Cover
Half-title
Title
Copyright
About the Author
Preface
Contents at a glance
Detailed contents
Abbreviations used in the book
Chapter 1: IASB and regulatory framework
1.1 What are International Financial Reporting Standards?
1.2 Objectives of International Financial Reporting Standard
1.3 Benefits of International Financial Reporting Standard
1.4 Disadvantages of International Financial Reporting StandardS
1.5 Need for global harmonization – Its benefits and barriers in International Accounting Standards
1.6 Benefits of globalization
1.7 Barriers of globalization
1.8 IFRS foundation
1.8.1 Monitoring board
1.8.2 Trustees of the IFRS foundation
1.8.2.1 Powers and duties of the trustees
1.8.3 IFRS Advisory Council
1.8.4 International Accounting Standards Board
1.8.4.1 Objectives of International Accounting Standards Board (IASB)
1.8.5 IFRS Interpretations Committee
1.8.6 Structure and Process flow
1.9 International Financial Reporting Standards (IFRS)
1.10 Standard setting process
1.11 Major economies who have adopted or are in the process of adopting IFRS
1.12 Frequently Asked Questions
Chapter 2: Conceptual framework for financial reporting
2.1 Meaning of IASB’s conceptual framework
2.2 Qualitative characteristics
2.3 Objectives and scope of financial statements
2.4 Underlying assumption of financial statements
2.5 Elements of financial statements
2.6 Elements of statement of financial position
2.6.1 Assets
2.6.1.1 Right
2.6.1.2 Economic benefits
2.6.1.3 Control
2.6.2 Liabilities
2.6.2.1 Obligation
2.6.3 Equity
2.7 The elements of profit and loss
2.7.1 Income
2.7.2 Expenses
2.8 Recognition of elements of financial statements
2.9 Recognition criteria
2.9.1 Relevance
2.9.2 Faithful representation
2.10 Derecognition
2.11 Bases of measurement
2.11.2 Current value
2.11.2.1 Fair value
2.11.2.2 Value in use and fulfilment value
2.11.2.3 Current cost
2.11.2.4 Measurement of equity
2.11.2.5 Cash flow-based measurement techniques
2.12 Concept of capital maintenance
2.13 Frequently Asked Questions
Chapter 3: IAS/IFRSs at a glance
3.1 International Accounting Standards (IAS)
3.2 International Finance Reporting Standards (IFRS)
3.3 IFRIC interpretation
3.4 SIC interpretation
3.5 IFRS for SMEs
3.6 International Accounting Standards (IFRS/IASs) at a glance
3.7 International Financial Reporting Interpretations Committee (IFRIC)
3.7.1 IFRIC 1 - Changes in existing decommissioning, restoration, and similar liabilities (IAS 37)
3.7.2 IFRIC 2 - Members’ shares in cooperative entities and similar instruments (IAS 32)
3.7.3 IFRIC 5 - Rights to interests arising from decommissioning Restoration and environment funds (IAS 8, IAS 27, IAS 28, IAS 31, IAS 37, IAS 39 and SIC 12)
3.7.4 IFRIC 6 - Liabilities arising from participating in a specific market – waste electrical and electronic equipment (IAS 37: Provisions, contingent liabilities and contingent assets)
3.7.5 IFRIC 7 - Applying the restatement approach under IAS 29 Financial reporting in Hyper-inflationary economies
3.7.6 IFRIC 10 - Interim financial reporting and impairment (IAS 34 Interim Financial Reporting)
3.7.7 IFRIC 12 - Service concession arrangements (IFRS 1/7, IAS 8/11/16/17/18/20/23/32/36/37/38/39, IFRIC4, SIC 29)
3.7.8 IFRIC 14 - The limit on a defined benefit asset minimum funding requirements and their interaction (IAS 19)
3.7.9 IFRIC 16 - Hedges of a net investment in a foreign operation
3.7.10 IFRIC 17 - Distribution of non-cash assets to owners
3.7.11 IFRIC 19 - Extinguishing financial liabilities with equity instruments
3.7.12 IFRIC 20 - Stripping cost in the production phase of a surface mine
3.7.13 IFRIC 21 - Levies
3.7.14 IFRIC 22 - Foreign currency transactions and advance considerations
3.7.15 IFRIC 23 - Uncertainty over Income tax treatment
3.8 Standing Interpretations Committee (SIC)
3.8.1 SIC 7 - Introduction of the Euro (IAS 21 The effects of changes in foreign exchange rates)
3.8.2 SIC 10 - Government assistance – no specific relation to operating activities (IAS 20: Accounting for Govt grants and disclosures of Govt assistance)
