INTERNATIONAL FINANCIAL REPORTING

STANDARDS (CHUẨN MỰC BÁO CÁO TÀI

CHÍNH QUỐC TẾ)

Copyright: Faculty of Accounting- Academy of Finance 1

 INTRODUCTION
1. Objectives:

üProvide the learner know how to understand IFRSs

üApplying IFRSs in preparing FS.

Copyright: Faculty of Accounting- Academy of Finance 2

 INTRODUCTION
2. Learning materials:

IFRS.ORG
IASPLUS.COM
ACCA FR STUDY TEXT, FR REVISION KIT
BIG 4 WEBSITES…
https://www.cpdbox.com/ifrs/
https://tuonthi.com
https://opentuition.com

Copyright: Faculty of Accounting- Academy of Finance 3

CONCEPTUAL FRAMEWORK
 STANDARDS IN ISSUE
IFRS 1 First-time Adoption of International Financial Reporting Standards
IFRS 2 Share-based Payment
IFRS 3 Business Combinations
IFRS 4 Insurance Contracts**
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
IFRS 6 Exploration for and Evaluation of Mineral Resources
IFRS 7 Financial Instruments: Disclosures
IFRS 8 Operating Segments
IFRS 9 Financial Instruments
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IFRS 14 Regulatory Deferral Accounts
IFRS 15 Revenue from Contracts with Customers

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 STANDARDS IN ISSUE
IFRS 16 Leases
IFRS 17 Insurance Contracts
IFRS 18 Presentation and Disclosure in Financial Statements
IFRS 19 Subsidiaries without Public Accountability
IFRS for SMEs
IAS 1 Presentation of Financial Statements
IAS 2 Inventories
IAS 7 Statement of Cash Flows
IAS 8 Accounting Policies, Changes in Accounting Estimates and
IAS 10 Errors Events After the Reporting Period
IAS 12 Income Taxes
IAS 16 Property, Plant and Equipment
IAS 19 Employee Benefits
IAS 20 Accounting for Government Grants and Disclosure of Government
IAS 21 The Effects of Changes in Foreign Exchange Rates
IAS 23 Borrowing Costs

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 STANDARDS IN ISSUE

IAS 24 Related Party Disclosures

IAS 26 Accounting and Reporting by Retirement Benefit Plans
IAS 27 Separate Financial Statements (revised 2011)
IAS 28 Investments in Associates and Joint Ventures (revised 2011)
IAS 29 Financial Reporting in Hyperinflationary Economies
IAS 32 Financial Instruments: Presentation
IAS 33 Earnings Per Share
IAS 34 Interim Financial Reporting
IAS 36 Impairment of Assets
IAS 37 Provisions, Contingent Liabilities and Contingent Assets
IAS 38 Intangible Assets
IAS 40 Investment Property
IAS 41 Agriculture

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WHAT IS THE CONCEPTUAL FRAMEWORK?

A practical tool that assists

Board Preparers All

• to develop • to develop • to understand
Standards consistent and interpret
accounting Standards
policies
Addresses fundamental issues
What are assets, liabilities,
What is the What makes equity, income and
objective of financial expenses, when should they
financial information be recognised and how
reporting? useful? should they be measured,
presented and disclosed?

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CONCEPTUAL FRAMEWORK

Purpose

Development of future IFRSs

Promoting harmonization
Assist national standard-setting bodies
Preparers of financial statements
Assist auditors
Assist in interpreting the information in F/s

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Why did we revise the Conceptual Framework?

Previous version of Conceptual Framework

useful but some improvements needed

incomplete out of date unclear

Main improvements

Filled in the gaps, for

example, concepts on Updated, for example, Clarified, for example,
measurement and the definitions of an the roles of
presentation and asset and a liability stewardship and
disclosure, including and recognition criteria prudence in financial
guidance on the use of reporting
profit or loss and OCI

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 CONCEPTUAL FRAMEWORK

Framework deals with: The objective of financial statements

The Conceptual

The qualitative characteristics that determine

the usefulness of information in financial
statements.
The definition, recognition and measurement
of the elements from which financial
statements are constructed

Concepts of capital and capital maintenance

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 OBJECTIVE OF FINANCIAL REPORTING
Provide financial information useful to users in making
decisions

Users’ decisions involve decisions about

buying, holding or providing or settling voting and influencing
selling loans management

To make these decisions, users assess

prospects for future net cash management’s stewardship of the
inflows to the entity entity’s economic resources

To make both these assessments, users need information

about both
economic resources, claims and how efficiently and effectively
changes in those resources and management has discharged its
claims responsibilities

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 QUALITATIVE CHARACTERISTICS

Fundamental qualitative characteristics

Relevance Faithful representation

• Information is relevant if it is
• Information must faithfully
capable of making a difference represent the substance of
to the decisions made by
what it purports to represent
users
Enhancing characteristics

Comparability Verifiability Timeliness Understandability

Cost constraint

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Clarifying aspects of faithful representation

• Exercise of caution under conditions of uncertainty

• Does not allow for overstatement or understatement
Prudence of assets, liabilities, income or expenses
• Supports neutrality

• Arises when monetary amounts cannot be

observed directly and need to be estimated
Measurement • Does not prevent information from being useful
uncertainty • If very high, may affect whether a sufficiently
faithful representation can be achieved

• Economic substance of the underlying economic

Substance phenomenon is normally the same as the legal
form
over form • If not, need to represent the substance to provide
faithful representation

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 Elements of financial statements —
assets, liabilities and equity

• Relate to financial position

A present economic resource controlled by the entity as
a result of past events
Asset • An economic resource is a right that has the
potential to produce economic benefits

A present obligation of the entity to transfer an

economic resource as a result of past events
Liability • An obligation is a duty or responsibility that the
entity has no practical ability to avoid

The residual interest in the assets of the entity after

deducting all its liabilities
Equity • Financial Instruments with Characteristics of Equity
research project further explores how to distinguish
liabilities from equity

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 Which of the following would be classified as a
liability?
• A. Dexter's business manufactures a product under licence. In 12
months' time the licence expires and Dexter will have to pay
$50,000 for it to be renewed.

