Conceptual Framework for Financial Reporting IFRS 3 Business Combinations

The revised Conceptual Framework for Financial Reporting IFRS 3 establishes principles and requirements for how an
(Conceptual Framework) issued in March 2018 is effective acquirer in a business combination:
immediately for the International Accounting Standards
 recognises and measures in its financial statements the assets
Board (Board) and the IFRS Interpretations Committee. For
and liabilities acquired, and any interest in the acquiree held
companies that use the Conceptual Framework to develop by other parties;
accounting policies when no IFRS Standard applies to a
particular transaction, the revised Conceptual Framework is  recognises and measures the goodwill acquired in the
effective for annual reporting periods beginning on or after 1 business combination or a gain from a bargain purchase; and
January 2020, with earlier application permitted.  determines what information to disclose to enable users of
the financial statements to evaluate the nature and financial
The Conceptual Framework sets out the fundamental concepts
effects of the business combination.
for financial reporting that guide the Board in developing IFRS
Standards. It helps to ensure that the Standards are The core principles in IFRS 3 are that an acquirer measures the
conceptually consistent and that similar transactions are cost of the acquisition at the fair value of the consideration
treated the same way, so as to provide useful information for paid; allocates that cost to the acquired identifiable assets
investors, lenders and other creditors. and liabilities on the basis of their fair values; allocates the
rest of the cost to goodwill; and recognises any excess of
The Conceptual Framework also assists companies in acquired assets and liabilities over the consideration paid (a
developing accounting policies when no IFRS Standard applies ‘bargain purchase’) in profit or loss immediately. The acquirer
to a particular transaction, and more broadly, helps discloses information that enables users to evaluate the
stakeholders to understand and interpret the Standards. nature and financial effects of the acquisition.

The 2018 revised Conceptual Framework sets out: IFRS 4 Insurance Contracts

 the objective of general purpose financial reporting; Will be superseded by IFRS 17.

 the qualitative characteristics of useful financial information; IFRS 4 specifies some aspects of the financial reporting for
insurance contracts by any entity that issues such contracts
 a description of the reporting entity and its boundary; and has not yet applied IFRS 17. 
 definitions of an asset, a liability, equity, income and Insurance contract is a contract under which one party (the
expenses and guidance supporting these definitions; insurer) accepts significant insurance risk from another party
 criteria for including assets and liabilities in financial (the policyholder) by agreeing to compensate the
statements (recognition) and guidance on when to remove policyholder if a specified uncertain future event (the insured
them (derecognition); event) adversely affects the policyholder.

 measurement bases and guidance on when to use them; IFRS 4 applies to all insurance contracts (including reinsurance
contracts) that an entity issues and to reinsurance contracts
 concepts and guidance on presentation and disclosure; and that it holds, except for specified contracts covered by other
Standards. It does not apply to other assets and liabilities of
 concepts relating to capital and capital maintenance.
an insurer, such as financial assets and financial liabilities
within the scope of IFRS 9. Furthermore, it does not address
accounting by policyholders.
IFRS 1 First-time Adoption of International Financial Reporting
Standards IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations
IFRS 1 requires an entity that is adopting IFRS Standards for the
first time to prepare a complete set of financial statements IFRS 5 requires:
covering its first IFRS reporting period and the preceding year.
 a non-current asset or disposal group to be classified as held
The entity uses the same accounting policies throughout all for sale if its carrying amount will be recovered principally
periods presented in its first IFRS financial statements. Those through a sale transaction instead of through continuing use;
accounting policies must comply with each Standard effective
at the end of its first IFRS reporting period.  assets held for sale to be measured at the lower of the
carrying amount and fair value less costs to sell;
IFRS 1 provides limited exemptions from the requirement to
restate prior periods in specified areas in which the cost of  depreciation of an asset to cease when it is held for sale;
complying with them would be likely to exceed the benefits  separate presentation in the statement of financial position
to users of financial statements. of an asset classified as held for sale and of the assets and
IFRS 1 First-time Adoption of International Financial Reporting liabilities included within a disposal group classified as held
Standards for sale; and

