IAS Standards

IAS 1 Presentation of Financial Statements

About

IAS 1 sets out overall requirements for the presentation of financial statements, guidelines for their
structure and minimum requirements for their content. It requires an entity to present a complete
set of financial statements at least annually, with comparative amounts for the preceding year
(including comparative amounts in the notes). A complete set of financial statements comprises:

• a statement of financial position as at the end of the period;

• a statement of profit and loss and other comprehensive income for the period. Other
comprehensive income is those items of income and expense that are not recognised in
profit or loss in accordance with IFRS Standards. IAS 1 allows an entity to present a single
combined statement of profit and loss and other comprehensive income or two separate
statements;

• a statement of changes in equity for the period;

• a statement of cash flows for the period;

• notes, comprising a summary of significant accounting policies and other explanatory

information; and

• a statement of financial position as at the beginning of the preceding comparative period

when an entity applies an accounting policy retrospectively or makes a retrospective
restatement of items in its financial statements, or when it reclassifies items in its financial
statements.

An entity whose financial statements comply with IFRS Standards must make an explicit and
unreserved statement of such compliance in the notes. An entity must not describe financial
statements as complying with IFRS Standards unless they comply with all the requirements of the
Standards. The application of IFRS Standards, with additional disclosure when necessary, is
presumed to result in financial statements that achieve a fair presentation. IAS 1 also deals with
going concern issues, offsetting and changes in presentation or classification.
IAS 2 Inventories

About

IAS 2 provides guidance for determining the cost of inventories and the subsequent recognition of
the cost as an expense, including any write-down to net realisable value. It also provides guidance on
the cost formulas that are used to assign costs to inventories. Inventories are measured at the lower
of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and the estimated costs necessary to
make the sale.

The cost of inventories includes all costs of purchase, costs of conversion (direct labour and
production overhead) and other costs incurred in bringing the inventories to their present location
and condition. The cost of inventories is assigned by:

• specific identification of cost for items of inventory that are not ordinarily interchangeable;
and

• the first-in, first-out or weighted average cost formula for items that are ordinarily
interchangeable (generally large quantities of individually insignificant items).

When inventories are sold, the carrying amount of those inventories is recognised as an expense in
the period in which the related revenue is recognised. The amount of any write-down of inventories
to net realisable value and all losses of inventories are recognised as an expense in the period the
write-down or loss occurs.
IAS 7 Statement of Cash Flows

About

IAS 7 prescribes how to present information in a statement of cash flows about how an entity’s cash
and cash equivalents changed during the period. Cash comprises cash on hand and demand
deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to
known amounts of cash and that are subject to an insignificant risk of changes in value.

The statement classifies cash flows during a period into cash flows from operating, investing and
financing activities:

• operating activities are the principal revenue-producing activities of the entity and other
activities that are not investing or financing activities. An entity reports cash flows from
operating activities using either:

o the direct method, whereby major classes of gross cash receipts and gross cash
payments are disclosed; or

o the indirect method, whereby profit or loss is adjusted for the effects of transactions
of a non-cash nature, any deferrals or accruals of past or future operating cash
receipts or payments and items of income or expense associated with investing or
financing cash flows.

• investing activities are the acquisition and disposal of long-term assets and other
investments not included in cash equivalents. The aggregate cash flows arising from
obtaining and losing control of subsidiaries or other businesses are presented as investing
activities.

• financing activities are activities that result in changes in the size and composition of the
contributed equity and borrowings of the entity.

Investing and financing transactions that do not require the use of cash or cash equivalents are
excluded from a statement of cash flows but separately disclosed. IAS 7 requires an entity to disclose
the components of cash and cash equivalents and to present a reconciliation of the amounts in its
statement of cash flows with the equivalent items reported in the statement of financial position.
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

About

IAS 8 prescribes the criteria for selecting and changing accounting policies, together with the
accounting treatment and disclosure of changes in accounting policies, changes in accounting
estimates and corrections of errors. Accounting policies are the specific principles, bases,
conventions, rules and practices applied by an entity in preparing and presenting financial
statements. When an IFRS Standard or IFRS Interpretation specifically applies to a transaction, other
event or condition, an entity must apply that Standard.

In the absence of an IFRS Standard that specifically applies to a transaction, other event or condition,
management uses its judgement in developing and applying an accounting policy that results in
information that is relevant and reliable. In making that judgement management refers to the
following sources in descending order:

• the requirements and guidance in IFRS Standards dealing with similar and related issues; and

• the definitions, recognition criteria and measurement concepts for assets, liabilities, income
and expenses in the Conceptual Framework.

Changes in an accounting policy are applied retrospectively unless this is impracticable or unless
another IFRS Standard sets specific transitional provisions.

Changes in accounting estimates result from new information or new developments and,
accordingly, are not corrections of errors. The effect of a change in an accounting estimate is
recognised prospectively by including it in profit or loss in:

• the period of the change, if the change affects that period only; or

• the period of the change and future periods, if the change affects both.

Prior period errors are omissions from, and misstatements in, the entity’s financial statements for
one or more prior periods arising from a failure to use, or misuse of, available reliable information.
Unless it is impracticable to determine the effects of the error, an entity corrects material prior
period errors retrospectively by restating the comparative amounts for the prior period(s) presented
in which the error occurred.
IAS 10 Events after the Reporting Period

About

IAS 10 prescribes:

• when an entity should adjust its financial statements for events after the reporting period;
and

• the disclosures that an entity should give about the date when the financial statements were
authorised for issue and about events after the reporting period.

Events after the reporting period are those events, favourable and unfavourable, that occur
between the end of the reporting period and the date when the financial statements are authorised
for issue. The two types of events are:

• those that provide evidence of conditions that existed at the end of the reporting period
(adjusting events); and

• those that are indicative of conditions that arose after the reporting period (non-adjusting
events).

