, withearlier application permitted.

Objective To prescribe the accounting treatment forrecognising, measuring and disclosing allintangible assets that are not dealt withspecifically in another IFRS.

Summary • An intangible asset, whether purchased or self-created, is recognised if:

– it is probable that the future economicbenefits that are attributable to the asset willflow to the entity; and

– the cost of the asset can be measuredreliably.

• Additional recognition criteria for internally-generated intangible assets.

• All research costs are charged to expense whenincurred.

• Development costs are capitalised only aftertechnical and commercial feasibility of theresulting product or service have beenestablished.

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• Intangible assets, including in-process researchand development, acquired in a businesscombination are recognised separately fromgoodwill if they arise as a result of contractualor legal rights, or they are separable from thebusiness. In these circumstances therecognition criteria (probability of inflow offuture economic benefits and reliablemeasurement – see above) are alwaysconsidered to be satisfied.

• Internally-generated goodwill, brands,mastheads, publishing titles, customer lists, start-up costs, training costs, advertising costsand relocation costs are never recognised asassets.

• If an intangible item does not meet both thedefinition and the recognition criteria for anintangible asset, expenditure on the item isrecognised as an expense when it is incurred,except if the cost is incurred as part of abusiness combination, in which case it formspart of the amount recognised as goodwill atthe acquisition date.

• An entity may recognise a prepayment asset foradvertising or promotional expenditure.Recognition of an asset would be permitted upto the point at which the entity has the right toaccess the goods purchased or up to the pointof receipt of services. Mail order cataloguesspecifically identified as a form of advertisingand promotional activities.

• For the purpose of accounting subsequent toinitial acquisition, intangible assets are classifiedas:

– indefinite life: no foreseeable limit to theperiod over which the asset is expected togenerate net cash inflows for the entity.(Note – ‘indefinite’ does not mean ‘infinite’);and

– finite life: a limited period of benefit to theentity.



• Intangible assets may be accounted for using acost model or a revaluation model (permittedonly in limited circumstances – see below).Under the cost model, assets are carried at costless any accumulated amortisation and anyaccumulated impairment losses.

• If an intangible asset has a quoted market pricein an active market (which is uncommon), anaccounting policy choice of a revaluation modelis permitted. Under the revaluation model, theasset is carried at a revalued amount, which isfair value at revaluation date less anysubsequent depreciation and any subsequentimpairment losses.

• The cost (residual value is normally zero) of anintangible asset with a finite useful life isamortised over that life. Impairment testingunder IAS 36 is required whenever there is anindication that the carrying amount exceedsthe recoverable amount of the intangible asset.

• Intangible assets with indefinite useful lives arenot amortised but are tested for impairment onan annual basis. If recoverable amount is lowerthan the carrying amount, an impairment loss isrecognised. The entity also considers whetherthe intangible continues to have an indefinitelife.

• Under the revaluation model, revaluations arecarried out regularly. All items of a given classare revalued (unless there is no active marketfor a particular asset). Revaluation increases arerecognised in other comprehensive income andaccumulated in equity. Revaluation decreasesare charged first against the revaluation surplusin equity related to the specific asset, and anyexcess against profit or loss. When the revaluedasset is disposed of, the revaluation surplusremains in equity and is not reclassified to profitor loss.

• Normally, subsequent expenditure on anintangible asset after its purchase or completionis recognised as an expense. Only rarely are theasset recognition criteria met.

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Interpretations SIC 32 Intangible Assets – Web Site Costs

Certain initial infrastructure development andgraphic design costs incurred in web sitedevelopment may be capitalised.

IAS 39 Financial Instruments: Recognition and Measurement

Effective date Annual periods beginning on or after 1 January2005, except the 2004 and 2005 revisions for thefair value option, cash flow hedge accounting offorecast intragroup transactions, and financialguarantee contracts are effective 1 January 2006.