IFRS 2 specifies the financial reporting by an entity when it  separate presentation in the statement of comprehensive
undertakes a share-based payment transaction, including income of the results of discontinued operations.
issue of share options. It requires an entity to recognize
share-based payment transactions in its financial statements,
including transactions with employees or other parties to be IFRS 6 Exploration for and Evaluation of Mineral Resources
settled in cash, other assets or equity instruments of the IFRS 6 specifies some aspects of the financial reporting for
entity. It requires an entity to reflect in its reported profit or costs incurred for exploration for and evaluation of mineral
loss and financial position the effects of share-based payment resources (for example, minerals, oil, natural gas and similar
transactions, including expenses associated with transactions non-regenerative resources), as well as the costs of
in which share options are granted to employees. determination of the technical feasibility and commercial
viability of extracting the mineral resources.
IFRS 6: not at fair value through profit or loss, transaction costs that
are directly attributable to the acquisition or issue of the
 permits an entity to develop an accounting policy
financial asset or the financial liability.
for exploration and evaluation assets without specifically
considering the requirements of paragraphs 11–12 of IAS 8. Financial assets
Thus, an entity adopting IFRS 6 may continue to use the
When an entity first recognises a financial asset, it classifies it
accounting policies applied immediately before adopting IFRS
based on the entity’s business model for managing the asset
6.
and the asset’s contractual cash flow characteristics, as
 requires entities recognising exploration and follows:
evaluation assets to perform an impairment test on those
 Amortised cost—a financial asset is measured at amortised
assets when facts and circumstances suggest that the carrying
cost if both of the following conditions are met:
amount of the assets may exceed their recoverable amount.
o the asset is held within a business model
 varies the recognition of impairment from that in
whose objective is to hold assets in order to collect
IAS 36 but measures the impairment in accordance with that
contractual cash flows; and
Standard once the impairment is identified.
o the contractual terms of the financial
asset give rise on specified dates to cash flows that are solely
IFRS 7 Financial Instruments: Disclosures payments of principal and interest on the principal amount
outstanding.
IFRS 7 requires entities to provide disclosures in their financial
statements that enable users to evaluate:  Fair value through other comprehensive income—financial
assets are classified and measured at fair value through other
 the significance of financial instruments for the
comprehensive income if they are held in a business model
entity’s financial position and performance.
whose objective is achieved by both collecting contractual
 the nature and extent of risks arising from cash flows and selling financial assets.
financial instruments to which the entity is exposed during
 Fair value through profit or loss—any financial assets that are
the period and at the end of the reporting period, and how
not held in one of the two business models mentioned are
the entity manages those risks. The qualitative disclosures
measured at fair value through profit or loss.
describe management’s objectives, policies and processes for
managing those risks. The quantitative disclosures provide When, and only when, an entity changes its business model for
information about the extent to which the entity is exposed managing financial assets it must reclassify all affected
to risk, based on information provided internally to the financial assets.
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 10 Consolidated Financial Statements
IFRS 7 applies to all entities, including entities that have few IFRS 10 establishes principles for presenting and preparing
financial instruments (for example, a manufacturer whose consolidated financial statements when an entity controls
only financial instruments are cash, accounts receivable and one or more other entities. IFRS 10:
accounts payable) and those that have many financial
 requires an entity (the parent) that controls one
instruments (for example, a financial institution most of
or more other entities (subsidiaries) to present consolidated
whose assets and liabilities are financial instruments).
financial statements;
 defines the principle of control, and establishes
IFRS 8 Operating Segments control as the basis for consolidation;
IFRS 8 requires an entity whose debt or equity securities are  sets out how to apply the principle of control to
publicly traded to disclose information to enable users of its identify whether an investor controls an investee and
financial statements to evaluate the nature and financial therefore must consolidate the investee;
effects of the different business activities in which it engages
and the different economic environments in which it  sets out the accounting requirements for the
operates. It specifies how an entity should report information preparation of consolidated financial statements; and
about its operating segments in annual financial statements  defines an investment entity and sets out an
and in interim financial reports. It also sets out requirements exception to consolidating particular subsidiaries of an
for related disclosures about products and services, investment entity.
geographical areas and major customers.
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
IFRS 9 Financial Instruments
economic entity.
IFRS 9 is effective for annual periods beginning on or after 1
January 2018 with early application permitted.
IFRS 11 Joint Arrangements
IFRS 9 specifies how an entity should classify and measure
financial assets, financial liabilities, and some contracts to buy IFRS 11 establishes principles for financial reporting by entities
or sell non-financial items. that have an interest in arrangements that are controlled
jointly (joint arrangements).
IFRS 9 requires an entity to recognise a financial asset or a
financial liability in its statement of financial position when it A joint arrangement is an arrangement of which two or more
becomes party to the contractual provisions of the parties have joint control. Joint control is the contractually
instrument. At initial recognition, an entity measures a agreed sharing of control of an arrangement, which exists
financial asset or a financial liability at its fair value plus or only when decisions about the relevant activities (ie activities
minus, in the case of a financial asset or a financial liability
 that significantly affect the returns of the arrangement) the amount is included, or is expected to be included, by a
require the unanimous consent of the parties sharing control. rate regulator in establishing the price(s) that an entity can
charge to customers for rate-regulated goods or services.
IFRS 11 classifies joint arrangements into two types—joint
operations and joint ventures: IFRS 14 permits a first-time adopter within its scope to continue
to account for regulatory deferral account balances in its IFRS
 in a joint operation, the parties that have joint
financial statements in accordance with its previous GAAP
control of the arrangement (joint operators) have rights to
when it adopts IFRS Standards. However, IFRS 14 introduces
particular assets, and obligations for particular liabilities,
limited changes to some previous GAAP accounting practices
relating to the arrangement; and
for regulatory deferral account balances, which are primarily
 in a joint venture, the parties that have joint related to the presentation of those balances.
control of the arrangement (joint venturers) have rights to
the net assets of the arrangement.
IFRS 15 Revenue from Contracts with Customers
IFRS 11 requires a joint operator to recognise and measure its
share of the assets and liabilities (and recognise the related IFRS 15 is effective for annual reporting periods beginning on or
revenues and expenses) in accordance with IFRS Standards after 1 January 2018, with earlier application permitted.
applicable to the particular assets, liabilities, revenues and
expenses. IFRS 15 establishes the principles that an entity applies when
reporting information about the nature, amount, timing and
A joint venturer accounts for its interest in the joint venture uncertainty of revenue and cash flows from a contract with a
using the equity method (see IAS 28). 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
IFRS 12 Disclosure of Interests in Other Entities which the entity expects to be entitled in exchange for those
IFRS 12 requires an entity to disclose information that enables goods or services.
users of its financial statements to evaluate: To recognise revenue under IFRS 15, an entity applies the
 the nature of, and risks associated with, its following five steps:
interests in a subsidiary, a joint arrangement, an associate or  identify the contract(s) with a customer.
an unconsolidated structured entity; and
 identify the performance obligations in the
 the effects of those interests on its financial contract. Performance obligations are promises in a contract
position, financial performance and cash flows. to transfer to a customer goods or services that are distinct.
 determine the transaction price. The transaction
IFRS 13 Fair Value Measurement price is the amount of consideration to which an entity
expects to be entitled in exchange for transferring promised
IFRS 13 defines fair value, sets out a framework for measuring goods or services to a customer. If the consideration
fair value, and requires disclosures about fair value promised in a contract includes a variable amount, an entity
measurements. must estimate the amount of consideration to which it
It applies when another Standard requires or permits fair value expects to be entitled in exchange for transferring the
measurements or disclosures about fair value measurements promised goods or services to a customer.
(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 IFRS 16 Leases
specify the measurement and disclosure requirements for IFRS 16 is effective for annual reporting periods beginning on or
share-based payment transactions, leases or impairment of after 1 January 2019, with earlier application permitted (as
assets. Nor does it establish disclosure requirements for fair long as IFRS 15 is also applied).
values related to employee benefits and retirement plans.
The objective of IFRS 16 is to report information that (a)
IFRS 13 defines fair value as the price that would be received to faithfully represents lease transactions and (b) provides a
sell an asset or paid to transfer a liability in an orderly basis for users of financial statements to assess the amount,
transaction between market participants at the measurement timing and uncertainty of cash flows arising from leases. To
date (an exit price). When measuring fair value, an entity uses meet that objective, a lessee should recognise assets and
the assumptions that market participants would use when liabilities arising from a lease.
pricing the asset or the liability under current market
conditions, including assumptions about risk. As a result, an IFRS 16 introduces a single lessee accounting model and
entity’s intention to hold an asset or to settle or otherwise requires a lessee to recognise assets and liabilities for all
fulfil a liability is not relevant when measuring fair value. 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
IFRS 14 Regulatory Deferral Accounts underlying leased asset and a lease liability representing its
obligation to make lease payments.
IFRS 14 prescribes special accounting for the effects of rate
regulation. Rate regulation is a legal framework for
establishing the prices that a public utility or similar entity can IFRS 17 Insurance Contracts
charge to customers for regulated goods or services. 
IFRS 17 is effective for annual reporting periods beginning on or
Rate regulation can create a regulatory deferral account after 1 January 2023 with earlier application permitted as
balance. A regulatory deferral account balance is an amount long as IFRS 9 is also applied.
of expense or income that would not be recognised as an
asset or liability in accordance with other Standards, but that Insurance contracts combine features of both a financial
qualifies to be deferred in accordance with IFRS 14, because instrument and a service contract. In addition, many
 insurance contracts generate cash flows with substantial  a statement of profit and loss and other
variability over a long period. To provide useful information comprehensive income for the period.  Other comprehensive
about these features, IFRS 17: income is those items of income and expense that are not
recognised in profit or loss in accordance with IFRS
 combines current measurement of the future cash flows with
Standards.  IAS 1 allows an entity to present a single
the recognition of profit over the period that services are
combined statement of profit and loss and other
provided under the contract;
comprehensive income or two separate statements;