An entity adjusts the amounts recognised in its financial statements to reflect adjusting events, but it
does not adjust those amounts to reflect non-adjusting events. If non-adjusting events after the
reporting period are material, IAS 10 prescribes disclosures.
IAS 12 Income Taxes

About

IAS 12 prescribes the accounting treatment for income taxes. Income taxes include all domestic and
foreign taxes that are based on taxable profits.

Current tax for current and prior periods is, to the extent that it is unpaid, recognised as a liability.
Overpayment of current tax is recognised as an asset. Current tax liabilities (assets) for the current
and prior periods are measured at the amount expected to be paid to (recovered from) the taxation
authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by
the end of the reporting period.

IAS 12 requires an entity to recognise a deferred tax liability or (subject to specified conditions) a
deferred tax asset for all temporary differences, with some exceptions. Temporary differences are
differences between the tax base of an asset or liability and its carrying amount in the statement of
financial position. The tax base of an asset or liability is the amount attributed to that asset or
liability for tax purposes.

A deferred tax liability arises if an entity will pay tax if it recovers the carrying amount of another
asset or liability. A deferred tax asset arises if an entity:

• will pay less tax if it recovers the carrying amount of another asset or liability; or

• has unused tax losses or unused tax credits.

IAS 16 Property, Plant and Equipment

About

IAS 16 establishes principles for recognising property, plant and equipment as assets, measuring
their carrying amounts, and measuring the depreciation charges and impairment losses to be
recognised in relation to them. Property, plant and equipment are tangible items that:

• are held for use in the production or supply of goods or services, for rental to others, or for
administrative purposes; and

• are expected to be used during more than one period.

Property, plant and equipment includes bearer plants related to agricultural activity.

The cost of an item of property, plant and equipment is recognised as an asset if, and only if:

• it is probable that future economic benefits associated with the item will flow to the entity;
and

• the cost of the item can be measured reliably.

An item of property, plant and equipment is initially measured at its cost. Cost includes:

• its purchase price, including import duties and non-refundable purchase taxes, after
deducting trade discounts and rebates;

• any costs directly attributable to bringing the asset to the location and condition necessary
for it to be capable of operating in the manner intended by management; and

• the estimated costs of dismantling and removing the item and restoring the site on which it
is located, unless those costs relate to inventories produced during that period.
IAS 19 Employee Benefits

About

IAS 19 prescribes the accounting for all types of employee benefits except share-based payment, to
which IFRS 2 applies. Employee benefits are all forms of consideration given by an entity in exchange
for service rendered by employees or for the termination of employment. IAS 19 requires an entity
to recognise:

• a liability when an employee has provided service in exchange for employee benefits to be
paid in the future; and

• an expense when the entity consumes the economic benefit arising from the service
provided by an employee in exchange for employee benefits.

Short-term employee benefits (to be settled within 12 months, other than termination benefits)

These are recognised when the employee has rendered the service and are measured at the
undiscounted amount of benefits expected to be paid in exchange for that service.

Post-employment benefits (other than termination benefits and short-term employee benefits)
that are payable after the completion of employment

Plans providing these benefits are classified as either defined contribution plans or defined benefit
plans, depending on the economic substance of the plan as derived from its principal terms and
conditions:

• A defined contribution plan is a post-employment benefit plan under which an entity pays
fixed contributions into a separate entity (a fund) and will have no legal or constructive
obligation to pay further contributions if the fund does not hold sufficient assets to pay all
employee benefits relating to employee service in the current and prior periods. Under IAS
19, when an employee has rendered service to an entity during a period, the entity
recognises the contribution payable to a defined contribution plan in exchange for that
service as a liability (accrued expense) and as an expense, unless another Standard requires
or permits the inclusion of the contribution in the cost of an asset.

• A defined benefit plan is any post-employment benefit plan other than a defined
contribution plan. Under IAS 19, an entity uses an actuarial technique (the projected unit
credit method) to estimate the ultimate cost to the entity of the benefits that employees
have earned in return for their service in the current and prior periods; discounts that
benefit in order to determine the present value of the defined benefit obligation and the
current service cost; deducts the fair value of any plan assets from the present value of the
defined benefit obligation; determines the amount of the deficit or surplus; and determines
the amount to be recognised in profit and loss and other comprehensive income in the
current period. Those measurements are updated each period.

Other long-term benefits

These are all employee benefits other than short-term employee benefits, post-employment
benefits and termination benefits. Measurement is similar to defined benefit plans.
Termination benefits

Termination benefits are employee benefits provided in exchange for the termination of an
employee’s employment. An entity recognises a liability and expense for termination benefits at the
earlier of the following dates:

• when the entity can no longer withdraw the offer of those benefits; and

• when the entity recognises costs for a restructuring that is within the scope of IAS 37 and
involves the payment of termination benefits.
IAS 20 Accounting for Government Grants and Disclosure of Government Assistance

About

Government grants are transfers of resources to an entity by government in return for past or future
compliance with certain conditions relating to the operating activities of the entity. Government
assistance is action by government designed to provide an economic benefit that is specific to an
entity or range of entities qualifying under certain criteria.

An entity recognises government grants only when there is reasonable assurance that the entity will
comply with the conditions attached to them and the grants will be received. Government grants are
recognised in profit or loss on a systematic basis over the periods in which the entity recognises as
expenses the related costs for which the grants are intended to compensate.

A government grant that becomes receivable as compensation for expenses or losses already
incurred or for the purpose of giving immediate financial support to the entity with no future related
costs is recognised in profit or loss of the period in which it becomes receivable.

Government grants related to assets, including non-monetary grants at fair value, are presented in
the statement of financial position either by setting up the grant as deferred income or by deducting
the grant in arriving at the carrying amount of the asset.

Grants related to income are sometimes presented as a credit in the statement of comprehensive
income, either separately or under a general heading such as ‘Other income’; alternatively, they are
deducted in reporting the related expense.