3.8.3 SIC 25 - Income taxes – changes in the tax status of an enterprise or its shareholders (IAS 12: Income taxes)
3.8.4 SIC 29 - Disclosure – service concession arrangements (IAS 1 Presentation of financial statements)
3.8.5 SIC 32 - Intangible assets– Website costs (IAS 38 Intangible assets)
3.8.6 SIC 33 - Consolidation and Equity Method - Potential Voting Rights and allocation of Ownership Interests
Chapter 4: IAS 1: Presentation of Financial Statements
4.1 Objectives
4.2 Scope
4.3 Components of financial statements
4.4 Fair presentation
4.5 What is meant by effective compliance with IFRS?
4.6 Compliance with IFRS should be disclosed
4.7 Departure from the IFRS
4.8 Going concern assessment
4.9 Accrual accounting
4.10 Materiality and aggregation
4.11 Offsetting
4.12 Consistency of presentation
4.13 Disclosure requirements
4.13.1 Identification of financial statements
4.13.2 Statement of financial position
4.13.3 Current/non-current distinction
4.13.4 Current assets
4.13.5 Current liabilities
4.13.6 What is an operating cycle?
Illustration 4.1: Operating cycle related to inventories
Illustration 4.2: Operating cycle related to revenue
Illustration 4.3: Operating cycle – holding period of spares
Illustration 4.4: Operating cycle – high seas sales
Illustration 4.5: Operating cycle – milk and dairy
4.13.7 Sub-classification disclosures – assets
4.13.8 Sub-classification disclosures – share capital and reserves
4.13.9 Sub-classification disclosures – financial instruments
4.13.10 Statement of profit & loss and other comprehensive income (minimum disclosure)
4.13.11 Information to be presented in the statement of profit and loss or in the notes
4.13.12 Statement of changes in equity
4.13.13 Statement of cash flows
4.13.14 The notes on accounts (Paragraph 112)
4.13.15 Broad disclosures under notes on accounts
4.13.16 Disclosures of accounting policies
4.14 Specimen format of statement of financial position, statement of profit & loss and other comprehensive income and statement of changes in equity
4.14.1 Statement of financial position – specimen format
Illustration 4.6: Statement of financial position– specimen
4.14.2 Statement of profit & loss and other comprehensive income
4.14.3 Income statement format – by nature
Illustration 4.7: Consolidated statement of profit & loss: Specimen
4.14.4 Statement of changes in shareholder’s equity – specimen format
Illustration 4.8: Statement of changes in equity
4.15 Frequently Asked Questions
Chapter 5: Inventories
5.1 Definition of inventories
5.2 Scope
5.3 Areas where this standard is not applicable
5.4 Recognition of inventories
5.5 Bases of valuation
5.6 Measurement of inventories
5.6.1 Measurement techniques
5.6.2 Cost of inventories
5.6.3 Cost of purchase of inventories
Illustration 5.1: Cost of inventories
5.6.4 Costs of conversion of inventories
Illustration 5.2: Allocation of fixed overhead in valuation of inventories
Illustration 5.3: Variable overhead
5.6.5 Other costs
5.6.6 Costs not to be included in valuation of inventories
5.7 Specific accounting treatment highlighted in the standard
5.7.1 The basis of charging inventories to expense
5.7.2 Borrowing costs and inventories
5.7.3 Cost of inventories of a service provider
5.7.4 Cost of agricultural produce harvested from biological assets
5.8 Disclosure requirements
5.9 Financial impact of accounting method
5.10 Frequently Asked Questions
Chapter 6: Cash flow statements
6.1 Introduction
6.2 Definitions
6.3 Presentation of a statement of cash flows
Illustration 6.1: Some examples of cash flows from operating activities
Illustration 6.2: Cash flows from investing activities (examples)
Illustration 6.3: Some examples of cash flows from financing activities
6.4 Cash flow statements are reported in two methods - direct method and indirect method
6.5 Proceeds from issue Specimen format of direct and indirect method
6.5.1 Direct method statement of cash flows
6.5.2 Indirect method statement of cash flows
6.6 Reporting of cash flows on net basis
6.7 Cash flows from financial institutions
6.8 Foreign currency cash flows
6.9 Interest and dividends
6.10 Taxes on income
6.11 Changes in ownership interests in subsidiaries and other businesses
6.12 Frequently Asked Questions
Chapter 7: IAS 8 Accounting policies, changes in accounting estimates and errors
7.1 Constituents of this standard
7.2 Accounting policies
7.3 Changes in accounting policies treated as per this standard
Illustration 7.1: Change in accounting policy related to depreciation
Illustration 7.2: Change in treatment of depreciation
Illustration 7.3: Change in accounting policy: inventory valuation methods
7.4 Major areas for which disclosures of accounting policies are to be made
7.5 Accounting estimates
Illustration 7.4: Accounting estimate: change in useful life of asset
7.6 Accounting errors
Illustration 7.5: Accounting errors
7.7 Disclosure of prior period errors
Illustration 7.6: Accounting error – prospective impact
Illustration 7.7: Accounting error – retrospective impact
Illustration 7.8: Accounting estimate – prospective change
7.8 Financial analysis
7.9 Frequently Asked Questions
Chapter 8: IAS 10: Events occurring after the reporting period
8.1 Events occurring after the reporting period
8.2 Adjusting events and non-adjusting events
8.2.1 Adjusting events
8.2.2 Non-adjusting events
8.3 Dividends
8.4 Going concern
8.5 Disclosure requirements
8.5.1 Date of approval for issue
8.5.2 Updating disclosure about conditions at the end of the reporting period
8.5.3 Non-adjusting events after the reporting period
8.6 Illustrations
Illustration 8.1: Approval of Financial statements post closure
Illustration 8.2: Adjusting event
Illustration 8.3: Adjusting event
Illustration 8.4: Event post reporting date
Illustration 8.5: Adjusting event
Illustration 8.6: Event after reporting date
8.7 Frequently Asked Questions
Chapter 9: IAS 12 - Income taxes
9.1 Definitions
9.2 Tax base
9.2.1 Tax base of an asset
Illustration 9.1: Tax base of an asset