 presents insurance service results (including presentation of
 a statement of changes in equity for the period;
insurance revenue) separately from insurance finance income
or expenses; and  a statement of cash flows for the period;
 requires an entity to make an accounting policy choice of  notes, comprising a summary of significant
whether to recognise all insurance finance income or accounting policies and other explanatory information; and
expenses in profit or loss or to recognise some of that income
 a statement of financial position as at the
or expenses in other comprehensive income.
beginning of the preceding comparative period when an
The key principles in IFRS 17 are that an entity: entity applies an accounting policy retrospectively or makes a
retrospective restatement of items in its financial statements,
 identifies as insurance contracts those contracts
or when it reclassifies items in its financial statements.
under which the entity accepts significant insurance risk from
another party (the policyholder) by agreeing to compensate An entity whose financial statements comply with IFRS
the policyholder if a specified uncertain future event (the Standards must make an explicit and unreserved statement
insured event) adversely affects the policyholder; of such compliance in the notes. An entity must not describe
financial statements as complying with IFRS Standards unless
 separates specified embedded derivatives,
they comply with all the requirements of the Standards. The
distinct investment components and distinct performance
application of IFRS Standards, with additional disclosure when
obligations from the insurance contracts;
necessary, is presumed to result in financial statements that
 divides the contracts into groups that it will achieve a fair presentation. IAS 1 also deals with going
recognise and measure; concern issues, offsetting and changes in presentation or
classification.
 recognises and measures groups of insurance
contracts at:
i. a risk-adjusted present value of the future cash flows (the IAS 2 Inventories
fulfilment cash flows) that incorporates all of the available
IAS 2 provides guidance for determining the cost of inventories
information about the fulfilment cash flows in a way that is
and the subsequent recognition of the cost as an expense,
consistent with observable market information; plus (if this
including any write-down to net realisable value. It also
value is a liability) or minus (if this value is an asset)
provides guidance on the cost formulas that are used to
ii. an amount representing the unearned profit in the group of assign costs to inventories. Inventories are measured at the
contracts (the contractual service margin); lower of cost and net realisable value. Net realisable value is
the estimated selling price in the ordinary course of business
 recognises the profit from a group of insurance
less the estimated costs of completion and the estimated
contracts over the period the entity provides insurance
costs necessary to make the sale.
contract services, and as the entity is released from risk. If a
group of contracts is or becomes loss-making, an entity The cost of inventories includes all costs of purchase, costs of
recognises the loss immediately; conversion (direct labour and production overhead) and
other costs incurred in bringing the inventories to their
 presents separately insurance revenue (that present location and condition. The cost of inventories is
excludes the receipt of any investment component), assigned by:
insurance service expenses (that excludes the repayment of
any investment components) and insurance finance income  specific identification of cost for items of
or expenses; and inventory that are not ordinarily interchangeable; and
 discloses information to enable users of financial  the first-in, first-out or weighted average cost
statements to assess the effect that contracts within the formula for items that are ordinarily interchangeable
scope of IFRS 17 have on the financial position, financial (generally large quantities of individually insignificant items).
performance and cash flows of an entity.
When inventories are sold, the carrying amount of those
IFRS 17 includes an optional simplified measurement approach, inventories is recognised as an expense in the period in which
or premium allocation approach, for simpler insurance the related revenue is recognised. The amount of any write-
contracts. 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 1 Presentation of Financial Statements
IAS 1 sets out overall requirements for the presentation of
IAS 7 Statement of Cash Flows
financial statements, guidelines for their structure and
minimum requirements for their content. It requires an entity IAS 7 prescribes how to present information in a statement of
to present a complete set of financial statements at least cash flows about how an entity’s cash and cash equivalents
annually, with comparative amounts for the preceding year changed during the period. Cash comprises cash on hand and
(including comparative amounts in the notes). A complete set demand deposits. Cash equivalents are short-term, highly
of financial statements comprises: liquid investments that are readily convertible to known
amounts of cash and that are subject to an insignificant risk of
 a statement of financial position as at the end of changes in value. 
the period;
The statement classifies cash flows during a period into cash Prior period errors are omissions from, and misstatements in,
flows from operating, investing and financing activities: the entity’s financial statements for one or more prior
periods arising from a failure to use, or misuse of, available
 operating activities are the principal revenue-
reliable information. Unless it is impracticable to determine
producing activities of the entity and other activities that are
the effects of the error, an entity corrects material prior
not investing or financing activities. An entity reports cash
period errors retrospectively by restating the comparative
flows from operating activities using either:
amounts for the prior period(s) presented in which the error
o the direct method, whereby major occurred.
classes of gross cash receipts and gross cash payments are
IAS 10 Events after the Reporting Period
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 IAS 10 prescribes:
cash receipts or payments and items of income or expense  when an entity should adjust its financial statements for
associated with investing or financing cash flows. events after the reporting period; and
 investing activities are the acquisition and  the disclosures that an entity should give about the date
disposal of long-term assets and other investments not when the financial statements were authorised for issue and
included in cash equivalents. The aggregate cash flows arising about events after the reporting period.
from obtaining and losing control of subsidiaries or other
businesses are presented as investing activities. Events after the reporting period are those events, favourable
and unfavourable, that occur between the end of the
 financing activities are activities that result in reporting period and the date when the financial statements
changes in the size and composition of the contributed equity are authorised for issue. The two types of events are:
and borrowings of the entity.
 those that provide evidence of conditions that
Investing and financing transactions that do not require the use existed at the end of the reporting period (adjusting events);
of cash or cash equivalents are excluded from a statement of and
cash flows but separately disclosed. IAS 7 requires an entity
to disclose the components of cash and cash equivalents and  those that are indicative of conditions that arose
to present a reconciliation of the amounts in its statement of after the reporting period (non-adjusting events).
cash flows with the equivalent items reported in the An entity adjusts the amounts recognised in its financial
statement of financial position. 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
IAS 8 Accounting Policies, Changes in Accounting Estimates 10 prescribes disclosures.
and Errors
IAS 8 prescribes the criteria for selecting and changing
accounting policies, together with the accounting treatment IAS 11 Construction Contracts
and disclosure of changes in accounting policies, changes in Superseded by IFRS 15.
accounting estimates and corrections of errors. Accounting
policies are the specific principles, bases, conventions, rules IAS 11 prescribes the contractor’s accounting treatment of
and practices applied by an entity in preparing and presenting revenue and costs associated with construction contracts.
financial statements. When an IFRS Standard or IFRS Work under a construction contract is usually performed in
Interpretation specifically applies to a transaction, other two or more accounting periods.
event or condition, an entity must apply that Standard. Consequently, the primary accounting issue is the allocation of
In the absence of an IFRS Standard that specifically applies to a contract revenue and contract costs to the accounting
transaction, other event or condition, management uses its periods in which construction work is performed.
judgement in developing and applying an accounting policy IAS 11 requires:
that results in information that is relevant and reliable. In
making that judgement management refers to the following  when the outcome of a construction contract can
sources in descending order: be estimated reliably, contract revenue and contract costs
associated with the construction contract to be recognised as
 the requirements and guidance in IFRS Standards revenue and expenses respectively by reference to the stage
dealing with similar and related issues; and of completion of the contract activity at the end of the
 the definitions, recognition criteria and reporting period; and
measurement concepts for assets, liabilities, income and Related IFRIC Interpretations
expenses in the Conceptual Framework.
IFRIC 15 Agreements for the Construction of Real Estate
Changes in an accounting policy are applied retrospectively
unless this is impracticable or unless another IFRS Standard  when the outcome of a construction contract
sets specific transitional provisions. cannot be estimated reliably:
Changes in accounting estimates result from new information o revenue to be recognised only to the
or new developments and, accordingly, are not corrections of extent of contract costs incurred that is probable will be
errors. The effect of a change in an accounting estimate is recoverable; and
recognised prospectively by including it in profit or loss in:
o contract costs to be recognised as an
 the period of the change, if the change affects expense in the period in which they are incurred.
that period only; or
When it is probable that total contract costs will exceed the
 the period of the change and future periods, if total contract revenue, the expected loss is recognised as an
the change affects both. expense immediately.
 Superseded by IFRS 16.
IAS 12 Income Taxes IAS 17 classifies leases into two types:
IAS 12 prescribes the accounting treatment for income taxes.  a finance lease if the lease transfers substantially
Income taxes include all domestic and foreign taxes that are all the risks and rewards incidental to ownership; and
based on taxable profits.
 an operating lease if the lease does not transfer
Current tax for current and prior periods is, to the extent that it substantially all the risks and rewards incidental to
is unpaid, recognised as a liability. Overpayment of current ownership.
tax is recognised as an asset. Current tax liabilities (assets) for
IAS 17 prescribes lessee and lessor accounting policies for the
the current and prior periods are measured at the amount
two types of leases, as well as disclosures.
expected to be paid to (recovered from) the taxation
authorities, using the tax rates (and tax laws) that have been Leases in the financial statements of lessees—operating leases
enacted or substantively enacted by the end of the reporting
period. Lease payments under an operating lease are recognised as an
expense on a straight-line basis over the lease term unless
IAS 12 requires an entity to recognise a deferred tax liability or another systematic basis is more representative of the time
(subject to specified conditions) a deferred tax asset for all pattern of the user’s benefit.
temporary differences, with some exceptions.  Temporary
differences are differences between the tax base of an asset Leases in the financial statements of lessees—finance leases
or liability and its carrying amount in the statement of At the commencement of the lease term, lessees recognise
financial position. The tax base of an asset or liability is the finance leases as assets and liabilities in their statements of
amount attributed to that asset or liability for tax purposes.  financial position at amounts equal to the fair value of the
A deferred tax liability arises if an entity will pay tax if it leased property or, if lower, the present value of the
recovers the carrying amount of another asset or liability.  A minimum lease payments, each determined at the inception
deferred tax asset arises if an entity: of the lease.