If a government grant becomes repayable, the effect is accounted for as a change in accounting
estimate (see IAS 8).
IAS 21 The Effects of Changes in Foreign Exchange Rates

About

An entity may carry on foreign activities in two ways. It may have transactions in foreign currencies
or it may have foreign operations. IAS 21 prescribes how an entity should:

• account for foreign currency transactions;

• translate financial statements of a foreign operation into the entity’s functional currency;
and

• translate the entity’s financial statements into a presentation currency, if different from the
entity’s functional currency. IAS 21 permits an entity to present its financial statements in
any currency (or currencies).

The principal issues are which exchange rate(s) to use and how to report the effects of changes in
exchange rates in the financial statements.

An entity’s functional currency is the currency of the primary economic environment in which the
entity operates (ie the environment in which it primarily generates and expends cash). Any other
currency is a foreign currency.
IAS 23 Borrowing Costs

About

Borrowing costs that are directly attributable to the acquisition, construction or production of a
qualifying asset form part of the cost of that asset. Other borrowing costs are recognised as an
expense. Borrowing costs are interest and other costs that an entity incurs in connection with the
borrowing of funds. IAS 23 provides guidance on how to measure borrowing costs, particularly when
the costs of acquisition, construction or production are funded by an entity’s general borrowings.
IAS 24 Related Party Disclosures

About

The objective of IAS 24 is to ensure that an entity’s financial statements contain the disclosures
necessary to draw attention to the possibility that its financial position and profit or loss may have
been affected by the existence of related parties and by transactions and outstanding balances,
including commitments, with such parties.

A related party is a person or an entity that is related to the reporting entity:

• A person or a close member of that person’s family is related to a reporting entity if that
person has control, joint control, or significant influence over the entity or is a member of its
key management personnel.

• An entity is related to a reporting entity if, among other circumstances, it is a parent,

subsidiary, fellow subsidiary, associate, or joint venture of the reporting entity, or it is
controlled, jointly controlled, or significantly influenced or managed by a person who is a
related party.

A related party transaction is a transfer of resources, services or obligations between a reporting

entity and a related party, regardless of whether a price is charged. If an entity has had related party
transactions during the periods covered by the financial statements, IAS 24 requires it to disclose the
nature of the related party relationship as well as information about those transactions and
outstanding balances, including commitments, necessary for users to understand the potential
effect of the relationship on the financial statements.

IAS 24 requires an entity to disclose key management personnel compensation in total and by
category as defined in the Standard.
IAS 27 Separate Financial Statements

About

IAS 27 prescribes the accounting and disclosure requirements for investments in subsidiaries, joint
ventures and associates when an entity elects, or is required by local regulations, to present
separate financial statements.

Separate financial statements are those presented in addition to consolidated financial statements.

Separate financial statements could be those of a parent or of a subsidiary by itself. In separate

financial statements, an investor accounts for investments in subsidiaries, joint ventures and
associates either at cost, or in accordance with IFRS 9, or using the equity method as described in IAS
28.
IAS 28 Investments in Associates and Joint Ventures

About

IAS 28 requires an investor to account for its investment in associates using the equity method. IFRS
11 requires an investor to account for its investments in joint ventures using the equity method
(with some limited exceptions). IAS 28 prescribes how to apply the equity method when accounting
for investments in associates and joint ventures.

An associate is an entity over which the investor has significant influence. Significant influence is the
power to participate in the financial and operating policy decisions of the investee without the
power to control or jointly control those policies.

If an entity holds, directly or indirectly (e.g. through subsidiaries), 20 per cent or more of the voting
power of the investee, it is presumed that the entity has significant influence. A joint venture is a
joint arrangement whereby the parties that have joint control of the arrangement have rights to the
net assets of the arrangement.

Under the equity method, on initial recognition the investment in an associate or a joint venture is
recognised at cost. The carrying amount is then increased or decreased to recognise the investor’s
share of the subsequent profit or loss of the investee and to include that share of the investee’s
profit or loss in the investor’s profit or loss. Distributions received from an investee reduce the
carrying amount of the investment. Adjustments to the carrying amount may also be necessary for
changes in the investor’s proportionate interest in the investee and for the investee’s other
comprehensive income.
IAS 32 Financial Instruments: Presentation

About

IAS 32 specifies presentation for financial instruments. The recognition and measurement and the
disclosure of financial instruments are the subjects of IFRS 9 or IAS 39 and IFRS 7 respectively.

For presentation, financial instruments are classified into financial assets, financial liabilities and
equity instruments. Differentiation between a financial liability and equity depends on whether an
entity has an obligation to deliver cash (or some other financial asset).

However, exceptions apply. When a transaction will be settled in the issuer’s own shares,
classification depends on whether the number of shares to be issued is fixed or variable.

A compound financial instrument, such as a convertible bond, is split into equity and liability
components. When the instrument is issued, the equity component is measured as the difference
between the fair value of the compound instrument and the fair value of the liability component.

Financial assets and financial liabilities are offset only when the entity has a legally enforceable right
to set off the recognised amounts, and intends either to settle on a net basis or to realise the asset
and settle the liability simultaneously.
IAS 33 Earnings per Share

About

IAS 33 deals with the calculation and presentation of earnings per share (EPS). It applies to entities
whose ordinary shares or potential ordinary shares (for example, convertibles, options and warrants)
are publicly traded. Non-public entities electing to present EPS must also follow the Standard.

An entity must present basic EPS and diluted EPS with equal prominence in the statement of
comprehensive income. In consolidated financial statements, EPS measures are based on the
consolidated profit or loss attributable to ordinary equity holders of the parent.

Dilution is a potential reduction in EPS or a potential increase in loss per share resulting from the
assumption that convertible instruments are converted, options or warrants are exercised, or
ordinary shares are issued upon the satisfaction of specified conditions.

When the entity also discloses profit or loss from continuing operations, basic EPS and diluted EPS
must be presented in respect of continuing operations. Furthermore, if an entity reports a
discontinued operation, it must present basic and diluted amounts per share for the discontinued
operation either in the statement of comprehensive income or in the notes.

IAS 33 sets out principles for determining the denominator (the weighted average number of shares
outstanding for the period) and the numerator (‘earnings’) in basic EPS and diluted EPS calculations.