• designating and documenting hedges at thesegment level;

• applicable effective interest rate on cessation offair value hedge accounting; and

• reclassification of instruments into or out of fairvalue through profit or loss.

Amendments are effective 1 January 2009, withearlier application permitted.

Amendments (July 2008) regarding eligiblehedged items are effective for annual periodsbeginning on or after 1 July 2009, with earlierapplication permitted.

Amendments (October 2008) permittingreclassification of certain financial assets out offair value through profit or loss and available forsale categories are effective from 1 July 2008.No earlier application is permitted.

Amendments (March 2009) regardingreassessments of embedded derivatives areeffective for annual periods ending on or after30 June 2009.

Objective To establish principles for recognising,derecognising and measuring financial assets andfinancial liabilities.



Summary • All financial assets and financial liabilities,including all derivatives and certain embeddedderivatives, are recognised in the statement offinancial position.

• Financial instruments are initially measured atfair value on date of acquisition or issue.Usually this is the same as cost, but sometimesan adjustment is required.

• An entity has an option of recognising normalpurchases and sales of securities in the marketplace consistently either at trade date orsettlement date. If settlement-date accountingis used, IAS 39 requires recognition of certainvalue changes between trade and settlementdates.

• For the purpose of measuring a financial assetsubsequent to initial recognition, IAS 39classifies financial assets into four categories:

1. Loans and receivables not held for trading.

2. Held-to-maturity (HTM) investments, such asdebt securities and mandatorily redeemablepreference shares, that the entity intendsand is able to hold to maturity. If an entitysells any HTM investments (other than inexceptional circumstances), all of its otherHTM investments are reclassified asavailable-for-sale (category 4 below) for thecurrent and next two financial reportingperiods.

3. Financial assets measured at fair valuethrough profit or loss, which includes thoseheld for trading (short-term profit-taking)and any other financial asset that the entitydesignates (the ‘fair value option’).Derivative assets are always in this categoryunless they are designated as hedginginstruments.

4. Available-for-sale financial assets (AFS) – allfinancial assets that do not fall into one ofthe other three categories. This includes allinvestments in equity instruments that arenot measured at fair value through profit orloss. Additionally, an entity may designateany loans and receivables as AFS.

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• The use of the ‘fair value option’ (3 above) isrestricted to those financial instrumentsdesignated on initial recognition that meet atleast one of the following criteria:

– where the fair value option eliminates anaccounting mismatch that would otherwisearise from measuring assets or liabilities orrecognising the gains or losses on them ondifferent bases;

– those that are part of a group of financialassets, financial liabilities, or both that aremanaged, and their performance isevaluated by management on a fair valuebasis in accordance with a documented riskmanagement or investment strategy; and

– those that contain one or more embeddedderivatives, except if the embeddedderivative does not modify significantly theassociated cash flows or it is clear with littleor no analysis that separation is prohibited.

• Certain financial assets can be reclassified outof fair value through profit or loss or AFS ifspecified criteria are met.

• Subsequent to initial recognition:

– all financial assets in categories 1 and 2above are carried at amortised cost, subjectto a test for impairment;

– all financial assets in category 3 above arecarried at fair value, with value changesrecognised in profit or loss; and

– all financial assets in category 4 above (AFS)are measured at fair value in the statementof financial position, with value changesrecognised in other comprehensive income,subject to impairment testing. If the fairvalue of an AFS asset cannot be measuredreliably, the asset is carried at cost.



• After acquisition, most financial liabilities aremeasured at original recorded amount lessprincipal repayments and amortisation. Three categories of liabilities are measured atfair value with value changes recognised inprofit or loss:

– derivative liabilities (unless designated as ahedging instrument in an effective cash flowhedge);

– liabilities held for trading (short sales); and

– any liabilities that the entity designates, atissuance, to be measured at fair valuethrough profit or loss (the ‘fair value option’– see above).