9.2.2 Tax base of a liability
Illustration 9.2: Tax base of a liability
9.3 Recognition of current tax liabilities and current tax assets
Illustration 9.3: Current tax
9.4 Deferred tax assets and liabilities
9.5 Recognition of deferred tax liabilities and deferred tax assets
9.5.1 Taxable temporary differences
Illustration 9.4: Examples of circumstances that give rise to taxable temporary differences
9.5.2 Deductible temporary differences
Illustration 9.5: Examples of circumstances that give rise to deductible temporary differences
Illustration 9.6: Examples of circumstances where the carrying amount of an asset or liability is equal to its tax base
9.6 Conditions when an entity shall offset deferred tax assets and liabilities
9.7 Deferred tax assets and liabilities from a single transaction
9.8 Disclosure requirements
9.9 Decision tree
9.10 General illustrations
Illustration 1: Ascertaining Tax base and temporary differences
Illustration 2: Treatment of deferred tax assets and liabilities in financial statements
9.11 Frequently Asked Questions
Chapter 10: IAS 16 (Revised): Property, plant & equipment
10.1 Scope
10.2 Definitions
10.3 Non-current assets
10.4 Recognition of non-current assets
10.5 Elements of measurement of initial costs
10.5.1 Purchase price
10.5.2 Costs directly attributable to bringing the asset to its location and in the condition so as to make it available for its intended use
10.5.3 Initial estimate of the costs of dismantling and removing the item and restoration of site
Illustration 10.1: Treatment of cost of assets
Illustration 10.2: Treatment of cost of assets
10.6 Elements of costs not part of IAS 16
Illustration 10.3: Capitalization of expenses
10.7 Treatment of subsequent expenditure
Illustration 10.4: Treatment of calculation of depreciation
10.8 Basic elements of recognition and measurement
10.9 Comparison of the two methods: cost and revaluation
10.10 Revaluation model
10.10.1 Fair value of an asset
10.10.2 Accounting for revaluation adjustment
10.10.3 Treatment of revaluation surplus and profit or loss on sale
Illustration 10.5: Principle of revaluation of an asset explained
10.11 Principles of depreciation/impairment/de-recognition
10.11.1 Depreciation
10.11.2 Impairment
10.11.3 De-recognition
10.11.4 Asset on rent
10.11.5 Non-current assets held for sale
10.12 Treatment of accumulated depreciation after revaluation
Illustration 10.6: Treatment of depreciation on revaluation model
Illustration 10.7: Treatment of revaluation model
10.13 Depreciation methods
10.14 Depreciation calculation after revaluation
Illustration 10.8: Treatment of valuation of assets under revaluation model
Illustration 10.9: Treatment under revaluation model
10.15 De-recognition of property, plant and equipment
10.16 Disclosure requirements
Illustration 10.10: Valuation of properties for disposal
Illustration 10.11: Valuation of properties held for sale
Illustration 10.12: Valuation of restoration cost of properties
Illustration 10.13: Valuation of restoration of property
10.17 Frequently Asked Questions
Chapter 11: IAS 19 (Revised) Employee benefits
11.1 Types of employee benefits
11.1.1 Short term benefits
11.1.2 Post-employment benefits
11.1.2.1 Defined contribution plan
Illustration 11.1: Defined contribution plan
11.1.2.2 Recognition and measurement of defined contribution plan
11.1.2.3 Disclosure requirements of defined contribution plan
11.1.2.4 Defined benefit plan
Illustration 11.2: Defined benefit plan
11.1.2.5 Recognition and measurement of defined benefit plan
11.1.2.6 Methods of accounting in defined benefit plan
11.1.2.7 Projected unit credit method under defined benefit plan
Illustration 11.3: Projected unit credit method – an example
11.1.2.8 Comparison between defined contribution plan and defined benefit plan
11.1.2.9 Actuarial assumptions
11.1.2.10 Actuarial gains and losses
11.1.2.11 Re-measurement under IAS 19(Revised)
11.1.2.12 Methods for recognition of re-measurement
Illustration 11.4: Computation of re-measurements
11.1.2.13 Net defined benefit liability/(asset) and its treatment in financial statements
11.1.2.14 Past service costs and their measurement by the standard as revised
Illustration 11.5: Past service costs
11.1.3 Other long-term benefits
11.1.4 Termination benefits
Illustration 11.6: Calculation of transitional liability
11.2 Other definitions
Illustration 11.7: Multi-employer plan
Illustration 11.8: Accumulated cost of compensated absence
Illustration 11.9: Profit sharing and bonus plan
Illustration 11.10: Multi employer plan
Illustration 11.11: Defined Benefit Plan
Illustration 11.12: Re-Measurement of employee benefit
11.3 Frequently Asked Questions
Chapter 12: IAS 20 Government Grant
12.1 Types of Government grant
12.1.1 Grant is recognized as income
12.1.2 A grant related to assets
12.2 Recognition of government grants
12.2.1 Grants related to income
12.2.2 Grants related to assets
12.3 Principles of repayment of government grants
12.4 Disclosure
12.5 Illustrations
Illustration 12.1: Treatment of government grants
Illustration 12.2: Treatment of government grant
Illustration 12.3: Treatment of government grant
12.6 Frequently Asked Questions
Chapter 13: IAS 21 Effects of changes in foreign exchange rates
13.1 Scope
13.2 Treatment of foreign currency transactions
13.2.1 Foreign currency transactions
13.2.2 At each statement of financial position date
13.2.3 Income statement
13.2.4 Exchange differences
13.2.4.1 Monetary items
13.2.4.2 Non-monetary items
13.2.4.3 Change in functional currency
13.2.4.4 Translation to presentation currency
13.2.5 Foreign operations
13.3 Disposal or partial disposal of a foreign operation
13.4 Tax effects of all exchange differences
13.5 Disclosure
Chapter 14: IAS 23 Borrowing cost
14.1 What are borrowing costs
14.2 Exclusion
14.3 Qualifying asset
14.4 Recognition of borrowing costs
14.4.1 Borrowing costs that are directly attributable to the acquisition, construction, or production of a qualifying asset