The denominators used in the basic EPS and diluted EPS calculation might be affected by share
issues during the year; shares to be issued upon conversion of a convertible instrument; contingently
issuable or returnable shares; bonus issues; share splits and share consolidation; the exercise of
options and warrants; contracts that may be settled in shares; and contracts that require an entity to
repurchase its own shares (written put options).

IAS 33 requires an entity to disclose:

• the amounts used as the numerators in calculating basic and diluted earnings per share, and
a reconciliation of those amounts to profit or loss.

• the weighted average number of ordinary shares used as the denominator in calculating
basic and diluted earnings per share, and a reconciliation of these denominators to each
other.

• a description of any other instruments (including contingently issuable shares) that could
potentially dilute basic earnings per share in the future, but that were not included in the
calculation of diluted earnings per share.

• a description of ordinary share transactions that occur after the reporting period and that
could have changed the EPS calculations significantly if those transactions had occurred
before the end of the reporting period.
IAS 34 Interim Financial Reporting

About

An interim financial report is a complete or condensed set of financial statements for a period
shorter than a financial year. IAS 34 does not specify which entities must publish an interim financial
report. That is generally a matter for laws and government regulations. IAS 34 applies if an entity
using IFRS Standards in its annual financial statements publishes an interim financial report that
asserts compliance with IFRS Standards.

IAS 34 prescribes the minimum content of such an interim financial report. It also specifies the
accounting recognition and measurement principles applicable to an interim financial report.

The minimum content is a set of condensed financial statements for the current period and
comparative prior period information, ie statement of financial position, statement of
comprehensive income, statement of cash flows, statement of changes in equity, and selected
explanatory notes. In some cases, a statement of financial position at the beginning of the prior
period is also required. Generally, information available in the entity’s most recent annual report is
not repeated or updated in the interim report. The interim report deals with changes since the end
of the last annual reporting period.

The same accounting policies are applied in the interim report as in the most recent annual report,
or special disclosures are required if an accounting policy is changed. Assets and liabilities are
recognised and measured for interim reporting on the basis of information available on a year-to-
date basis. While measurements in both annual financial statements and interim financial reports
are often based on reasonable estimates, the preparation of interim financial reports will generally
require a greater use of estimation methods than annual financial statements.
IAS 36 Impairment of Assets

About

The core principle in IAS 36 is that an asset must not be carried in the financial statements at more
than the highest amount to be recovered through its use or sale. If the carrying amount exceeds the
recoverable amount, the asset is described as impaired. The entity must reduce the carrying amount
of the asset to its recoverable amount, and recognise an impairment loss. IAS 36 also applies to
groups of assets that do not generate cash flows individually (known as cash-generating units).

IAS 36 applies to all assets except those for which other Standards address impairment. The
exceptions include inventories, deferred tax assets, assets arising from employee benefits, financial
assets within the scope of IFRS 9, investment property measured at fair value, biological assets
within the scope of IAS 41, some assets arising from insurance contracts, and non-current assets
held for sale.

The recoverable amount of the following assets in the scope of IAS 36 must be assessed each year:
intangible assets with indefinite useful lives; intangible assets not yet available for use; and goodwill
acquired in a business combination. The recoverable amount of other assets is assessed only when
there is an indication that the asset may be impaired. Recoverable amount is the higher of (a) fair
value less costs to sell and (b) value in use.

Fair value less costs to sell is the arm’s length sale price between knowledgeable willing parties less
costs of disposal.

The value in use of an asset is the expected future cash flows that the asset in its current condition
will produce, discounted to present value using an appropriate discount rate. Sometimes, the value
in use of an individual asset cannot be determined. In that case, recoverable amount is determined
for the smallest group of assets that generates independent cash flows (cash-generating unit).
Whether goodwill is impaired is assessed by considering the recoverable amount of the cash-
generating unit(s) to which it is allocated.

An impairment loss is recognised immediately in profit or loss (or in comprehensive income if it is a

revaluation decrease under IAS 16 or IAS 38). The carrying amount of the asset (or cash-generating
unit) is reduced. In a cash-generating unit, goodwill is reduced first; then other assets are reduced
pro rata. The depreciation (amortisation) charge is adjusted in future periods to allocate the asset’s
revised carrying amount over its remaining useful life.

An impairment loss for goodwill is never reversed. For other assets, when the circumstances that
caused the impairment loss are favourably resolved, the impairment loss is reversed immediately in
profit or loss (or in comprehensive income if the asset is revalued under IAS 16 or IAS 38). On
reversal, the asset’s carrying amount is increased, but not above the amount that it would have been
without the prior impairment loss. Depreciation (amortisation) is adjusted in future periods.
IAS 37 Provisions, Contingent Liabilities and Contingent Assets

About

IAS 37 defines and specifies the accounting for and disclosure of provisions, contingent liabilities,
and contingent assets.

Provisions

A provision is a liability of uncertain timing or amount. The liability may be a legal obligation or a
constructive obligation. A constructive obligation arises from the entity’s actions, through which it
has indicated to others that it will accept certain responsibilities, and as a result has created an
expectation that it will discharge those responsibilities. Examples of provisions may include:
warranty obligations; legal or constructive obligations to clean up contaminated land or restore
facilities; and obligations caused by a retailer’s policy to make refunds to customers.

An entity recognises a provision if it is probable that an outflow of cash or other economic resources
will be required to settle the provision. If an outflow is not probable, the item is treated as a
contingent liability.

A provision is measured at the amount that the entity would rationally pay to settle the obligation at
the end of the reporting period or to transfer it to a third party at that time. Risks and uncertainties
are taken into account in measuring a provision. A provision is discounted to its present value.

IAS 37 elaborates on the application of the recognition and measurement requirements for three
specific cases:

• future operating losses—a provision cannot be recognised because there is no obligation at

the end of the reporting period;

• an onerous contract gives rise to a provision; and

• a provision for restructuring costs is recognised only when the entity has a constructive
obligation because the main features of the detailed restructuring plan have been
announced to those affected by it.