• Fair value is the amount for which an assetcould be exchanged, or a liability settled,between knowledgeable, willing parties in anarm’s length transaction. The IAS 39 fair valuehierarchy:

– best is quoted market price in an activemarket;

– otherwise use a valuation technique thatmakes maximum use of market inputs andincludes recent arm’s length markettransactions, reference to the current fairvalue of another instrument that issubstantially the same, discounted cash flowanalysis, or option pricing models.

• IAS 39 establishes conditions for determiningwhen a financial asset or liability should beremoved from the statement of financialposition (derecognised). Derecognition of afinancial asset is not permitted to the extentto which the transferor has retained (1)substantially all risks and rewards of thetransferred asset or part of the asset, or (2)control of an asset or part of an asset for whichit has neither retained nor transferredsubstantially all risks and rewards.

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• Hedge accounting (recognising the offsettingeffects of both the hedging instrument and thehedged item in the same period’s profit or loss)is permitted in certain circumstances, providedthat the hedging relationship is clearlydesignated and documented, measurable, andactually effective. IAS 39 provides for threetypes of hedges:

– fair value hedge: if an entity hedges achange in fair value of a recognised asset orliability or firm commitment, the change infair values of both the hedging instrumentand the hedged item are recognised in profitor loss when they occur;

– cash flow hedge: if an entity hedgeschanges in the future cash flows relating toa recognised asset or liability or a highlyprobable forecast transaction, then thechange in fair value of the hedginginstrument is recognised in othercomprehensive income to the extent thatthe hedge is effective until such time as thehedged future cash flows occur; and

– hedge of a net investment in a foreignentity: this is treated like a cash flow hedge.

• A hedge of foreign currency risk in a firmcommitment may be accounted for as a fairvalue hedge or as a cash flow hedge.

• The foreign currency risk of a highly probableintragroup transaction is permitted to qualify asthe hedged item in a cash flow hedge in theconsolidated financial statements, providedthat the transaction is denominated in acurrency other than the functional currency ofthe entity entering into that transaction and theforeign currency risk will affect the consolidatedprofit or loss.

• If the hedge of a forecast intragrouptransaction qualifies for hedge accounting, anygain or loss that is recognised in othercomprehensive income in accordance with thehedging rules in IAS 39 is reclassified fromequity to profit or loss in the same period orperiods in which the foreign currency risk of thehedged transaction affects profit or loss.



• October 2008 amendments permit an entity toreclassify non-derivative financial assets out ofthe FVTPL and AFS categories in limitedcircumstances. The amendments specify criteriafor reclassification, and requirements formeasurement at the reclassification date andsubsequently.

• March 2009 amendments prohibitreclassification out of FVTPL if an entity isunable to separately measure the embeddedderivative on reclassification. In suchcircumstances the entire (combined) contractremains classified as at FVTPL.

• A portfolio hedge of interest rate risk (hedgingan amount rather than a specific asset orliability) can qualify as a fair value hedge.

Interpretations IFRIC 9 Reassessment of Embedded Derivatives

Generally, determination as to whether to accountfor an embedded derivative separately from thehost contract is made when the entity firstbecomes a party to the host contract, and is notsubsequently reassessed.

A first-time adopter of IFRSs makes its assessmentbased on conditions existing when the entitybecame party to the hybrid contract, not when itadopts IFRSs.

An entity only revisits its assessment if the terms ofthe contract change, and the expected future cashflows of the embedded derivative, the hostcontract, or both, change significantly relative tothe previously expected cash flows on the contract.

Amended in March 2009 to clarify that onreclassification (as permitted by the October 2008amendments to IAS 39), the instrument reclassifiedmust be assessed for separation of embeddedderivatives. Effective for annual periods ending onor after 30 June 2009.

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IFRIC 16 Hedges of a Net Investment in aForeign Operation

The presentation currency does not create anexposure to which an entity may apply hedgeaccounting. Consequently, a parent entity maydesignate as a hedged risk only the foreignexchange differences arising from a differencebetween its own functional currency and that ofits foreign operation.