 will pay less tax if it recovers the carrying amount Related IFRIC Interpretations
of another asset or liability; or IFRIC 4 Determining whether an Arrangement Contains a Lease
 has unused tax losses or unused tax credits. SIC-15 Operating Leases—Incentives
SIC-27 Evaluating the Substance of Transactions Involving the
IAS 16 Property, Plant and Equipment Legal Form of a Lease
IAS 16 establishes principles for recognising property, plant and Any initial direct costs of the lessee are added to the amount
equipment as assets, measuring their carrying amounts, and recognised as an asset. Minimum lease payments are
measuring the depreciation charges and impairment losses to apportioned between the finance charge and the reduction of
be recognised in relation to them. Property, plant and the outstanding liability. The finance charge is allocated to
equipment are tangible items that: each period during the lease term so as to produce a constant
 are held for use in the production or supply of periodic rate of interest on the remaining balance of the
goods or services, for rental to others, or for administrative liability. Contingent rents are charged as expenses in the
purposes; and periods in which they are incurred. A finance lease gives rise
 are expected to be used during more than one to depreciation expense for the recognised lease assets as
period. well as finance expense for each accounting period.

Property, plant and equipment includes bearer plants related to

agricultural activity. Leases in the financial statements of lessors—operating leases
The cost of an item of property, plant and equipment is Lessors present assets subject to operating leases in their
recognised as an asset if, and only if: statements of financial position according to the nature of
 it is probable that future economic benefits the asset. Lessors depreciate the leased assets in accordance
associated with the item will flow to the entity; and with IAS 16 and IAS 38. Lease income from operating leases is
recognised in income on a straight-line basis over the lease
 the cost of the item can be measured reliably. term, unless another systematic basis is more representative
An item of property, plant and equipment is initially measured of the time pattern in which the benefit derived from the
at its cost. Cost includes: leased asset is diminished.
 its purchase price, including import duties and
non-refundable purchase taxes, after deducting trade Leases in the financial statements of lessors—finance leases
discounts and rebates;
Lessors recognise assets held under a finance lease in their
 any costs directly attributable to bringing the
statements of financial position and present them as a
asset to the location and condition necessary for it to be
receivable at an amount equal to the net investment in the
capable of operating in the manner intended by
lease. The recognition of finance income is based on a pattern
management; and
reflecting a constant periodic rate of return on the lessor’s
 the estimated costs of dismantling and removing net investment in the finance lease. Manufacturer or dealer
the item and restoring the site on which it is located, unless lessors recognise selling profit or loss in accordance with the
those costs relate to inventories produced during that period. policy followed by the entity for outright sales.