14.4.2 Where funds are part of general pool
14.5 Conditions of capitalization
14.5.1 Commencement of capitalization
14.5.2 Suspension of capitalization
14.5.3 Cessation of capitalization
14.6 Accounting of borrowing costs prescribed by the standard
14.7 Disclosure
Chapter 15: IAS 24 Related party disclosures
15.1 Who are related parties?
15.2 Entities not deemed to be related
15.3 What are related party transactions
15.4 Disclosure requirements
15.4.1 Relationships between parents and subsidiaries
15.4.2 Management compensation
15.4.3 Related party transactions
Illustration 15.1: Related parties
15.5 Frequently Asked Questions
Chapter 16: IAS 29: Financial reporting in hyperinflationary economies
16.1 Scope
16.2 Elements in restatement of historical cost in financial statements
16.3 Economies ceasing to be hyperinflationary
16.4 Disclosures
Chapter 17: IAS 33 Earnings per share
17.1 Scope
17.2 Basic earnings per share
Illustration 17.1: Basic earnings per share
Illustration 17.2: Basic earnings per share
Illustration 17.3: Bonus issue
17.3 Rights Issue
Illustration 17.4: Rights issue
17.4 Diluted earnings per share
Illustration 17.5: Diluted earnings per share
17.5 When earnings per share should be restated
17.6 Disclosure
Illustration 17.6: Diluted Earnings per share
17.7 Frequently Asked Questions
Chapter 18: IAS 34: Interim financial reporting
18.1 Definition of interim financial reporting
18.2 Scope
Illustration 18.1: Interim financial statements
18.3 Content of an interim financial report
18.4 Minimum components of an interim financial report
18.5 Form and content of interim financial statements
18.6 Same accounting policies as for annual financial statements
18.7 Deferral of revenues
18.8 Deferral of expenses
Illustration 18.2: Interim financial reporting
18.9 Frequently Asked Questions
Chapter 19: IAS 36: Impairment of assets
19.1 Scope and exclusion
19.2 What is impairment
19.3 Other definitions
19.4 Identify an asset that may be impaired
19.5 Indications of potential for impairment loss
19.5.1 External sources of information
19.5.2 Internal sources of information
19.6 Measurement of recoverable amount
19.6.1 Fair value less cost of disposal
19.6.2 Value- in- use
19.7 Steps involved in estimating value-in-use
19.7.1 Estimating future cash flows
19.7.2 Composition of estimates of future cash flows
19.7.3 Discount rate
Illustration 19.1: Calculation of recoverable amount
19.8 Recognition and measurement of an impairment loss
Illustration 19.2: Impairment loss
19.9 What is a cash generating unit?
Illustration 19.3: Cash generating unit
Illustration 19.4: Cash generating unit
19.10 Calculation recoverable amount and carrying amount of a cash generating unit
Illustration 19.5: Cash generating unit
19.11 Treatment of goodwill in testing a cash generating unit for impairment
19.12 Treatment of corporate assets in testing cash-generating unit
19.13 Calculation of impairment loss of a cash generating unit
19.14 Treatment of reversal of impairment loss
19.14.1 Reversal of impairment loss of an individual asset
19.14.2 Reversal of impairment loss of a cash generating unit
19.15 Disclosure
19.16 Impact on financial statements
Illustration 19.6: Allocation of impairment loss
19.17 Frequently Asked Questions
Chapter 20: IAS 37: Provisions, contingent liabilities and contingent assets
20.1 Need of this standard
20.2 Definition of provision
20.3 Conditions that are to be fulfilled when provisions need to be made
20.4 When do we change and reverse provisions?
20.5 Accounting treatment of provisions
20.6 Obligations
20.7 Contingent liabilities
20.8 Contingent assets
20.9 Onerous contracts (OC) – accounting treatment
20.10 IASB amendment related to onerous contract
20.11 Determinants for provisions and contingent liabilities
20.12 Illustrations
Illustration 20.1: Provision for decommissioning costs
Illustration 20.2: Provisions for warranty
Illustration 20.3: Provisions related to legislation.
Illustration 20.4: Provision
20.13 Frequently Asked Questions
Chapter 21: IAS 38: Intangible Assets
21.1 Objectives
21.2 Categories of intangible assets
21.3 Conditions to be satisfied to be intangible assets
21.4 Principles of recognition of Intangible assets
21.5 Characteristics of intangible assets
21.6 Treatment of Internally generated intangible assets
21.7 Treatment of intangible assets during research and development phase
21.8 Costs to be included for internally generated intangible assets
Illustration 21.1: Recognition of intangible assets
Illustration 21.2: Impairment of intangible assets
21.9 Expenditure on intangible items to be recognised as expense
21.10 Goodwill be treated as intangible asset
21.11 Measurement criteria for other purchased intangibles
21.12 Treatment of subsequent expenditure on an intangible asset
21.13 Factors governing the amortization of intangible assets
21.14 Factors that govern impairment losses in intangible assets
21.15 Principles of retirements and disposals with respect to intangible assets
21.16 Disclosure requirements related to intangible assets
21.17 Illustrations
Illustration 21.3: Eligibility of intangible assets
Illustration 21.4: Impairment of trademark
Illustration 21.5: Treatment of intangible assets
Illustration 21.6: Whether staff training can be treated as intangible assets
Illustration 21.7: Treatment of research and development
Illustration 21.8: Treatment of advertisement as intangible assets
21.18 Frequently Asked Questions
Chapter 22: IAS 40 (Revised): Investment properties
22.1 Definitions
22.2 Scope
22.3 Exclusion
22.4 Recognition of investment property
Illustration 22.1: Investment property
Illustration 22.2: Categorisation of investment property
Illustration 22.3: Treatment of investment property
22.5 Measurement of investment property
22.6 Treatment of investment property held under lease
22.7 Stipulations provided in transfer of property from investment property to another category and vice – versa
Illustration 22.4: Investment property at fair value
Illustration 22.5: Transfer of investment property
22.8 Disposal
22.9 Disclosure requirements
22.9.1 An entity shall disclose
22.9.2 In addition to the disclosures required as in 22.9.1. above
22.10 Illustration: Treatment of investment property
22.11 Frequently Asked Questions
Chapter 23: IAS 41: Agriculture
23.1 Objective
23.2 Scope
23.2.1 This standard shall be applied to account for the following when they relate to agricultural activity
23.2.2 This standard does not apply to
23.3 Definitions
23.3.1 Agriculture based definitions
23.3.2 The following are not bearer plants
23.3.3 Biological transformation results in the following types of outcomes
23.3.4 General definitions
23.4 Recognition and measurement