The hedging instrument(s) may be held by anyentity or entities within the group except for theentity being hedged as long as the designationand effectiveness requirements for a hedge of anet investment are satisfied.

Where a foreign operation is disposed of, IAS 39must be applied to determine the amount thatneeds to be reclassified to profit or loss from theforeign currency translation reserve in respect ofthe hedging instrument, while IAS 21 must beapplied in respect of the hedged item.

IAS 39 guidance Implementation guidance is provided in the IASB’sannual bound volume of IFRSs.



IAS 40 Investment Property


Amendments as a result of Improvements to IFRSs(May 2008) regarding property under constructionor development for future use as investmentproperty are effective from 1 January 2009.



Objective To prescribe the accounting treatment forinvestment property and related disclosures.

Summary • Investment property is land or buildings held(whether by the owner or by a lessee under afinance lease) to earn rentals or for capitalappreciation or both.

• IAS 40 does not apply to owner-occupiedproperty or property that is being constructedor developed for future use as investmentproperty, or property held for sale in theordinary course of business.

• Mixed-use property (partly used by the ownerand partly held for rental or appreciation) mustbe split with components accounted forseparately.

• An entity chooses either the fair value model orthe cost model;

– fair value model: investment property ismeasured at fair value, and changes in fairvalue are recognised in profit or loss; and

– cost model: investment property is measuredat depreciated cost less any accumulatedimpairment losses. Fair value of theinvestment property is disclosed.

• The chosen measurement model is applied toall of the entity’s investment property.

• If an entity uses the fair value model but, whena particular property is acquired, there is clearevidence that the entity will not be able todetermine fair value on a continuing basis, thecost model is used for that property – and itmust continue to be used until disposal of theproperty.

• Change from one model to the other ispermitted if it will result in a more appropriatepresentation (highly unlikely for change fromfair value to cost model).

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• A property interest held by a lessee under anoperating lease can qualify as investmentproperty provided that the lessee uses the fairvalue model of IAS 40. In this case, the lesseeaccounts for the lease as if it were a financelease.


IAS 41 Agriculture

Effective Date Periods beginning on or after 1 January 2003.


• discount rate for fair value calculations; and

• additional biological transformation.

Amendments are effective from 1 January 2009.

Objective To prescribe accounting for agricultural activity –the management of the biological transformationof biological assets (living plants and animals) intoagricultural produce.

Summary • All biological assets are measured at fair valueless estimated point-of-sale costs, unless fairvalue cannot be measured reliably.

• Agricultural produce is measured at fair value atthe point of harvest less estimated point-of-salecosts. Because harvested produce is amarketable commodity, there is no‘measurement reliability’ exception for produce.

• Any change in the fair value of biological assetsduring a period is reported in profit or loss.

• Exception to fair value model for biologicalassets: if there is no active market at the timeof recognition in the financial statements, andno other reliable measurement method, thenthe cost model is used for the specificbiological asset only. The biological asset ismeasured at depreciated cost less anyaccumulated impairment losses.



• Quoted market price in an active marketgenerally represents the best measure of thefair value of a biological asset or agriculturalproduce. If an active market does not exist,IAS 41 provides guidance for choosing anothermeasurement basis.

• The May 2008 amendments permit additionalbiological transformation to be taken intoconsideration when calculating the fair value ofbiological assets using discounted cash flows.

• Fair value measurement stops at harvest. IAS 2applies after harvest.


IFRIC 12 Service Concession Arrangements

Note: This Interpretation draws from severalStandards and is included separately dueto its complexity and significance.


Objective To address the accounting by private sectoroperators involved in the provision of publicsector infrastructure assets and services.The Interpretation does not address theaccounting for the government (grantor) sideof such arrangements.