IAS 17 Leases
IAS 18 Revenue
Superseded by IFRS 15. for their service in the current and prior periods; discounts
that benefit in order to determine the present value of the
IAS 18 addresses when to recognise and how to measure
defined benefit obligation and the current service cost;
revenue. Revenue is the gross inflow of economic benefits
deducts the fair value of any plan assets from the present
during the period arising from the course of the ordinary
value of the defined benefit obligation; determines the
activities of an entity when those inflows result in increases in
amount of the deficit or surplus; and determines the amount
equity, other than increases relating to contributions from
to be recognised in profit and loss and other comprehensive
equity participants. IAS 18 applies to accounting for revenue
income in the current period. Those measurements are
arising from the following transactions and events:
updated each period.
 the sale of goods;
Other long-term benefits
 the rendering of services; and
These are all employee benefits other than short-term
 the use by others of entity assets yielding employee benefits, post-employment benefits and
interest, royalties and dividends. termination benefits. Measurement is similar to defined
benefit plans.
Revenue is recognised when it is probable that future economic
benefits will flow to the entity and those benefits can be Termination benefits
measured reliably. IAS 18 identifies the circumstances in
Termination benefits are employee benefits provided in
which those criteria will be met and, therefore, revenue will
exchange for the termination of an employee’s employment.
be recognised. It also provides practical guidance on the
An entity recognises a liability and expense for termination
application of the criteria. Revenue is measured at the fair
benefits at the earlier of the following dates:
value of the consideration received or receivable.
 when the entity can no longer withdraw the offer
of those benefits; and
IAS 19 Employee Benefits
 when the entity recognises costs for a
IAS 19 prescribes the accounting for all types of employee restructuring that is within the scope of IAS 37 and involves
benefits except share-based payment, to which IFRS 2 the payment of termination benefits.
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 IAS 20 Accounting for Government Grants and Disclosure of
requires an entity to recognise: Government Assistance
 a liability when an employee has provided service Government grants are transfers of resources to an entity by
in exchange for employee benefits to be paid in the future; government in return for past or future compliance with
and certain conditions relating to the operating activities of the
 an expense when the entity consumes the entity. Government assistance is action by government
economic benefit arising from the service provided by an designed to provide an economic benefit that is specific to an
employee in exchange for employee benefits. entity or range of entities qualifying under certain criteria.

Short-term employee benefits (to be settled within 12 months, An entity recognises government grants only when there is
other than termination benefits) reasonable assurance that the entity will comply with the
conditions attached to them and the grants will be received.
These are recognised when the employee has rendered the Government grants are recognised in profit or loss on a
service and are measured at the undiscounted amount of systematic basis over the periods in which the entity
benefits expected to be paid in exchange for that service. recognises as expenses the related costs for which the grants
Post-employment benefits (other than termination benefits and are intended to compensate.
short-term employee benefits) that are payable after the A government grant that becomes receivable as compensation
completion of employment for expenses or losses already incurred or for the purpose of
giving immediate financial support to the entity with no
Plans providing these benefits are classified as either defined
future related costs is recognised in profit or loss of the
contribution plans or defined benefit plans, depending on the
period in which it becomes receivable.
economic substance of the plan as derived from its principal
terms and conditions: Government grants related to assets, including non-monetary
grants at fair value, are presented in the statement of
 A defined contribution plan is a post-employment financial position either by setting up the grant as deferred
benefit plan under which an entity pays fixed contributions income or by deducting the grant in arriving at the carrying
into a separate entity (a fund) and will have no legal or amount of the asset.
constructive obligation to pay further contributions if the
fund does not hold sufficient assets to pay all employee Grants related to income are sometimes presented as a credit
benefits relating to employee service in the current and prior in the statement of comprehensive income, either separately
periods.  Under IAS 19, when an employee has rendered or under a general heading such as ‘Other income’;
service to an entity during a period, the entity recognises the alternatively, they are deducted in reporting the related
contribution payable to a defined contribution plan in expense.
exchange for that service as a liability (accrued expense) and If a government grant becomes repayable, the effect is
as an expense, unless another Standard requires or permits accounted for as a change in accounting estimate (see IAS 8).
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 21 The Effects of Changes in Foreign Exchange Rates
IAS 19, an entity uses an actuarial technique (the projected An entity may carry on foreign activities in two ways. It may
unit credit method) to estimate the ultimate cost to the have transactions in foreign currencies or it may have foreign
entity of the benefits that employees have earned in return operations. IAS 21 prescribes how an entity should:
 account for  foreign currency transactions;  The objective of IAS 24 is to ensure that an entity’s financial
statements contain the disclosures necessary to draw
 translate financial statements of a foreign
attention to the possibility that its financial position and profit
operation into the entity’s functional currency; and
or loss may have been affected by the existence of related
 translate the entity’s financial statements into a parties and by transactions and outstanding balances,
presentation currency, if different from the entity’s functional including commitments, with such parties.
currency. IAS 21 permits an entity to present its financial
A related party is a person or an entity that is related to the
statements in any currency (or currencies).
reporting entity: 
The principal issues are which exchange rate(s) to use and how
 A person or a close member of that person’s
to report the effects of changes in exchange rates in the
family is related to a reporting entity if that person has
financial statements.
control, joint control, or significant influence over the entity
An entity’s functional currency is the currency of the primary or is a member of its key management personnel.
economic environment in which the entity operates (ie the
 An entity is related to a reporting entity if, among
environment in which it primarily generates and expends
other circumstances, it is a parent, subsidiary, fellow
cash). Any other currency is a foreign currency.
subsidiary, associate, or joint venture of the reporting entity,
The following procedures apply when an entity accounts for or it is controlled, jointly controlled, or significantly
transactions in a foreign currency. A foreign currency influenced or managed by a person who is a related party. 
transaction is recorded, on initial recognition in the functional
A related party transaction is a transfer of resources, services or
currency, by applying to the foreign currency amount the
obligations between a reporting entity and a related party,
spot exchange rate at the date of the transaction. At the end
regardless of whether a price is charged. If an entity has had
of each reporting period:
related party transactions during the periods covered by the
 foreign currency monetary items are translated financial statements, IAS 24 requires it to disclose the nature
into the functional currency using the closing rate; of the related party relationship as well as information about
those transactions and outstanding balances, including
 non-monetary items that are measured in terms
commitments, necessary for users to understand the
of historical cost in a foreign currency continue to be
potential effect of the relationship on the financial
translated using the exchange rate that prevailed at the date
statements.
of the transaction; and
IAS 24 requires an entity to disclose key management personnel
 non-monetary items that are measured at fair compensation in total and by category as defined in the
value in a foreign currency are translated using the exchange Standard.
rates that prevailed at the date when the fair value was
measured.
The resulting exchange differences are recognised in profit or IAS 26 Accounting and Reporting by Retirement Benefit Plans
loss when they arise except for some exchange differences IAS 26 prescribes the minimum content of the financial
that form part of a reporting entity’s net investment in a statements of retirement benefit plans. It requires that the
foreign operation.  The latter are recognised initially in other financial statements of a defined benefit plan must contain
comprehensive income and reclassified to profit or loss on either:
disposal of the net investment.
 a statement that shows the net assets available
For translation into the functional currency or into a
for benefits; the actuarial present value of promised
presentation currency, the following procedures apply,
retirement benefits, distinguishing between vested benefits
except in limited circumstances:
and non-vested benefits; and the resulting excess or deficit;
 assets and liabilities are translated at the or
exchange rate at the end of the period;
 a statement of net assets available for benefits
 income and expenses are translated at exchange including either a note disclosing the actuarial present value
rates at the dates of the transactions; and of promised vested and non-vested retirement benefits or a
reference to this information in an accompanying actuarial
 resulting exchange differences are recognised in report.   
other comprehensive income and reclassified to profit or loss
on disposal of the related foreign operation.
IAS 27 Separate Financial Statements