• B. Reckless purchased an investment 9 months ago for $120,000.

The market for these investments has now fallen and Reckless's
investment is valued at $90,000.

• C. Carter has estimated the tax charge on its profits for the year
just ended as $165,000.

• D. Expansion is planning to invest in new machinery and has been

quoted a price of $570,000.

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 Elements of financial statements—
income and expenses

• Relate to financial performance

Increases in assets, or decreases in liabilities,
Income that result in increases in equity, other than
those relating to contributions from holders of
equity claims

Decreases in assets, or increases in liabilities,

Expenses that result in decreases in equity, other than
those relating to distributions to holders of
equity claims

Information about income and expenses is just as important

as information about assets and liabilities

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 RECOGNITION

Recognition criteria

Relevance Faithful representation

Whether recognition of an item Whether recognition of an item
results in relevant information may results in a faithful representation
be affected by, for example: may be affected by, for example:
• low probability of a flow of • measurement uncertainty
economic benefits • recognition inconsistency
• existence uncertainty • presentation and disclosure of
resulting income, expenses and
changes in equity
Cost constraint

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 CONCEPTUAL FRAMEWORK (OLD)
Item Recognised in When
Asset The statement of It is probable that the future economic benefits
financial position will flow to the entity and the asset has a cost or
value that can be measured reliably
Liability The statement of It is probable that an outflow of resources
financial position embodying economic benefits will result from the
settlement of a present obligation and the
amount at which the settlement will take place
can be measured reliably
Income The statement of An increase in future economic benefits related
profit or loss and to an increase in an asset or a decrease of a
other comprehensive liability has arisen that can be measured reliably
income
Expenses The statement of A decrease in future economic benefits related to
profit or loss and a decrease in an asset or an increase of a
other comprehensive liability has arisen that can be measured reliably
income

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 EXERCISE 1
• State which of the following items could appear as an asset on the
balance sheet of business A. Explain your reasoning in each case
a. $1,000 owing to business A by a customer who will never be able to
pay
b. The purchase of a license from business B giving business A the right
to produce a product designed by B. Production of this new product is
expected to increase profits over the period in which business A holds
the license
c. The hiring by business A of a new marketing director who is
confidently expected to increase profits by at least 30% over the next
three years
d. The purchase by business A of a machine which will save $10,000 per
annum. It is currently being used by business A but it has been acquired
on credit and is not yet fully paid for

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 EXERCISE 2
• State which of the following items could appear as a liability on the
balance sheet of a business. Explain your reasoning in each case
a. $2,000 owing to business B for the satisfactory supply of goods during
the past month
b. Magazine subscription worth $27,400 have been received in advance by
a publisher
c. The business has guaranteed a manager’s personal loan from a bank of
$100,000. The manager has maintained the account in good order and
$79,000 us currently owing
d. There is a legal claim against the business for negligence over faulty
workmanship. It is probable the business will settle out of court for
$50,000

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 MEASUREMENT

Historical cost Current value

measurement bases measurement bases
• include amortised cost • include fair value, value in use (A),
fulfilment value (L) and current cost

Selecting a measurement basis

Relevance Faithful representation

• characteristics of the asset or liability • measurement inconsistency
• contribution to future cash flows • measurement uncertainty

Information in both the statement of financial position and the

statement(s) of financial performance

Enhancing qualitative characteristics and cost constraint

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EXAMPLE:
A machine was purchased on 1 Jan X8 for $3m. Historical cost is:
$__________

It has useful life of 10 years and under the historical cost convention,
it will be carried at original cost less accumulated depreciation. So in
the FSs at 31 Dec X9, it will be carried at: $___________

The two-year-old machine like this one may currently be changing

hands for $2.5m. This is called ________ and the current cost is
$_______

If the machine will be expected to generate $500,000 per annum for

the remaining 8 years of its life and if the company’s cost of capital is
10%. The present value is $___________ (cumulative present of $1
per annum for 8 years discounted at 10%)

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 PROFIT OR LOSS AND OCI

Statement of • Primary source of information about

profit or loss performance
• Default location for income and expenses

Other • Exceptional circumstances

• Only changes in current values of assets
comprehensive and liabilities
income • In principle, OCI items are recycled

Classification into profit or loss and OCI and recycling

Relevance Faithful representation

Only the Board can take decisions on OCI and recycling

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 CONCEPTUAL FRAMEWORK
Capital maintenance
Capital maintenance is a theoretical concept which tries to
ensure that excessive dividends are not paid in times of
changing prices.

• Physical capital maintenance (PCM),

• Financial capital maintenance (FCM).

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