23.4.1 An entity shall recognize a biological asset or agricultural produce when, and only when:
23.5 Gains and losses
23.6 Inability to measure fair value reliably
23.7 Government grants
23.8 Disclosure
23.8.1 General
23.8.2 Additional disclosures
23.8.3 Disclosure on Government grant
Illustration 23.1: Valuation of orchard
23.9 Frequently Asked Questions
Chapter 24: IFRS 1: First time adoption of International Finance Reporting Standards
24.1 Objective
24.2 Scope
24.3 Recognition and measurement
24.3.1 Accounting policies
24.4 Exceptions
24.4.1 Exceptions to the retrospective application of other IFRSs
24.4.1.1 Estimates
24.4.1.2 Exceptions to retrospective applications to other IFRSs (Appendix B)
24.4.2 Other exceptions (Appendix C – E)
24.5 Presentation and disclosure
24.5.1 Comparative information
24.5.2 Non-IFRS comparative information and historical summaries
24.5.3 Explanation of transition to IFRSs
24.5.4 Reconciliations
24.5.5 Designation of financial assets or financial liabilities
24.5.6 Use of fair value as deemed cost
24.5.7 Use of deemed cost for investments in subsidiaries, joint ventures and associates
24.5.8 Use of deemed cost for oil and gas assets
24.5.9 Use of deemed cost for operations subject to rate regulation
24.5.10 Use of deemed cost after severe hyperinflation
24.5.11 Interim financial reports
Chapter 25: IFRS 2: Share based payments
25.1 Scope
25.2 What are share based payments
25.3 Equity-settled share-based payment transaction
Illustration 25.1: Equity-settled share-based payment
25.4 Cash-settled share-based payment transaction
25.5 Share-based payment transactions with cash alternatives
25.6 Accounting for Share-based payment transactions
Illustration 25.2: Equity-settled share-based payment
Illustration 25.3: Cash-settled share-based payment
Illustration 25.4: Recognition of share-based payments in financial statements
25.7 Frequently Asked Questions
Chapter 26: IFRS 17: Insurance Contracts
26.1 Objective
26.2 Scope
26.3 Salient features
26.3.1 Combination of insurance contracts
26.3.2 Separating contracts from an insurance contract
26.3.3 Level of aggregation of insurance contracts
26.4 Recognition and measurement
26.4.1 Insurance acquisition cash flows (paragraphs B35A‒ B35D)
26.5 Measurement
26.5.1 Measurement on initial recognition
26.5.1.1 Estimates of future cash flows
26.5.1.2 Discount rate
26.5.1.3 Contractual service margin
26.5.2 Subsequent measurement
26.5.2.1 Liability for remaining coverage
26.5.2.2 Liability for incurred claims
26.5.2.3 Contractual service margin
26.5.2.4 Onerous contract
26.5.2.5 Premium allocation approach
26.6 Modification and derecognition
26.6.1 Modification of an insurance contract
26.6.2 Derecognition
26.7 Presentation in the statement of financial position
26.8 Recognition and presentation in the statement(s) of financial performance (paragraphs B120–B136)
26.8.1 Insurance service result
26.8.2 Insurance finance income or expenses
26.9 Disclosure
26.10 Frequently Asked Questions
Chapter 27: IFRS 5: Non-current assets held for sale and discontinued operations
27.1 Objective
27.2 Scope
27.3 Classification of non-current assets (or disposal groups) held for sale or as held for distribution to owners
27.4 Non-current assets that are to be abandoned
27.5 Measurement of non-current assets (or disposal groups) classified as held for sale
27.6 Recognition of impairment losses and reversals
27.7 Change to a plan of sale
27.8 Presentation and disclosure
27.8.1 Presenting discontinued operations
27.8.2 Presentation of a non-current asset or disposal group classified as held for sale
Illustration 27.1: Measurement of assets classified as held for sale
Illustration 27.2: Treatment of assets held for sale in financial statements
Illustration 27.3: Treatment of property held for sale
Illustration 27.4: Treatment of assets held for sale
27.9 Frequently Asked Questions
Chapter 28: IFRS 6: Exploration and evaluation of mineral resources
28.1 Objective
28.2 Scope
28.3 Recognition of exploration and evaluation assets
28.4 Measurement of exploration and evaluation assets
28.4.1 Exploration and evaluation assets shall be measured at cost (Para 8)
28.5 Subsequent measurement
28.6 Change in accounting policies
28.7 Presentation
28.7.1 Classification of exploration and evaluation assets
28.7.2 Reclassification of exploration and evaluation assets
28.8 Impairment
28.9 Disclosure requirements
28.10 Frequently Asked Questions
Chapter 29: IFRS 8: Operating Segments
29.1. Scope
29.2. Operating segment
Illustration 29.1: Operating segments
29.3. Reportable segment
29.4. Quantitative threshold
Illustration 29.2: Operating segments
29.5. Aggregation criteria
29.6. Disclosure requirements
29.7. Frequently Asked Questions
Chapter 30: Financial Instruments (IAS 32, IFRS 7, IFRS 9)
30.1 What is a financial instrument?
30.2 Financial asset
Illustration 30.1: Financial assets
Illustration 30.2: Financial assets
Illustration 30.3: Financial assets
30.3 Financial liability
Illustration 30.4: Financial liability
Illustration 30.5: Examples of financial assets and liabilities
30.4 Derivative
Illustration 30.6: Derivative
Illustration 30.7: Derivative
Illustration 30.8: Derivative
Illustration 30.9: Examples of derivatives and underlyings
30.5 Recognition and derecognition of financial instruments
30.5.1 Initial recognition
30.5.2 Determinants of de-recognition of financial assets and liabilities
30.5.2.1 De-recognition of financial assets
30.5.2.2 De-recognition of financial liabilities
30.6 Classification of financial instruments
30.6.1 Measurement of financial assets
Illustration 30.10: Classification of financial assets and liabilities
30.7 Measurement of financial liabilities
Illustration 30.11: Measurement of Financial liability through amortized cost
30.8 Classification, measurement and subsequent measurement of financial assets and financial liabilities are given in the table below
30.9 Amortized cost measurement
30.9.1 Effective interest method
30.9.2 Modification of contractual cash flows
30.9.3 Write-off
30.9.4 Transaction cost
30.10 Impairment
30.11 Analysis of financial instruments whether debt or equity
30.12 Compound financial instruments
Illustration 30.12: Compound financial instruments
30.13 Measurement of derivatives
Illustration 30.13: Measurement of embedded derivative
Illustration 30.14: Measurement of embedded derivatives
30.14 Reclassification
30.14.1 Financial assets
30.14.2 Financial liabilities
30.15 Gains and losses of financial assets and financial liabilities
30.15.1 A gain or loss on a financial asset or financial liability that is measured at fair value shall be recognised in profit or loss unless
30.15.2 Dividends are recognised in profit or loss only when