Contingent liabilities

Contingent liabilities are possible obligations whose existence will be confirmed by uncertain future
events that are not wholly within the control of the entity. An example is litigation against the entity
when it is uncertain whether the entity has committed an act of wrongdoing and when it is not
probable that settlement will be needed.

Contingent liabilities also include obligations that are not recognised because their amount cannot
be measured reliably or because settlement is not probable. Contingent liabilities do not include
provisions for which it is certain that the entity has a present obligation that is more likely than not
to lead to an outflow of cash or other economic resources, even though the amount or timing is
uncertain.
A contingent liability is not recognised in the statement of financial position. However, unless the
possibility of an outflow of economic resources is remote, a contingent liability is disclosed in the
notes.

Contingent assets

Contingent assets are possible assets whose existence will be confirmed by the occurrence or non-
occurrence of uncertain future events that are not wholly within the control of the entity.
Contingent assets are not recognised, but they are disclosed when it is more likely than not that an
inflow of benefits will occur. However, when the inflow of benefits is virtually certain an asset is
recognised in the statement of financial position, because that asset is no longer considered to be
contingent.
IAS 38 Intangible Assets

About

IAS 38 sets out the criteria for recognising and measuring intangible assets and requires disclosures
about them. An intangible asset is an identifiable non-monetary asset without physical substance.
Such an asset is identifiable when it is separable, or when it arises from contractual or other legal
rights. Separable assets can be sold, transferred, licensed, etc. Examples of intangible assets include
computer software, licences, trademarks, patents, films, copyrights and import quotas. Goodwill
acquired in a business combination is accounted for in accordance with IFRS 3 and is outside the
scope of IAS 38. Internally generated goodwill is within the scope of IAS 38 but is not recognised as
an asset because it is not an identifiable resource.

Expenditure for an intangible item is recognised as an expense, unless the item meets the definition
of an intangible asset, and:

• it is probable that there will be future economic benefits from the asset; and

• the cost of the asset can be reliably measured.

The cost of generating an intangible asset internally is often difficult to distinguish from the cost of
maintaining or enhancing the entity’s operations or goodwill. For this reason, internally generated
brands, mastheads, publishing titles, customer lists and similar items are not recognised as
intangible assets. The costs of generating other internally generated intangible assets are classified
into whether they arise in a research phase or a development phase. Research expenditure is
recognised as an expense. Development expenditure that meets specified criteria is recognised as
the cost of an intangible asset.

Intangible assets are measured initially at cost. After initial recognition, an entity usually measures
an intangible asset at cost less accumulated amortisation. It may choose to measure the asset at fair
value in rare cases when fair value can be determined by reference to an active market.

An intangible asset with a finite useful life is amortised and is subject to impairment testing. An
intangible asset with an indefinite useful life is not amortised, but is tested annually for impairment.
When an intangible asset is disposed of, the gain or loss on disposal is included in profit or loss.
IAS 40 Investment Property

About

Investment property is land or a building (including part of a building) or both that is:

• held to earn rentals or for capital appreciation or both;

• not owner-occupied;

• not used in production or supply of goods and services, or for administration; and

• not held for sale in the ordinary course of business.

Investment property may include investment property that is being redeveloped.

An investment property is measured initially at cost. The cost of an investment property interest
held under a lease is measured in accordance with IAS 17 at the lower of the fair value of the
property interest and the present value of the minimum lease payments.

For subsequent measurement an entity must adopt either the fair value model or the cost model as
its accounting policy for all investment properties. All entities must determine fair value for
measurement (if the entity uses the fair value model) or disclosure (if it uses the cost model). Fair
value reflects market conditions at the end of the reporting period.

Under the fair value model, investment property is remeasured at the end of each reporting period.
Changes in fair value are recognised in profit or loss as they occur. Fair value is the price at which the
property could be exchanged between knowledgeable, willing parties in an arm’s length transaction,
without deducting transaction costs (see IFRS 13).

Under the cost model, investment property is measured at cost less accumulated depreciation and
any accumulated impairment losses. Fair value is disclosed.

Gains and losses on disposal are recognised in profit or loss.

IAS 41 Agriculture

About

IAS 41 prescribes the accounting treatment, financial statement presentation, and disclosures
related to agricultural activity. Agricultural activity is the management of the biological
transformation of biological assets (living animals or plants) and harvest of biological assets for sale
or for conversion into agricultural produce or into additional biological assets.

IAS 41 establishes the accounting treatment for biological assets during their growth, degeneration,
production and procreation, and for the initial measurement of agricultural produce at the point of
harvest. It does not deal with processing of agricultural produce after harvest (for example,
processing grapes into wine, or wool into yarn). IAS 41 contains the following accounting
requirements:

• bearer plants are accounted for using IAS 16;

• other biological assets are measured at fair value less costs to sell;

• agricultural produce at the point of harvest is also measured at fair value less costs to sell;

• changes in the fair value of biological assets are included in profit or loss; and

• biological assets attached to land (for example, trees in a plantation forest) are measured
separately from the land.

The fair value of a biological asset or agricultural produce is its market price less any costs to sell the
produce. Costs to sell include commissions, levies, and transfer taxes and duties.

IAS 41 differs from IAS 20 with regard to recognition of government grants. Unconditional grants
related to biological assets measured at fair value less costs to sell are recognised as income when
the grant becomes receivable. Conditional grants are recognised as income only when the conditions
attaching to the grant are met.
IFRS Accounting Standards
IFRS 1 First-time Adoption of International Financial Reporting Standards

About

IFRS 1 requires an entity that is adopting IFRS Standards for the first time to prepare a complete set
of financial statements covering its first IFRS reporting period and the preceding year.

The entity uses the same accounting policies throughout all periods presented in its first IFRS
financial statements. Those accounting policies must comply with each Standard effective at the end
of its first IFRS reporting period.

IFRS 1 provides limited exemptions from the requirement to restate prior periods in specified areas
in which the cost of complying with them would be likely to exceed the benefits to users of financial
statements.