Summary • For all arrangements falling within the scope ofthe Interpretation (essentially those where theinfrastructure assets are not controlled by theoperator), the infrastructure assets are notrecognised as property, plant and equipment ofthe operator. Rather, depending on the termsof the arrangement, the operator recognises:

– a financial asset – where the operator has anunconditional right to receive a specifiedamount of cash or other financial asset overthe life of the arrangement; or

104


– an intangible asset – where the operator’sfuture cash flows are not specified (e.g.where they will vary according to usage ofthe infrastructure asset); or

– both a financial asset and an intangible assetwhere the operator’s return is providedpartially by a financial asset and partially byan intangible asset.

IFRIC 17 Distributions of Non-cash Assets to Owners

Note: This Interpretation draws from severalStandards and is included separately dueto its complexity and significance.

Effective date Annual periods beginning on or after 1 July 2009.Earlier application is permitted with somerestrictions.

Objective To address the accounting when non-cash assetsare distributed to owners.

Summary • A dividend payable should be recognised whenthe dividend is appropriately authorised and isno longer at the discretion of the entity.

• An entity should measure the dividend payableat the fair value of the net assets to bedistributed. The liability should be remeasuredat each reporting date with changes recogniseddirectly in equity.

• The difference between the dividend paid andthe carrying amount of the net assets distributedshould be recognised in profit or loss.



Current IASB agenda projects Our www.iasplus.com website has the latest information about the IASBand IFRIC agenda projects and research topics, including summaries ofdecisions reached at each IASB and IFRIC meeting.

The following is a summary of the IASB’s agenda projects at 31 March 2009.

* Convergence project with FASB

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Topic Project Status

Annual improvements

Minor amendments to IFRSs:

• 2008-2009

• 2009-2010

Final IFRS expectedfirst half 2009

ED expected secondhalf 2009

Common controltransactions

Addresses the accounting forcombinations between entitiesor businesses under commoncontrol in the acquirer’sconsolidated and separatefinancial statements.

Added to agenda inDecember 2007

Timing of work yetto be determined

Conceptualframework*

The project is being addressedin eight phases:

A Objectives and qualitativecharacteristics

B Elements and recognition

C Measurement

D Reporting entity

E Presentation and disclosure

F Purpose and status offramework

G Applicability to not-for-profitentities

H Other issues, if necessary

Final Phase Achapters expectedfirst half 2009

DP on Phase Bplanned for 2010

DP on Phase Cplanned for secondhalf of 2009

ED on Phase Dplanned for secondhalf 2009

IASB has not yetdetermined timing ofother phases


Current IASB agenda projects 107


Consolidation,including specialpurpose entities*

The objective of the project is to provide more rigorousguidance on the concept of‘control’ as the basis forpreparing consolidatedfinancial statements.

ED issued December2008

Derecognition The revision of conflictingaspects of IAS 39’s guidanceon derecognition.

ED issued March 2009

DiscontinuedOperations andNon-currentAssets Heldfor Sale

The goal of this project is toamend the definition of adiscontinued operation inIFRS 5.

ED issued September2008

Final IFRS expectedfirst half 2009

Earnings per Share Amendment of IAS 33 retreasury stock method andseveral other issues.

ED issued August 2008

IFRS expected secondhalf 2009

Emission tradingschemes

Addresses the accounting foremission trading rights,including any governmentgrants associated with suchrights but will not addressgovernment grants moregenerally.


Fair valuemeasurementguidance*

To provide guidance to entitieson how they should measurethe fair value of assets andliabilities when required byother Standards.

DP wrap-around ofFAS 157 Fair ValueMeasurement wasissued in November2006

ED expected first half2009

Financialinstruments:comprehensiveproject

The review of IAS 39 will focuson improving, simplifying, andultimately replacing thestandard.


Financialinstruments withcharacteristics ofequity

This project addresses thedistinction between liabilitiesand equity.




Financialstatementpresentation(performancereporting)*

In two phases:

A Which financial statementsand comparative information

B Presentation in the financialstatements

Final IFRS issued inSeptember 2007

ED expected 2010

Governmentgrants

The objective of this project isto improve IAS 20.