30.16 Hedge accounting
30.16.1 Introduction
30.16.2 What is hedge accounting
Illustration 30.15: Hedging transaction
Illustration 30.16: Hedged item and hedged instrument
30.16.3 Classification of hedges
30.16.4 Conditions to be satisfied to qualify for hedge accounting
30.16.5 Effectiveness testing of hedging
Illustration 30.17: Forward contract
Illustration 30.18: Hedged item and hedged instrument
30.16.6 Rebalancing
Illustration 30.19: Hedge ratio
30.16.7 Treatment of hedged items and hedged instruments in hedge accounting
Illustration 30.20: Hedge accounting
30.17 Guidance of IFRS 9 on hedge accounting
30.17.1 Risk components as hedged items
Illustration 30.21: Hedge effectiveness
30.17.2 Aggregated exposures
Illustration 30.22: Interest swap
30.17.3 Equity investment at FVTOCI
Illustration 30.23: Fair Value accounting of financial assets
30.17.4 Hedge instruments – options
Illustration 30.24: Options
Illustration 30.25: Interest rate option accounting
30.17.5 Forwards
30.17.6 Foreign currency swaps and basis spreads
30.17.7 Cash instruments measured at FVTPL
30.17.8 Hedges of groups and net positions
30.17.9 Interest rate swaps
Illustration 30.26: Interest swap on forward contract
30.17.10 Inflation as a hedged risk
30.18 Major comparisons between IAS 39 and IFRS 9
30.19 Disclosure requirements
Illustration 30.27: Impairment of debentures
Illustration 30.28: Hedge accounting
Illustration 30.29: Compound financial instrument
Illustration 30.30: Impairment of financial assets
Illustration 30.31: Accounting of convertible loan note
Illustration 30.32: Financial Instruments and its contractual cash flows
Illustration 30.33: Contractual cash flows of Financial Instruments
30.20 Definitions (Appendix A)
30.21 Frequently Asked Questions
Chapter 31: IFRS 3: Business Combination
31.1 Objectives
31.2 Scope and exclusion
31.3 Definitions (Appendix A)
31.4 Applying the acquisition method
31.4.1 Identifying a business combination
31.4.2 The acquisition method
31.4.3 Identifying the acquirer
31.4.4 Determining the acquisition date
31.4.5 Recognition principle
31.4.5.1 Exception to recognition principle – contingent liabilities
31.4.6 Measurement principle
31.4.6.1 Exceptions to recognition and measurement principle
31.4.6.2 Leases in which the acquiree is the lessee
31.4.6.3 Exceptions to measurement principle
31.5 Goodwill and bargain purchase
31.5.1 Recognizing and measuring goodwill or a gain from a bargain purchase
31.5.1.1 Goodwill
31.5.1.2 Bargain purchases
31.6 Consideration
31.6.1 Consideration transferred
31.6.2. Contingent consideration
31.7 Business combination achieved in stages
Illustration 31.1. Steps in calculation of valuation of goodwill
Illustration 31.2: Valuation of goodwill
Illustration 31.3: Valuation of bargain purchase
31.8 Business combination without transfer of consideration
31.9 Measurement period
31.10 Acquisition related costs
31.11 Subsequent measurement and accounting
31.12 Business combination of entities under common control (application to para 2(c)
31.13 Annexure B to IFRS 3, application guidance
31.13.1 Identifying a business combination (application of paragraph 3)
31.13.2 Definition of a business (application of paragraph 3)
31.13.3 The three elements of a business
31.13.4 Identifying the acquirer (application of paragraphs 6 and 7)
31.13.5 Reverse acquisitions
31.13.6 Recognizing particular assets acquired and liabilities assumed (application of paragraphs 10–13)
31.13.7 Measuring the fair value of particular identifiable assets and a noncontrolling interest in an acquiree (application of paragraphs 18 and 19)
31.13.8 Measuring goodwill or a gain from a bargain purchase
31.13.9 Determining what is part of the business combination transaction (application of paragraphs 51 and 52)
31.13.10 Effective settlement of a pre-existing relationship between the acquirer and acquiree in a business combination (application of paragraph 52(a))
31.13.11 Arrangements for contingent payments to employees or selling shareholders (application of paragraph 52(b))
31.13.12 Acquirer share-based payment awards exchanged for awards held by the acquiree’s employees (application of paragraph 52(b))
31.13.13 Equity-settled share-based payment transactions of the acquiree
31.13.14 Other IFRSs that provide guidance on subsequent measurement and accounting (application of paragraph 54)
31.14 Disclosure requirements
Illustration:31.4 Computation of goodwill under business combination
Illustration:31.5. Computation of goodwill under business combination
Illustration:31.6. Business combination and assets held for sale
Illustration:31.7 Computation of goodwill under business combination
Illustration:31.8 Computation of goodwill under business combination
Illustration:31.9 Computation of goodwill under business combination
Illustration:31.10 Computation of goodwill under business combination
Illustration:31.11 Computation of goodwill under business combination
31.15 Frequently Asked Questions
Chapter 32: IFRS 13: Fair value Measurement
32.1 Objective
32.2 Scope
32.3 Exclusion
32.3.1 The measurement and disclosure requirements of this IFRS do not apply to the following
32.3.2 The disclosures required by this IFRS are not required for the following
32.4 Fair value measurement
32.4.1 Definition of fair value
32.4.2 Fair value measurement of asset and liability
32.4.3 Transaction
32.4.4 Market participants
32.4.5 The price
32.4.6 Application to non-financial assets
32.4.7 Application to liabilities and an entity's own equity instruments - General principles
32.4.7.1 Liabilities and equity instruments held by other parties as assets
32.4.7.2 Liabilities and equity instruments not held by other parties as assets
32.4.7.3 Non-performance risk
32.4.7.4 Restriction preventing the transfer of a liability or an entity's own equity instrument
32.4.7.5 Financial liability with a demand feature
32.4.8 Application to financial assets and financial liabilities with offsetting positions in market risks or counterparty credit risk
32.4.9 Fair value at initial recognition
32.5 Valuation techniques
32.5.1 Valuation techniques used to measure fair value shall be applied consistently
32.5.2 Present value techniques
32.5.3 Inputs to valuation techniques
32.6 Steps in Valuation technique
32.7 Disclosure
32.8 Valuation of tangible fixed assets (IAS 16) (A recap)
32.9 Valuation of intangible assets (IAS 38) (a recap)
Illustration 32.2: Business combination—fair value of brand name acquired— intangible asset
32.10 Valuation of liabilities and provisions (IAS 37)
32.11 Valuation of financial instruments (IFRS 9)
32.12 Valuation of investment property (IAS 40)
32.13 Investments in associates and joint venture (IAS 28)