IAS 23 Borrowing Costs IAS 27 prescribes the accounting and disclosure requirements
for investments in subsidiaries, joint ventures and associates
Borrowing costs that are directly attributable to the acquisition, when an entity elects, or is required by local regulations, to
construction or production of a qualifying asset form part of present separate financial statements.
the cost of that asset. Other borrowing costs are recognised
Separate financial statements are those presented in addition
as an expense. Borrowing costs are interest and other costs
to consolidated financial statements.
that an entity incurs in connection with the borrowing of
funds. IAS 23 provides guidance on how to measure Separate financial statements could be those of a parent or of a
borrowing costs, particularly when the costs of acquisition, subsidiary by itself.  In separate financial statements, an
construction or production are funded by an entity’s general investor accounts for investments in subsidiaries, joint
ventures and associates either at cost, or in accordance with
borrowings.
IFRS 9, or using the equity method as described in IAS 28.

IAS 28 Investments in Associates and Joint Ventures

IAS 24 Related Party Disclosures

IAS 28 requires an investor to account for its investment in However, exceptions apply. When a transaction will be settled
associates using the equity method. IFRS 11 requires an in the issuer’s own shares, classification depends on whether
investor to account for its investments in joint ventures using the number of shares to be issued is fixed or variable.
the equity method (with some limited exceptions). IAS 28
A compound financial instrument, such as a convertible bond, is
prescribes how to apply the equity method when accounting
split into equity and liability components. When the
for investments in associates and joint ventures.
instrument is issued, the equity component is measured as
An associate is an entity over which the investor has significant the difference between the fair value of the compound
influence. Significant influence is the power to participate in instrument and the fair value of the liability component.
the financial and operating policy decisions of the investee
Financial assets and financial liabilities are offset only when the
without the power to control or jointly control those policies. 
entity has a legally enforceable right to set off the recognised
If an entity holds, directly or indirectly (eg through subsidiaries), amounts, and intends either to settle on a net basis or to
20 per cent or more of the voting power of the investee, it is realise the asset and settle the liability simultaneously.
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 IAS 33 Earnings per Share
of the arrangement.
IAS 33 deals with the calculation and presentation of earnings
Under the equity method, on initial recognition the investment per share (EPS). It applies to entities whose ordinary shares or
in an associate or a joint venture is recognised at cost.  The potential ordinary shares (for example, convertibles, options
carrying amount is then increased or decreased to recognise and warrants) are publicly traded. Non-public entities electing
the investor’s share of the subsequent profit or loss of the to present EPS must also follow the Standard.
investee and to include that share of the investee’s profit or An entity must present basic EPS and diluted EPS with equal
loss in the investor’s profit or loss. Distributions received prominence in the statement of comprehensive income. In
from an investee reduce the carrying amount of the consolidated financial statements, EPS measures are based
investment. Adjustments to the carrying amount may also be on the consolidated profit or loss attributable to ordinary
necessary for changes in the investor’s proportionate interest equity holders of the parent.
in the investee and for the investee’s other comprehensive Dilution is a potential reduction in EPS or a potential increase in
income. 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
IAS 29 Financial Reporting in Hyperinflationary Economies specified conditions.
IAS 29 applies to any entity whose functional currency is the When the entity also discloses profit or loss from continuing
currency of a hyperinflationary economy. operations, basic EPS and diluted EPS must be presented in
respect of continuing operations. Furthermore, if an entity
Hyperinflation is indicated by factors such as prices, interest
reports a discontinued operation, it must present basic and
and wages linked to a price index, and cumulative inflation
diluted amounts per share for the discontinued operation
over three years of around 100 per cent or more.
either in the statement of comprehensive income or in the
In a hyperinflationary environment, financial statements, notes.
including comparative information, must be expressed in
IAS 33 sets out principles for determining the denominator (the
units of the functional currency current as at the end of the
weighted average number of shares outstanding for the
reporting period. Restatement to current units of currency is
period) and the numerator (‘earnings’) in basic EPS and
made using the change in a general price index. The gain or
diluted EPS calculations.
loss on the net monetary position must be included in profit
or loss for the period and must be separately disclosed. The denominators used in the basic EPS and diluted EPS
calculation might be affected by share issues during the year;
An entity must disclose the fact that the financial statements
shares to be issued upon conversion of a convertible
have been restated, the price index used for restatement,
instrument; contingently issuable or returnable shares; bonus
and whether the financial statements are prepared on the
issues; share splits and share consolidation; the exercise of
basis of historical costs or current costs.
options and warrants; contracts that may be settled in shares;
An entity must measure its results and financial position in its and contracts that require an entity to repurchase its own
functional currency. However, after restatement, the financial shares (written put options).
statements may be presented in any currency by translating
IAS 33 requires an entity to disclose:
the results and financial position in accordance with IAS 21.
 the amounts used as the numerators in
calculating basic and diluted earnings per share, and a
IAS 32 Financial Instruments: Presentation reconciliation of those amounts to profit or loss. 
IAS 32 specifies presentation for financial instruments. The  the weighted average number of ordinary shares
recognition and measurement and the disclosure of financial used as the denominator in calculating basic and diluted
instruments are the subjects of IFRS 9 or IAS 39 and IFRS 7 earnings per share, and a reconciliation of these
respectively. denominators to each other. 
For presentation, financial instruments are classified into  a description of any other instruments (including
financial assets, financial liabilities and equity instruments. contingently issuable shares) that could potentially dilute
Differentiation between a financial liability and equity basic earnings per share in the future, but that were not
depends on whether an entity has an obligation to deliver included in the calculation of diluted earnings per share.
cash (or some other financial asset).
 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 interim financial reports are often based on reasonable
occurred before the end of the reporting period. estimates, the preparation of interim financial reports will
generally require a greater use of estimation methods than
annual financial statements.
IAS 34 Interim Financial Reporting
An interim financial report is a complete or condensed set of
IAS 36 Impairment of Assets
financial statements for a period shorter than a financial year.
IAS 34 does not specify which entities must publish an interim The core principle in IAS 36 is that an asset must not be carried
financial report. That is generally a matter for laws and in the financial statements at more than the highest amount
government regulations. IAS 34 applies if an entity using IFRS to be recovered through its use or sale. If the carrying
Standards in its annual financial statements publishes an amount exceeds the recoverable amount, the asset is
interim financial report that asserts compliance with IFRS described as impaired. The entity must reduce the carrying
Standards. amount of the asset to its recoverable amount, and recognise
an impairment loss. IAS 36 also applies to groups of assets
IAS 34 prescribes the minimum content of such an interim
that do not generate cash flows individually (known as cash-
financial report. It also specifies the accounting recognition
generating units).
and measurement principles applicable to an interim financial