Work has beendeferred pendingcompletion of theLiabilities Project

The revised timetablehas not yet beenannounced

IFRS 1 issues Transitional issues faced byjurisdictions expected to adoptIFRSs in coming years


IFRS expected secondhalf 2009

IFRS 2amendment

Group cash-settled share-based payment transactions(IFRS 2 and IFRIC 11)

IFRS expected secondquarter 2009

Impairment* Reconsideration of IAS 36Impairment of Assets

Staff research is inprogress

Income taxes* Aimed at reducing thedifferences between IAS 12Income Taxes and the USstandard, SFAS 109Accounting for Income Taxes.

ED issued March 2009

Final Standardexpected 2010

Insurancecontracts Phase II

The objective of the project is to take a fresh look ataccounting for insurancecontracts.


Joint ventures* Replacement of IAS 31Interests in Joint Ventureswith a Standard that reducesoptions and focuses onunderlying rights andobligations.


Final IFRS expectedsecond quarter 2009

Leases* The objective of the project is to improve the accountingfor leases by developing anapproach that is moreconsistent with the conceptualframework definitions ofassets and liabilities.

DP issued March 2009

ED expected first half2010

108



Liabilities (IAS 37amendments)

The objective of the project isto improve the requirementsrelating to identification andrecognition of liabilities.

ED was issued in June2005

Final IFRS expectedsecond half 2009

Managementcommentary

• Added to agenda in December 2007.

• Objective of this project is to develop a model for anarrative report that wouldaccompany but be presentedoutside of the financialstatements.

• The output would be a bestpractice guidance document.

IASB issued a DP forcomment in October2005

ED expected secondquarter 2009

Post-employmentbenefits (including pensions)

The project includes:

• a targeted series ofimprovements to IAS 19 tobe completed within a fouryear period; and

• a comprehensive reviewof the existing pensionaccounting model inconjunction with FASB.

DP issued March 2008


Rate-regulatedactivities

The main objective is toaddress whether rate-regulated entities could orshould recognise a liability (or an asset) as a result of rateregulation by regulatory bodiesor governments.

ED expected secondquarter 2009

Related PartyDisclosures

The main objectives of theproject are to address:

• the requirements in IAS 24for entities with significantstate ownership when theytransact with similar entities;and

• a number of changesrequired in the detail of thedefinition of related party.

Revised ED issuedDecember 2008

Final IFRS expectedsecond half 2009

109Current IASB agenda projects



Revenuerecognition*

The objective of the project isto develop general principlesfor determining when revenueshould be recognised in thefinancial statements.

DP issued December2008

ED expected 2010

(IFRS for) Small and medium-sizedentities

The objective of the project isto develop an InternationalFinancial Reporting Standardfor entities that do not havepublic accountability.

ED was issued inFebruary 2007

Final Standardexpected first half2009

110


Topic Status

Intangible assets

(Convergence project with the FASB)

• To develop a consistent approach torecognition and measurement of intangibleassets, including purchased and internallygenerated intangible assets not related to abusiness combination.

• Staff research paper being developed.

• Decision in December 2007 not to add thisproject to the agenda but to continue as aresearch project.

Extractive activities • To focus on the factors influencing theestimation of reserves and resources and themajor reserve reporting codes andclassification systems used in the extractiveindustries.

• A group of national standard setters isdeveloping a discussion paper expected in thefirst half of 2009.

IASC Foundation project

Topic Status

IFRS XBRL Taxonomy • Refer to http://www.iasb.org/XBRL/XBRL.htm

111IASB active research topics

IASB active research topics


InterpretationsInterpretations of IASs and IFRSs are developed by the InternationalFinancial Reporting Interpretations Committee (IFRIC), which replaced theStanding Interpretations Committee (SIC) in 2002. Interpretations are partof IASB’s authoritative literature. Therefore, financial statements may notbe described as complying with International Financial ReportingStandards unless they comply with all the requirements of each applicableStandard and each applicable Interpretation.