32.14 Frequently Asked Questions
Chapter 33: Consolidated Financial statements (IAS 27, IAS 28 (R), IFRS 10, IFRS 11 and IFRS 12)
33.1 Necessity for introducing IFRS 10 to replace IAS 27
33.2 Separate financial statements: IAS 27
33.2.1 Objective and scope
33.2.2 Preparation of separate financial statements
33.2.3 Disclosure requirement under IAS 27
33.3 Concept of group
33.4 Concept of control
33.5 Disclosure requirements
33.6 Major differences between IAS 27 and IFRS 10
33.7 Consolidated financial statements
33.8 Separate financial statements
33.9 Objectives of preparing consolidated financial statements
33.10 Circumstances when subsidiaries should be excluded from consolidated financial statements
33.11 Need for using coterminous year-ends and uniform accounting policies when preparing consolidated financial statements and how is it achieved in practical world
33.12 Process followed in summary for consolidation of parent with subsidiaries
33.13 Purchase consideration
33.14 Non-controlling interest (NCI)
33.15 Measurement and recognition of goodwill in consolidated financial statements
Illustration 33.1: Calculation of goodwill / bargain purchase
Illustration 33.2: Calculation of goodwill / bargain purchase
33.16 Treatment for acquisition related costs
33.17 Measurement of contingent liabilities in business combination
33.18 Accounting treatment of pre-acquisition and post-acquisition profit
Illustration 33.3: Consolidation of financial statements
Illustration 33.4: Consolidation of financial statements
33.19 Consolidated income statement
Illustration 33.5: Consolidated statement of profit & loss
33.20 Consolidated statement of changes in equity
Illustration 33.6: Consolidated statement of changes in equity
33.21 Treatment of unrealised profit related to inventories in preparation of consolidated financial statements
Illustration 33.7: Consolidation of financial statements with treatment of unrealized profit under inventories
Illustration 33.8: Consolidation of financial statements with treatment of unrealized profit under inventories
33.22 Treatment of unrealised profit related to sale of non-current assets in preparation of consolidated financial statements
Illustration 33.9: Consolidation of financial statements with treatment of Unrealized profit on non-current assets
33.23 Treatment of intra-group interest expense
33.24 Treatment of intra-group dividends
Illustration 33.10: Consolidation of financial statements with treatment of intra-group dividend
33.25 Treatment of fair value in the consideration paid for a subsidiary as well as in determining subsidiary’s identifiable assets and liabilities when preparing consolidated financial statements
Illustration 33.11: Consolidation of financial statements with treatment of fair value adjustments
33.26 Partial disposal of an investment in a subsidiary
33.27 Disclosures required in consolidated financial statement
Illustration 33.12: Power – relevant activities
Illustration 33.13: Power- exposure to variability of returns
Illustration 33.14: Power – Substantive rights
Illustration 33.15: Substantive rights – forward contract
Illustration 33.16: Protective rights
Illustration 33.17: Voting rights
Illustration 33.18: Voting rights
Illustration 33.19: Exposure to variability of returns from other interests
Illustration 33.20: Exposure to variability of returns
Illustration 33.21: Exposure to variability of returns from other interests
33.28 Who is an associate under IAS 28 – Investment in associates and joint ventures?
33.29 What is significant influence?
33.30 Equity method of accounting
Illustration 33.22: Calculation of equity method
Illustration 33.23: Calculation of goodwill under equity method
Illustration 33.24: Calculation of goodwill and bargain purchase under equity method
Illustration 33.25: Calculation of goodwill and treatment in consolidated financial statements under equity method
33.31 Treatment of unrealised intra-group profits related to associates
33.32 Accounting treatment of goodwill, bargain purchases and losses with respect to associates
33.33 Disclosure requirements under IAS 28
33.34 Joint arrangements
33.34.1 Major changes highlighted in IFRS 11 related to Joint venture accounting
33.34.2 Accounting treatment related to types of joint arrangements
33.35 Comparative analysis of the various entities in consolidation of financial statements
33.36 Frequently Asked Questions
Chapter 34: IFRS 15: Revenue from Contract with customers
34.1 Objective
34.2 Core principle
34.3 Scope
34.3.1 According to Para 5 of this Standard an entity shall apply this Standard to all contracts with customers, except the following:
34.3.2 An entity shall apply this Standard to a contract (other than a contract listed in 34.3.1 above) only if the counterparty to the contract is a customer.
34.4 Definitions
34.5 Recognition
34.5.1 Identifying the contract
34.5.2 Combination of contract
Illustration 34.1: Combination of contracts
34.5.3 Contract modifications
Illustration 34.2: Modification of contracts
Illustration 34.3: Adjustment of stand-alone selling price
34.5.4 Identifying performance obligations
34.5.5 What are distinct goods and services
34.5.6 Satisfaction of performance obligation
34.5.6.1 Performance obligations satisfied over time
34.5.6.2 Performance obligations satisfied at a point in time
34.5.6.3 Measuring progress towards complete satisfaction of a performance obligation
34.6 Measurement
34.6.1 Determining the transaction price
34.6.2 Determinants of transaction price
34.6.3 Variable consideration
34.6.4 The existence of a significant financing component in the contract
Illustration 34.4: Revenue recognition involving financing component of a contract
34.6.5 Non-cash consideration
34.6.6 Consideration payable to a customer
34.6.7 Allocating the transaction price to performance obligations
34.6.8 Allocation based on stand-alone selling price
34.6.9 Allocation of discount to stand alone price
34.6.10 Changes in transaction price
34.6.11 Contract cost
Illustration 34.5: Recognition of contract cost
34.7 Presentation
34.8 Disclosure
34.8.1 Objective
34.8.2 Contracts with customers
34.8.3 Disaggregation of revenue
34.8.4 Contract balances
34.8.5 Performance obligation
34.8.6 Transaction price allocated to the remaining performance obligations
34.8.7 Determining the timing of satisfaction of performance obligations
34.8.8 Determining the transaction price and the amounts allocated to performance
34.8.9 Assets recognised from the costs to obtain or fulfil a contract with a customer
Illustration 34.6: Treatment of Sales Commission
Illustration 34.7: Treatment of advance payment prior to delivery
Illustration 34.8: Treatment of costs as expense or assets