report. IAS 36 applies to all assets except those for which other
Standards address impairment. The exceptions include
The minimum content is a set of condensed financial
inventories, deferred tax assets, assets arising from employee
statements for the current period and comparative prior
benefits, financial assets within the scope of IFRS 9,
period information, ie statement of financial position,
investment property measured at fair value, biological assets
statement of comprehensive income, statement of cash
within the scope of IAS 41, some assets arising from
flows, statement of changes in equity, and selected
insurance contracts, and non-current assets held for sale.
explanatory notes. In some cases, a statement of financial
position at the beginning of the prior period is also required. The recoverable amount of the following assets in the scope of
Generally, information available in the entity’s most recent IAS 36 must be assessed each year: intangible assets with
annual report is not repeated or updated in the interim indefinite useful lives; intangible assets not yet available for
report. The interim report deals with changes since the end of use; and goodwill acquired in a business combination. The
the last annual reporting period. recoverable amount of other assets is assessed only when
there is an indication that the asset may be impaired.
The same accounting policies are applied in the interim report
Recoverable amount is the higher of (a) fair value less costs to
as in the most recent annual report, or special disclosures are
sell and (b) value in use.
required if an accounting policy is changed. Assets and
liabilities are recognised and measured for interim reporting Fair value less costs to sell is the arm’s length sale price
on the basis of information available on a year-to-date basis. between knowledgeable willing parties less costs of disposal.
While measurements in both annual financial statements and The value in use of an asset is the expected future cash flows
interim financial reports are often based on reasonable that the asset in its current condition will produce,
estimates, the preparation of interim financial reports will discounted to present value using an appropriate discount
generally require a greater use of estimation methods than rate. Sometimes, the value in use of an individual asset
annual financial statements. cannot be determined. In that case, recoverable amount is
An interim financial report is a complete or condensed set of determined for the smallest group of assets that generates
financial statements for a period shorter than a financial year. independent cash flows (cash-generating unit). Whether
IAS 34 does not specify which entities must publish an interim goodwill is impaired is assessed by considering the
financial report. That is generally a matter for laws and recoverable amount of the cash-generating unit(s) to which it
government regulations. IAS 34 applies if an entity using IFRS is allocated.
Standards in its annual financial statements publishes an An impairment loss is recognised immediately in profit or loss
interim financial report that asserts compliance with IFRS (or in comprehensive income if it is a revaluation decrease
Standards. under IAS 16 or IAS 38). The carrying amount of the asset (or
IAS 34 prescribes the minimum content of such an interim cash-generating unit) is reduced. In a cash-generating unit,
financial report. It also specifies the accounting recognition goodwill is reduced first; then other assets are reduced pro
and measurement principles applicable to an interim financial rata. The depreciation (amortisation) charge is adjusted in
report. future periods to allocate the asset’s revised carrying amount
over its remaining useful life.
The minimum content is a set of condensed financial
statements for the current period and comparative prior An impairment loss for goodwill is never reversed. For other
period information, ie statement of financial position, assets, when the circumstances that caused the impairment
statement of comprehensive income, statement of cash loss are favourably resolved, the impairment loss is reversed
flows, statement of changes in equity, and selected immediately in profit or loss (or in comprehensive income if
explanatory notes. In some cases, a statement of financial the asset is revalued under IAS 16 or IAS 38). On reversal, the
position at the beginning of the prior period is also required. asset’s carrying amount is increased, but not above the
Generally, information available in the entity’s most recent amount that it would have been without the prior
annual report is not repeated or updated in the interim impairment loss. Depreciation (amortisation) is adjusted in
report. The interim report deals with changes since the end of future periods.
the last annual reporting period.
The same accounting policies are applied in the interim report IAS 37 Provisions, Contingent Liabilities and Contingent Assets
as in the most recent annual report, or special disclosures are
required if an accounting policy is changed. Assets and IAS 37 defines and specifies the accounting for and disclosure of
liabilities are recognised and measured for interim reporting provisions, contingent liabilities, and contingent assets.
on the basis of information available on a year-to-date basis. Provisions
While measurements in both annual financial statements and
A provision is a liability of uncertain timing or amount. The licences, trademarks, patents, films, copyrights and import
liability may be a legal obligation or a constructive obligation. quotas. Goodwill acquired in a business combination is
A constructive obligation arises from the entity’s actions, accounted for in accordance with IFRS 3 and is outside the
through which it has indicated to others that it will accept scope of IAS 38. Internally generated goodwill is within the
certain responsibilities, and as a result has created an scope of IAS 38 but is not recognised as an asset because it is
expectation that it will discharge those responsibilities. not an identifiable resource.
Examples of provisions may include: warranty obligations;
Expenditure for an intangible item is recognised as an expense,
legal or constructive obligations to clean up contaminated
unless the item meets the definition of an intangible asset,
land or restore facilities; and obligations caused by a retailer’s
and:
policy to make refunds to customers.
 it is probable that there will be future economic benefits from
An entity recognises a provision if it is probable that an outflow
the asset; and
of cash or other economic resources will be required to settle
the provision. If an outflow is not probable, the item is  the cost of the asset can be reliably measured.
treated as a contingent liability.
 The cost of generating an intangible asset internally is often
A provision is measured at the amount that the entity would difficult to distinguish from the cost of maintaining or
rationally pay to settle the obligation at the end of the enhancing the entity’s operations or goodwill. For this reason,
reporting period or to transfer it to a third party at that time. internally generated brands, mastheads, publishing titles,
Risks and uncertainties are taken into account in measuring a customer lists and similar items are not recognised as
provision. A provision is discounted to its present value. intangible assets. The costs of generating other internally
generated intangible assets are classified into whether they
IAS 37 elaborates on the application of the recognition and
arise in a research phase or a development phase. Research
measurement requirements for three specific cases:
expenditure is recognised as an expense. Development
 future operating losses—a provision cannot be expenditure that meets specified criteria is recognised as the
recognised because there is no obligation at the end of the cost of an intangible asset.
reporting period;  Intangible assets are measured initially at cost. After initial
recognition, an entity usually measures an intangible asset at
 an onerous contract gives rise to a provision; and
cost less accumulated amortisation. It may choose to
 a provision for restructuring costs is recognised measure the asset at fair value in rare cases when fair value
only when the entity has a constructive obligation because can be determined by reference to an active market.
the main features of the detailed restructuring plan have  An intangible asset with a finite useful life is
been announced to those affected by it. amortised and is subject to impairment testing. An intangible
asset with an indefinite useful life is not amortised, but is
 Contingent liabilities
tested annually for impairment. When an intangible asset is
 Contingent liabilities are possible obligations
disposed of, the gain or loss on disposal is included in profit