IFRIC Interpretations

The following Interpretations have been issued by the International FinancialReporting Interpretations Committee (IFRIC) starting in 2004 through31 March 2009.

• IFRIC 1 Changes in Existing Decommissioning, Restoration and SimilarLiabilities

• IFRIC 2 Members’ Shares in Co-operative Entities and Similar Instruments

• IFRIC 3 – withdrawn

• IFRIC 4 Determining whether an Arrangement contains a Lease

• IFRIC 5 Rights to Interests Arising from Decommissioning, Restorationand Environmental Rehabilitation Funds

• IFRIC 6 Liabilities arising from Participating in a Specific Market – WasteElectrical and Electronic Equipment

• IFRIC 7 Applying the Restatement Approach under IAS 29, FinancialReporting in Hyperinflationary Economies

• IFRIC 8 Scope of IFRS 2

• IFRIC 9 Reassessment of Embedded Derivatives

• IFRIC 10 Interim Financial Reporting and Impairment

• IFRIC 11 IFRS 2 – Group and Treasury Share Transactions

• IFRIC 12 Service Concession Arrangements

• IFRIC 13 Customer Loyalty Programmes

• IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum FundingRequirements and their Interaction

• IFRIC 15 Agreements for the Construction of Real Estate

• IFRIC 16 Hedges of a Net Investment in a Foreign Operation

• IFRIC 17 Distributions of Non-cash Assets to Owners

• IFRIC 18 Transfers of Assets from Customers

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SIC Interpretations

The following Interpretations, issued by the Standing InterpretationsCommittee (SIC) from 1997-2001, remain in effect. All other SICInterpretations have been superseded by amendments to IASs or new IFRSsissued by the IASB:

• SIC-7 Introduction of the Euro

• SIC-10 Government Assistance – No Specific Relation to OperatingActivities

• SIC-12 Consolidation – Special Purpose Entities

• SIC-13 Jointly Controlled Entities – Non-Monetary Contributions byVenturers

• SIC-15 Operating Leases – Incentives

• SIC-21 Income Taxes – Recovery of Revalued Non-Depreciable Assets

• SIC-25 Income Taxes – Changes in the Tax Status of an Entity or itsShareholders

• SIC-27 Evaluating the Substance of Transactions in the Legal Form ofa Lease

• SIC-29 Service Concession Arrangements: Disclosures

• SIC-31 Revenue – Barter Transactions Involving Advertising Services

• SIC-32 Intangible Assets – Web Site Costs

Items not added to IFRIC agenda

We maintain on www.iasplus.com a list of over 140 issues that the IFRICconsidered adding to its agenda but decided not to do so. In each case, theIFRIC announces its reason for not taking the issue onto its agenda. By theirnature, those announcements provide helpful guidance in applying IFRSs.You will find the list at www.iasplus.com/ifric/notadded.htm

IFRIC due process

In February 2007, the Trustees of the IASC Foundation published theDue Process Handbook for the International Financial Reporting InterpretationsCommittee (IFRIC). A copy may be downloaded from the IASB’s websitewww.iasb.org

The IFRIC approves draft and final Interpretations if not more than four of thefourteen IFRIC members vote against. Final Interpretations must then beapproved by the IASB (at least nine votes in favour).

113Interpretations


IFRIC current agenda issuesThe following is a summary of the IFRIC’s agenda projects at 31 March 2009.

Standard Topic Status

IFRIC 14 Voluntary Prepaid Contributionsunder a Minimum FundingRequirement

Active

IAS 38 REACH (European CommissionRegulation Concerning theRegistration, Evaluation,Authorisation and Restrictionof Chemicals)

Active

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Deloitte IFRS e-learningDeloitte is pleased to make available, in the publicinterest and without charge, our e-learning trainingmaterials for IFRSs. Modules are available for virtuallyall IASs/IFRSs. They are kept up to date regularly.