Illustration 34.9: Whether expenses can be eligible for recognition as assets
34.9 Frequently Asked questions
Chapter 35: IFRS 16: Leases
35.1 Introduction
35.2 Definitions
35.3 Objective
35.4 Scope
35.5 Recognition exemptions
35.6 Identifying a lease
35.7 Separating components of a contract
35.7.1 Lessee
35.7.2 Lessor
35.7.3 Lease term
35.7.4 Lessee
35.7.5 Recognition
35.8 Measurement
35.8.1 Lessee
35.8.1.1 Initial measurement
35.8.1.2 Subsequent measurement
35.8.1.3 Reassessment of the lease liability
35.8.1.4 Presentation
35.8.1.5 Disclosure (Para 51)
35.8.2 Lessor
35.8.2.1 Classification of leases (paragraphs B53–B58) (Para 61)
35.8.2.2 Finance leases
35.8.2.3 Operating leases
35.8.2.4 Disclosure
35.9 Frequently Asked questions
Chapter 36: IFRS 14: Regulatory deferral
36.1 Objective
36.2 Scope
36.3 Recognition, measurement, impairment and derecognition
36.3.1 Continuation of existing accounting policies
36.3.2 Changes in accounting policies
36.4 Presentation
36.4.1 Classification of regulatory deferral account balances
36.5 Disclosure
36.5.1 According to Para 27 of this IFRS, an entity that elects to apply this standard shall disclose information that enables users to assess
36.5.2 To meet the disclosure objective in paragraph 27 mentioned above
36.5.3 Explanation of activities subject to rate regulation
36.5.4 Explanation of recognised amounts
36.5.5 Deferred tax
36.5.6 Disclosure of interests in other entities
36.5.7 Disclosure of unrecoverable or reversible regulatory deferral account balance
36.6 Application guidance of this standard
36.6.1 Rate regulated activities
36.6.2 Regulatory deferral account balance
36.6.3 Applicability of other standards
Chapter 37: International Financial Reporting Interpretations Committee (IFRIC)
37.1 IFRIC 1: Changes in existing decommissioning, restoration, and similar liabilities (IAS 37)
37.2 IFRIC 2: Members’ shares in cooperative entities and similar instruments (IAS 32)
37.3 IFRIC 5: Rights to interests arising from decommissioning restoration and environment funds (IAS 8, IAS 27, IAS 28, IAS 31, IAS 37, IAS 39 and SIC 12)
37.4 IFRIC 6: Liabilities arising from participating in a specific market – waste electrical and electronic equipment (IAS 37: Provisions, contingent liabilities and contingent assets)
37.5 IFRIC 7: Applying the restatement approach under IAS 29 Financial reporting in hyper-inflationary economies
37.6 IFRIC 10: Interim financial reporting and impairment (IAS 34 Interim Financial Reporting)
37.7 IFRIC 12: Service concession arrangements (IFRS 1/7, IAS8/11/16/17/18/20/23/32/36/37/38/39, IFRIC4, SIC 29)
37.8 IFRIC 14: Regulatory deferral accounts
37.9 IFRIC 16: Hedges of a net investment in a foreign operation
37.10 IFRIC 17: Distribution of non-cash assets to owners
37.11 IFRIC 19: Extinguishing financial liabilities with equity
37.12 IFRIC 20: Stripping cost in the production phase of a surface mine
37.13 IFRIC 21: Levies
37.14 IFRIC 22 Foreign currency transactions and advance considerations
37.15 IFRIC 23 Uncertainty over income tax treatment
Chapter 38: Standing Interpretation Committee (SIC)
Chapter 39: Small and Medium Enterprises
39.1 Meaning of SMEs
39.2 Need of a standard for SMEs
39.3 Qualitative characteristics
39.4 Comparative summary between full IFRS and IFRS related to SMEs
39.5 Topics not addressed by the SMEs
39.6 Treatment of financial instruments under IFRS for SMEs
Chapter 40: Case studies
40.1 Share based payments
40.2 IFRS 15: Revenue from contract with customers
40.3 IAS 24: Related party disclosures and IAS 38: Intangible assets
40.4 IAS 21: Foreign currency transactions
40.5 IAS 12: Income taxes
40.6 IFRS 9: Financial instruments, IFRS – 5: Non-current assets held for sale and discontinued operations
40.7 IAS 16: Property, plant, and equipment
40.8 IFRS 2: Share-based payment
40.9 IAS 12: Income taxes
40.10 IAS 21: Effects of changes in foreign currency; IFRS 11: Joint arrangement; IFRS 10: Consolidated financial statements
40.11 IFRS 13: Fair value measurement; IFRS 8: Operating segments
40.12 IFRS 15: Revenue from contracts with customers; IAS 16: Property, plant, and equipment; IAS 37: Provisions, contingent liabilities and contingent assets
40.13 IFRS 3: Business combinations; IFRS 10: Consolidated financial statements
40.14 IFRS 8: Operating segments; IFRS 2: Share-based payment; IFRS 5: Non-current assets held for sale and discontinued operations
40.15 IFRS 9: Financial instrument; IAS 8: Accounting policies, accounting estimates and errors; IAS 37, Provisions, contingent liabilities and contingent asset
40.16 IFRS 5: Non-current assets held for sale and discontinued operations; IAS 36: Impairment of assets
40.17 IAS 16: Property, plant, and equipment; IAS 37: Provisions, contingent liabilities and contingent assets
40.18 IAS 16: Property, plant, and equipment; IFRS 2: Share-based payment, IAS 37: Provisions, contingent liabilities and contingent assets
40.19 IFRS 5: Non-current assets held for sale and discontinued operations; IAS 36: Impairment of assets
40.20 IAS 16: Property, plant and equipment; IFRS 16: Leases; IAS 37: Provisions, contingent liabilities and contingent assets
40.21 IAS 16: Property, plant and equipment; IFRS 9: Financial instruments
40.22 IAS 40: Investment property, IAS 21: The effect of changes in foreign exchange rates; IFRS 2: Share based payment
40.23 IFRS 15: Revenue from contracts with customers
40.24 IFRS 15: Revenue from contracts with customers
40.25 IFRS 2: Share based payment; IAS 37: Provisions, contingent liabilities and contingent assets; IAS 24: Related party disclosures
40.26 IAS 12: Income taxes
40.27 IFRS 9: Financial instruments; IAS 41: Agriculture
40.28 IFRS 16: Leases; IFRS 11: Joint arrangement; IFRS 9: Financial instruments
40.29 IFRS 1: First time adoption of IFRS; IFRS 9: Financial instruments; IFRS 2: Share based payment
40.30 IAS 16: Property, plant & equipment; IAS 40: Investment property; IAS 38: Intangible assets
40.31 IFRS 10: Consolidated financial statements
40.32 IFRS 10: Consolidated income statements
40.33 IFRS 10: Consolidated income statements and statement of changes in equity
40.34 IFRS 10: Consolidated financial statements
40.35 IFRS 10: Consolidated income statements and statements of changes in equity
40.36 IFRS 10: Consolidated income statements and statements of changes in equity
40.37 IFRS 10: Consolidated financial statements
40.38 IAS 16: Property, plant and equipment and IAS 37, Provisions, contingent liabilities and contingent assets
40.39 IFRS 3, Business combinations and IAS 38, Intangible assets
Chapter 41: Multiple choice questions
Annexure: Major similarities and differences between IFRS and US GAAP
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