IFRS 1 also prohibits retrospective application of IFRS Standards in some areas, particularly when
retrospective application would require judgements by management about past conditions after the
outcome of a particular transaction is already known.

IFRS 1 requires disclosures that explain how the transition from previous GAAP to IFRS Standards
affected the entity’s reported financial position, financial performance and cash flows.
IFRS 2 Share-based Payment

About

IFRS 2 specifies the financial reporting by an entity when it undertakes a share-based payment
transaction, including issue of share options. It requires an entity to recognise share-based payment
transactions in its financial statements, including transactions with employees or other parties to be
settled in cash, other assets or equity instruments of the entity. It requires an entity to reflect in its
reported profit or loss and financial position the effects of share-based payment transactions,
including expenses associated with transactions in which share options are granted to employees.
IFRS 3 Business Combinations

About

IFRS 3 establishes principles and requirements for how an acquirer in a business combination:

• recognises and measures in its financial statements the assets and liabilities acquired, and
any interest in the acquiree held by other parties;

• recognises and measures the goodwill acquired in the business combination or a gain from a
bargain purchase; and

• determines what information to disclose to enable users of the financial statements to

evaluate the nature and financial effects of the business combination.

The core principles in IFRS 3 are that an acquirer measures the cost of the acquisition at the fair
value of the consideration paid; allocates that cost to the acquired identifiable assets and liabilities
on the basis of their fair values; allocates the rest of the cost to goodwill; and recognises any excess
of acquired assets and liabilities over the consideration paid (a ‘bargain purchase’) in profit or loss
immediately. The acquirer discloses information that enables users to evaluate the nature and
financial effects of the acquisition.
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

About

IFRS 5 requires:

• a non-current asset or disposal group to be classified as held for sale if its carrying amount
will be recovered principally through a sale transaction instead of through continuing use;
• assets held for sale to be measured at the lower of the carrying amount and fair value less
costs to sell;
• depreciation of an asset to cease when it is held for sale;
• separate presentation in the statement of financial position of an asset classified as held for
sale and of the assets and liabilities included within a disposal group classified as held for
sale; and
• separate presentation in the statement of comprehensive income of the results of
discontinued operations.
IFRS 7 Financial Instruments: Disclosures

About

IFRS 7 requires entities to provide disclosures in their financial statements that enable users to
evaluate:

• the significance of financial instruments for the entity’s financial position and performance.

• the nature and extent of risks arising from financial instruments to which the entity is
exposed during the period and at the end of the reporting period, and how the entity
manages those risks. The qualitative disclosures describe management’s objectives, policies
and processes for managing those risks. The quantitative disclosures provide information
about the extent to which the entity is exposed to risk, based on information provided
internally to the entity’s key management personnel. Together, these disclosures provide an
overview of the entity’s use of financial instruments and the exposures to risks they create.

IFRS 7 applies to all entities, including entities that have few financial instruments (for example, a
manufacturer whose only financial instruments are cash, accounts receivable and accounts payable)
and those that have many financial instruments (for example, a financial institution most of whose
assets and liabilities are financial instruments).
IFRS 8 Operating Segments

About

IFRS 8 requires an entity whose debt or equity securities are publicly traded to disclose information
to enable users of its financial statements to evaluate the nature and financial effects of the
different business activities in which it engages and the different economic environments in which it
operates.
It specifies how an entity should report information about its operating segments in annual financial
statements and in interim financial reports. It also sets out requirements for related disclosures
about products and services, geographical areas and major customers.
IFRS 9 Financial Instruments

About

IFRS 9 is effective for annual periods beginning on or after 1 January 2018 with early application
permitted.

IFRS 9 specifies how an entity should classify and measure financial assets, financial liabilities, and
some contracts to buy or sell non-financial items.

IFRS 9 requires an entity to recognise a financial asset or a financial liability in its statement of
financial position when it becomes party to the contractual provisions of the instrument. At initial
recognition, an entity measures a financial asset or a financial liability at its fair value plus or minus,
in the case of a financial asset or a financial liability not at fair value through profit or loss,
transaction costs that are directly attributable to the acquisition or issue of the financial asset or the
financial liability.
IFRS 10 Consolidated Financial Statements

About

IFRS 10 establishes principles for presenting and preparing consolidated financial statements when
an entity controls one or more other entities. IFRS 10:

• requires an entity (the parent) that controls one or more other entities (subsidiaries) to
present consolidated financial statements;

• defines the principle of control, and establishes control as the basis for consolidation;

• sets out how to apply the principle of control to identify whether an investor controls an
investee and therefore must consolidate the investee;

• sets out the accounting requirements for the preparation of consolidated financial
statements; and

• defines an investment entity and sets out an exception to consolidating particular

subsidiaries of an investment entity.

Consolidated financial statements are financial statements that present the assets, liabilities, equity,
income, expenses and cash flows of a parent and its subsidiaries as those of a single economic entity.
IFRS 11 Joint Arrangements

About

IFRS 11 establishes principles for financial reporting by entities that have an interest in arrangements
that are controlled jointly (joint arrangements).

A joint arrangement is an arrangement of which two or more parties have joint control. Joint control
is the contractually agreed sharing of control of an arrangement, which exists only when decisions
about the relevant activities (ie activities that significantly affect the returns of the arrangement)
require the unanimous consent of the parties sharing control.
IFRS 12 Disclosure of Interests in Other Entities

About

IFRS 12 requires an entity to disclose information that enables users of its financial statements to
evaluate:

• the nature of, and risks associated with, its interests in a subsidiary, a joint arrangement, an
associate or an unconsolidated structured entity; and

• the effects of those interests on its financial position, financial performance and cash flows.
IFRS 13 Fair Value Measurement

About

IFRS 13 defines fair value, sets out a framework for measuring fair value, and requires disclosures
about fair value measurements.

It applies when another Standard requires or permits fair value measurements or disclosures about
fair value measurements (and measurements based on fair value, such as fair value less costs to
sell), except in specified circumstances in which other Standards govern. For example, IFRS 13 does
not specify the measurement and disclosure requirements for share-based payment transactions,
leases or impairment of assets. Nor does it establish disclosure requirements for fair values related
to employee benefits and retirement plans.

IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date (an exit
price). When measuring fair value, an entity uses the assumptions that market participants would
use when pricing the asset or the liability under current market conditions, including assumptions
about risk. As a result, an entity’s intention to hold an asset or to settle or otherwise fulfil a liability is
not relevant when measuring fair value.
IFRS 15 Revenue from Contracts with Customers

About

IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with earlier
application permitted.

IFRS 15 establishes the principles that an entity applies when reporting information about the
nature, amount, timing and uncertainty of revenue and cash flows from a contract with a customer.
Applying IFRS 15, an entity recognises revenue to depict the transfer of promised goods or services
to the customer in an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services.

To recognise revenue under IFRS 15, an entity applies the following five steps:

• identify the contract(s) with a customer.

• identify the performance obligations in the contract. Performance obligations are promises
in a contract to transfer to a customer goods or services that are distinct.
• determine the transaction price. The transaction price is the amount of consideration to
which an entity expects to be entitled in exchange for transferring promised goods or
services to a customer. If the consideration promised in a contract includes a variable
amount, an entity must estimate the amount of consideration to which it expects to be
entitled in exchange for transferring the promised goods or services to a customer.
• allocate the transaction price to each performance obligation on the basis of the relative
stand-alone selling prices of each distinct good or service promised in the contract.
• recognise revenue when a performance obligation is satisfied by transferring a promised
good or service to a customer (which is when the customer obtains control of that good or
service). A performance obligation may be satisfied at a point in time (typically for promises
to transfer goods to a customer) or over time (typically for promises to transfer services to a
customer). For a performance obligation satisfied over time, an entity would select an
appropriate measure of progress to determine how much revenue should be recognised as
the performance obligation is satisfied.
IFRS 16 Leases

About

IFRS 16 is effective for annual reporting periods beginning on or after 1 January 2019, with earlier
application permitted (as long as IFRS 15 is also applied).

The objective of IFRS 16 is to report information that (a) faithfully represents lease transactions and
(b) provides a basis for users of financial statements to assess the amount, timing and uncertainty of
cash flows arising from leases. To meet that objective, a lessee should recognise assets and liabilities
arising from a lease.

IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and
liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low
value. A lessee is required to recognise a right-of-use asset representing its right to use the
underlying leased asset and a lease liability representing its obligation to make lease payments.
IFRS for SMEs Accounting Standard

About

The IFRS for SMEs Accounting Standard reflects five types of simplifications from full IFRS Accounting
Standards:

• some topics in full IFRS Accounting Standards are omitted because they are not relevant to
typical SMEs;

• some accounting policy options in full IFRS Accounting Standards are not allowed because a
more simplified method is available to SMEs;

• many of the recognition and measurement principles that are in full IFRS Accounting
Standards have been simplified;

• substantially fewer disclosures are required; and

• the text of full IFRS Accounting Standards has been redrafted in ‘plain English’ for easier
understandability and translation.

The IFRS for SMEs Accounting Standard includes an option for entities to apply the recognition and
measurement requirements of IAS 39 Financial Instruments: Recognition and Measurement. If an
entity chooses this option, the applicable version of IAS 39 is explained below:

• For accounting periods beginning before 1 January 2018, an SME shall apply the version of
IAS 39 that is in effect at its reporting date, by reference to the full IFRS Accounting
Standards publication titled IFRS® Standards Consolidated without early application (Blue
Book).

• For accounting periods beginning on or after 1 January 2018 an SME shall apply the version
of IAS 39 that applied immediately prior to the effective date of IFRS 9 Financial Instruments.
IFRS Sustainability Disclosure Standards
IFRS S1 General Requirements for Disclosure of Sustainability-related Financial
Information

About

IFRS S1 is effective for annual reporting periods beginning on or after 1 January 2024 with earlier
application permitted as long as IFRS S2 Climate-related Disclosures is also applied.

The objective of IFRS S1 is to require an entity to disclose information about its sustainability-related
risks and opportunities that is useful to users of general-purpose financial reports in making
decisions relating to providing resources to the entity.

IFRS S1 requires an entity to disclose information about all sustainability-related risks and
opportunities that could reasonably be expected to affect the entity’s cash flows, its access to
finance or cost of capital over the short, medium or long term (collectively referred to as
‘sustainability-related risks and opportunities that could reasonably be expected to affect the
entity’s prospects’).

IFRS S1 prescribes how an entity prepares and reports its sustainability-related financial disclosures.
It sets out general requirements for the content and presentation of those disclosures so that the
information disclosed is useful to users in making decisions relating to providing resources to the
entity.

IFRS S1 sets out the requirements for disclosing information about an entity’s sustainability-related
risks and opportunities. In particular, an entity is required to provide disclosures about:

a. the governance processes, controls and procedures the entity uses to monitor, manage and
oversee sustainability-related risks and opportunities;

b. the entity’s strategy for managing sustainability-related risks and opportunities;

c. the processes the entity uses to identify, assess, prioritise and monitor sustainability-related
risks and opportunities; and

d. the entity’s performance in relation to sustainability-related risks and opportunities,

including progress towards any targets the entity has set or is required to meet by law or
regulation.
IFRS S2 Climate-related Disclosures

About

IFRS S2 is effective for annual reporting periods beginning on or after 1 January 2024 with earlier
application permitted as long as IFRS S1 General Requirements for Disclosure of Sustainability-related
Financial Information is also applied.

The objective of IFRS S2 is to require an entity to disclose information about its climate-related risks
and opportunities that is useful to users of general-purpose financial reports in making decisions
relating to providing resources to the entity.

IFRS S2 requires an entity to disclose information about climate-related risks and opportunities that
could reasonably be expected to affect the entity’s cash flows, its access to finance or cost of capital
over the short, medium or long term (collectively referred to as ‘climate-related risks and
opportunities that could reasonably be expected to affect the entity’s prospects’).