Each module involves downloading a 4mb to 6mb zipfile and extracting the enclosed files and directorystructure into a directory on your computer.

Before downloading, you will be asked to read andaccept a disclaimer notice. The e-learning modulesmay be used and distributed freely by thoseregistering with the site, without alteration from theoriginal form and subject to the terms of the Deloittecopyright over the material.

To download, go to www.iasplus.com and click onthe light bulb icon on the home page.

115Deloitte IFRS e-learning


Website addressesDeloitte Touche Tohmatsu

www.deloitte.com

www.iasplus.com

IASB

www.iasb.org

Some national standard-setting bodies

Australian Accounting Standards Board www.aasb.com.au

Canadian Accounting Standards Board www.acsbcanada.org

China Accounting Standards Committee www.casc.gov.cn/internet/internet/en.html

Conseil National de la Comptabilité www.minefi.gouv.fr/(France) directions_services/CNCompta/

German Accounting Standards Board www.drsc.de

Accounting Standards Board of Japan www.asb.or.jp

Korea Accounting Standards Board http://eng.kasb.or.kr

New Zealand Financial Reporting www.nzica.comStandards Board and New Zealand www.asrb.co.nzAccounting Standards Review Board

Accounting Standards Board www.asb.org.uk(United Kingdom)

Financial Accounting Standards Board www.fasb.org(USA)

International Auditing and Assurance Standards Board

www.ifac.org/iaasb

International Federation of Accountants

www.ifac.org

International Organization of Securities Commissions

www.iosco.org

Our IAS Plus website has a page with links to nearly 200 accounting-related websites: www.iasplus.com/links/links.htm

116


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If you would like to receive alerts to these newsletters, with download links,via email, you can subscribe by visiting the IAS Plus website:www.iasplus.com/subscribe.htm

Electronic editions of the IAS Plus Update newsletter are available atwww.iasplus.com/iasplus/iasplus.htm

We also offer alerts via our RSS feed – subscribe on the IAS Plus websitehome page.

117Subscribe to our IAS Plus Update newsletter


Notes

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Notes

119


Notes

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Deloitte IFRS resourcesIn addition to this publication, Deloitte Touche Tohmatsu has a range oftools and publications to assist in implementing and reporting under IFRSs.These include:

www.iasplus.com Updated daily, iasplus.com is your one-stop shopfor information related to IFRSs.

Deloitte’s IFRS e-Learning IFRS training materials, one module

e-Learning modules for each IAS and IFRS and the Framework, withself-tests, available without charge atwww.iasplus.com

IAS Plus newsletter Quarterly newsletter on recent developments inIFRSs and accounting updates for individualcountries. Special editions for importantdevelopments. To subscribe, visitwww.iasplus.com

Presentation and Checklist incorporating all of the presentation disclosure checklist and disclosure requirements of Standards.

Model financial Model financial statements illustrating the statements presentation and disclosure requirements of IFRSs.

iGAAP 2007 3rd edition (March 2007). Guidance on how to Financial instruments: apply these complex Standards, including IAS 32, IAS 39 and illustrative examples and interpretations.IFRS7 explained

First-time adoption: Application guidance for the “stable platform” A guide to IFRS 1 standards effective in 2005.

Share-based payments: Guidance on applying IFRS 2 to many common A guide to IFRS 2 share-based payment transactions.

Business combinations: Supplements the IASB’s own guidance for A guide to IFRS 3 applying this Standard.

Assets held for sale Detailed summaries and explanations of theand discontinued requirements of the Standard, including operations: examples of application and discussion ofA guide to IFRS 5 evolving literature.

Interim financial Guidance on applying the interim reporting reporting: standard, including a model interim financialA guide to IAS 34 report and an IAS 34 compliance checklist.


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