whose existence will be confirmed by uncertain future events
or loss.
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
IAS 39 Financial Instruments: Recognition and Measurement
when it is not probable that settlement will be needed.
 Contingent liabilities also include obligations that are not IAS 39 was superseded by IFRS 9 subject to:
recognised because their amount cannot be measured
 the accounting policy choice about whether or
reliably or because settlement is not probable. Contingent
not to continue applying the hedge accounting requirements
liabilities do not include provisions for which it is certain that
in IAS 39 in accordance with paragraph 7.2.21 or paragraph
the entity has a present obligation that is more likely than not
6.1.3 of IFRS 9; and
to lead to an outflow of cash or other economic resources,
even though the amount or timing is uncertain.  the temporary exemption in paragraph 20A of
 A contingent liability is not recognised in the IFRS 4 that provides a temporary exemption to some insurers
statement of financial position. However, unless the from applying IFRS 9 until they apply IFRS 17.
possibility of an outflow of economic resources is remote, a
IAS 39 establishes principles for recognising and measuring
contingent liability is disclosed in the notes.
financial assets, financial liabilities and some contracts to buy
 Contingent assets
or sell non-financial items. It also prescribes principles for
 Contingent assets are possible assets whose
derecognising financial instruments and for hedge
existence will be confirmed by the occurrence or non-
accounting. The presentation and the disclosure of financial
occurrence of uncertain future events that are not wholly
instruments are the subjects of IAS 32 and IFRS 7 respectively.
within the control of the entity. Contingent assets are not
recognised, but they are disclosed when it is more likely than Recognition and derecognition
not that an inflow of benefits will occur. However, when the
A financial instrument is recognised in the financial statements
inflow of benefits is virtually certain an asset is recognised in
when the entity becomes a party to the financial instrument
the statement of financial position, because that asset is no
contract. An entity removes a financial liability from its
longer considered to be contingent.
statement of financial position when its obligation is
extinguished. An entity removes a financial asset from its
statement of financial position when its contractual rights to
IAS 38 Intangible Assets
the asset’s cash flows expire; when it has transferred the
IAS 38 sets out the criteria for recognising and measuring asset and substantially all the risks and rewards of ownership;
intangible assets and requires disclosures about them. An or when it has transferred the asset, and has retained some
intangible asset is an identifiable non-monetary asset without substantial risks and rewards of ownership, but the other
physical substance. Such an asset is identifiable when it is party may sell the asset. The risks and rewards retained are
separable, or when it arises from contractual or other legal recognised as an asset.
rights. Separable assets can be sold, transferred, licensed, etc.
Examples of intangible assets include computer software,
Measurement  agricultural produce at the point of harvest is also
measured at fair value less costs to sell;
A financial asset or financial liability is measured initially at fair
value. Subsequent measurement depends on the category of  changes in the fair value of biological assets are
financial instrument. Some categories are measured at included in profit or loss; and
amortised cost, and some at fair value. In limited
 biological assets attached to land (for example,
circumstances other measurement bases apply, for example,
trees in a plantation forest) are measured separately from the
certain financial guarantee contracts.
land. 
The fair value of a biological asset or agricultural produce is its
IAS 40 Investment Property market price less any costs to sell the produce. Costs to sell
include commissions, levies, and transfer taxes and duties.
Investment property is land or a building (including part of a
building) or both that is: IAS 41 differs from IAS 20 with regard to recognition of
government grants. Unconditional grants related to biological
 held to earn rentals or for capital appreciation or
assets measured at fair value less costs to sell are recognised
both;
as income when the grant becomes receivable. Conditional
 not owner-occupied; grants are recognised as income only when the conditions
attaching to the grant are met.
 not used in production or supply of goods and
services, or for administration; and
 not held for sale in the ordinary course of IFRS Practice Statement 1: Management Commentary
business. Issued in December 2010, the Practice Statement Management
Investment property may include investment property that is Commentary provides a broad, non-binding framework for
being redeveloped. the presentation of management commentary that relates to
financial statements that have been prepared in accordance
An investment property is measured initially at cost. The cost of
with IFRS Standards.
an investment property interest held under a lease is
measured in accordance with IAS 17 at the lower of the fair Management commentary should provide users of financial
value of the property interest and the present value of the statements with integrated information providing a context
minimum lease payments. for the related financial statements, including the entity's
resources and the claims against the entity and its resources,
For subsequent measurement an entity must adopt either the
and the transactions and other events that change them. It
fair value model or the cost model as its accounting policy for
also provides management with an opportunity to explain its
all investment properties. All entities must determine fair
objectives and its strategies for achieving those objectives.
value for measurement (if the entity uses the fair value
model) or disclosure (if it uses the cost model). Fair value The Practice Statement makes clear that management
reflects market conditions at the end of the reporting period. commentary should be consistent with the following
principles:
Under the fair value model, investment property is remeasured
at the end of each reporting period. Changes in fair value are  Provide management's view of the entity's
recognised in profit or loss as they occur. Fair value is the performance, position and progress (including forward
price at which the property could be exchanged between looking information)
knowledgeable, willing parties in an arm’s length transaction,
 Supplement and complement information
without deducting transaction costs (see IFRS 13).
presented in the financial statements (and possess the
Under the cost model, investment property is measured at cost qualitative characteristics described in the Conceptual
less accumulated depreciation and any accumulated Framework for Financial Reporting).
impairment losses. Fair value is disclosed.
Although the particular focus of management commentary will
Gains and losses on disposal are recognised in profit or loss. 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
IAS 41 Agriculture commentary.

IAS 41 prescribes the accounting treatment, financial statement The Practice Statement has not been updated or amended since
presentation, and disclosures related to agricultural activity. its publication in December 2010. In line with a
Agricultural activity is the management of the biological recommendation by the IFRS Foundation Trustees in their
transformation of biological assets (living animals or plants) latest review of structure and effectiveness (2015-16), the
and harvest of biological assets for sale or for conversion into staff have been monitoring developments in wider corporate
agricultural produce or into additional biological assets. reporting and the implications for the Board. At its November
IAS 41 establishes the accounting treatment for biological assets 2017 meeting, the Board decide to take on a project to revise
during their growth, degeneration, production and and update the Practice Statement.
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, IFRS Practice Statement 2: Making Materiality Judgements
processing grapes into wine, or wool into yarn). IAS 41
IFRS Practice Statement 2: Making Materiality
contains the following accounting requirements:
Judgements (Practice Statement) provides companies with
 bearer plants are accounted for using IAS 16; guidance on how to make materiality judgements when
preparing their general purpose financial statements in
 other biological assets are measured at fair value
accordance with IFRS Standards.
less costs to sell;
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.