IFRS S2 applies to:

a. climate-related risks to which the entity is exposed, which are:

i. climate-related physical risks; and

ii. climate-related transition risks; and

b. climate-related opportunities available to the entity.

IFRS S2 sets out the requirements for disclosing information about an entity’s climate-related risks
and opportunities. In particular, IFRS S2 requires an entity to disclose information that enables users
of general-purpose financial reports to understand:

a. the governance processes, controls and procedures the entity uses to monitor, manage and
oversee climate-related risks and opportunities;

b. the entity’s strategy for managing climate-related risks and opportunities;

c. the processes the entity uses to identify, assess, prioritise and monitor climate-related risks
and opportunities, including whether and how those processes are integrated into and
inform the entity’s overall risk management process; and

d. the entity’s performance in relation to its climate-related risks and opportunities, including
progress towards any climate-related targets it has set, and any targets it is required to meet
by law or regulation.
Other Statements
Conceptual Framework for Financial Reporting

About

The revised Conceptual Framework for Financial Reporting (Conceptual Framework) issued in March
2018 is effective immediately for the International Accounting Standards Board (Board) and the IFRS
Interpretations Committee. For companies that use the Conceptual Framework to develop
accounting policies when no IFRS Standard applies to a particular transaction, the revised Conceptual
Framework is effective for annual reporting periods beginning on or after 1 January 2020, with
earlier application permitted.

The Conceptual Framework sets out the fundamental concepts for financial reporting that guide the
Board in developing IFRS Standards. It helps to ensure that the Standards are conceptually
consistent and that similar transactions are treated the same way, so as to provide useful
information for investors, lenders and other creditors.

The Conceptual Framework also assists companies in developing accounting policies when no IFRS
Standard applies to a particular transaction, and more broadly, helps stakeholders to understand
and interpret the Standards.

The 2018 revised Conceptual Framework sets out:

• the objective of general-purpose financial reporting;

• the qualitative characteristics of useful financial information;

• a description of the reporting entity and its boundary;

• definitions of an asset, a liability, equity, income and expenses and guidance supporting
these definitions;

• criteria for including assets and liabilities in financial statements (recognition) and guidance
on when to remove them (derecognition);

• measurement bases and guidance on when to use them;

• concepts and guidance on presentation and disclosure; and

• concepts relating to capital and capital maintenance.

The International <IR> Framework

About

In 2013, the International Integrated Reporting Council (IIRC) released the first version of its
framework for integrated reporting. This followed a three-month global consultation and trials in 25
countries.

The framework established principles and concepts that govern the overall content of an integrated
report. An integrated report sets out how the organisation’s strategy, governance, performance and
prospects lead to the creation of value.

The primary purpose of an integrated report is to explain to providers of financial capital how an
organisation creates value over time. An integrated report benefits all stakeholders interested in a
company’s ability to create value, including employees, customers, suppliers, business partners,
local communities, legislators, regulators and policymakers, although it is not directly aimed at all
stakeholders. Providers of financial capital can have a significant effect on the capital allocation and
attempting to aim the report at all stakeholders would be an impossible task and would reduce the
focus and increase the length of the report. This would be contrary to the objectives of the report,
which is value creation.

Historical financial statements are essential in corporate reporting, particularly for compliance
purposes, but do not provide meaningful information regarding business value. Users need a more
forward-looking focus without the necessity of companies providing their own forecasts and
projections. Companies have recognised the benefits of showing a fuller picture of company value
and a more holistic view of the organisation.

The International Integrated Reporting Framework encouraged the preparation of a report that
showed performance against strategy, explained the various capitals used and affected, and gave a
longer-term view of the organisation. The integrated report enabled stakeholders to make a more
informed assessment of the organisation and its prospects.
IFRS Practice Statement 1: Management Commentary

About

Issued in December 2010, the Practice Statement Management Commentary provides a broad, non-
binding framework for the presentation of management commentary that relates to financial
statements that have been prepared in accordance with IFRS Standards.

Management commentary should provide users of financial statements with integrated information
providing a context for the related financial statements, including the entity's resources and the
claims against the entity and its resources, and the transactions and other events that change them.
It also provides management with an opportunity to explain its objectives and its strategies for
achieving those objectives.

The Practice Statement makes clear that management commentary should be consistent with the
following principles:

• Provide management's view of the entity's performance, position and progress (including
forward looking information)

• Supplement and complement information presented in the financial statements (and

possess the qualitative characteristics described in the Conceptual Framework for Financial
Reporting).

Although the particular focus of management commentary will depend on the facts and
circumstances of an individual entity, the Practice Statement outlines the main elements of the
information that should always be included in a management commentary.

The Practice Statement has not been updated or amended since its publication in December 2010. In
line with a recommendation by the IFRS Foundation Trustees in their latest review of structure and
effectiveness (2015-16), the staff have been monitoring developments in wider corporate reporting
and the implications for the Board. At its November 2017 meeting, the Board decide to take on a
project to revise and update the Practice Statement.
IFRS Practice Statement 2: Making Materiality Judgements

About

IFRS Practice Statement 2: Making Materiality Judgements (Practice Statement) provides companies
with guidance on how to make materiality judgements when preparing their general-purpose
financial statements in accordance with IFRS Standards.

The need for materiality judgements is pervasive in the preparation of financial statements. IFRS
Standards require companies to make materiality judgements in decisions about recognition,
measurement, presentation and disclosure.

The Practice Statement:

• provides an overview of the general characteristics of materiality;

• presents a four-step process companies may follow in making materiality judgements when
preparing their financial statements; and

• provides guidance on how to make materiality judgements in specific circumstances;

namely, how to make materiality judgements about prior-period information, errors and
covenants, and in the context of interim reporting.

The Practice Statement is a non-mandatory document. It does not change or introduce any
requirements in IFRS Standards and companies are not required to comply with it to state
compliance with IFRS Standards.

Companies are permitted to apply the guidance in the Practice Statement to financial statements
prepared any time after 14 September 2017.