ifrs pocket guide

7/29/2019 Ifrs Pocket Guide

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IFRS pocket guide

2012

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IFRS pocket guide 2012

Introduction

Introduction

This pocket guide provides a summary o the recognition and measurement

requirements o International Financial Reporting Standards (IFRS) issued upto August 2012. It does not address in detail the disclosure requirements; these

can be ound in the PwC publication IFRS disclosure checklist 2012.

The inormation in this guide is arranged in six sections:

Accountingprinciples.

Incomestatementandrelatednotes.

Balancesheetandrelatednotes. Consolidatedandseparatenancialstatements.

Othersubjects.

Industry-specictopics.

More detailed guidance and inormation on these topics can be ound in theIFRS manual o accounting 2013 and other PwC publications. A list o PwCs

IFRS publications is provided on the inside ront and back covers.


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Contents

i

Contents

Accounting rules and principles 11. Introduction 1

2. Accounting principles and applicability o IFRS 1

3. First-timeadoptionofIFRSIFRS1 2

4. PresentationofnancialstatementsIAS1 3

5. Accountingpolicies,accountingestimatesanderrorsIAS8 7

6. FinancialinstrumentsIFRS9,IFRS7,IAS32,IAS39,IFRIC19 8

7. ForeigncurrenciesIAS21,IAS29 18

8. InsurancecontractsIFRS4 19

9. RevenueIAS18,IAS11,IAS20 2010. SegmentreportingIFRS8 23

11. EmployeebenetsIAS19 23

12. Share-basedpaymentIFRS2 26

13. TaxationIAS12 27

14. EarningspershareIAS33 29

Balancesheetandrelatednotes 30

15. IntangibleassetsIAS38 30

16. Property,plantandequipmentIAS16 31

17. InvestmentpropertyIAS40 32

18. ImpairmentofassetsIAS36 33

19. LeaseaccountingIAS17 34

20. InventoriesIAS2 35

21. ProvisionsandcontingencesIAS37 36

22. EventsafterthereportingperiodandnancialcommitmentsIAS10 38

23. Sharecapitalandreserves 39


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Contents

ii

Consolidatedandseparatenancialstatements 41

24. ConsolidatedandseparatenancialstatementsIAS27 41

24A.ConsolidatednancialstatementsIFRS10 42

25. BusinesscombinationsIFRS3 44

26. Disposalsofsubsidiaries,businessesandnon-currentassetsIFRS5 46

27. EquityaccountingIAS28 48

28. InterestsinjointventuresIAS31 49

28A.JointarrangementsIFRS11 50

Othersubjects 51

29. Related-partydisclosuresIAS24 51

30. CashowstatementsIAS7 52

31. InterimreportsIAS34 53

32. ServiceconcessionarrangementsSIC29,IFRIC12 54

33. RetirementbenetplansIAS26 55

34. FairvaluemeasurementIFRS13 56

Industry-specictopics 57

35. AgricultureIAS41 57

36. ExtractiveindustriesIFRS6,IFRIC20 58

Index by standards and interpretation 61


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Accounting rules and principles

1 IFRS pocket guide 2012


1 Introduction

Therehavebeenmajorchangesinnancialreportinginrecentyears.Most

obvious is the continuing adoption o IFRS worldwide. Many territories havebeen using IFRS or some years, and more are planning to come on stream

rom 2012. For the latest inormation on countries transition to IFRS, visit

pwc.com/usirs and see Interactive IFRS adoption by country map.

An important recent development is the extent to which IFRS is aected by

politics. The issues with Greek debt, the problems in the banking sector andthe attempts o politicians to resolve these questions have resulted in

pressureonstandard-setterstoamendtheirstandards,primarilythoseon

nancialinstruments.Thispressureisunlikelytodisappear,atleastinthe

shortterm.TheIASBisworkinghardtorespondtothis;wecanthereforeexpect a continued stream o changes to the standards in the next ew months

and years.

2 Accounting principles and applicability o IFRS

TheIASBhastheauthoritytosetIFRSsandtoapproveinterpretationsof

those standards.

IFRSsareintendedtobeappliedbyprot-orientatedentities.Theseentities

nancialstatementsgiveinformationaboutperformance,positionandcashowthatisusefultoarangeofusersinmakingnancialdecisions.These

users include shareholders, creditors, employees and the general public. A

completesetofnancialstatementsincludesa: balancesheet(statementofnancialposition);

statementofcomprehensiveincome; statementofcashows;

adescriptionofaccountingpolicies;and

notestothenancialstatements.

The concepts underlying accounting practices under IFRS are set out in the

IASBsConceptualFrameworkforFinancialReportingissuedinSeptember

2010 (the Framework).


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2IFRS pocket guide 2012

3 First-time adoption o IFRS IFRS 1

An entity moving rom national GAAP to IFRS should apply the requirements

ofIFRS1.ItappliestoanentitysrstIFRSnancialstatementsandtheinterimreportspresentedunderIAS34,Interimnancialreporting,thatarepartofthatperiod.Italsoappliestoentitiesunderrepeatedrst-time

application. The basic requirement is or ull retrospective application o all

IFRSs eective at the reporting date. However, there are a number o

optional exemptions and mandatory exceptions to the requirement or

retrospective application.

TheexemptionscoverstandardsforwhichtheIASBconsidersthat

retrospectiveapplicationcouldprovetoodifcultorcouldresultinacostlikelytoexceedanybenetstousers.Theexemptionsareoptional.Any,all

or none o the exemptions may be applied. The optional exemptions relate to: businesscombinations;

deemedcost;

employeebenets;

cumulativetranslationdifferences;

compoundnancialinstruments;

assetsandliabilitiesofsubsidiaries,associatesandjointventures; designationofpreviouslyrecognisednancialinstruments;

share-basedpaymenttransactions;

fairvaluemeasurementofnancialassetsornancialliabilitiesatinitial

recognition; insurancecontracts;

decommissioningliabilitiesincludedinthecostofproperty,plantand

equipment;

leases;

serviceconcessionarrangements; borrowingcosts;

investmentsinsubsidiaries,jointlycontrolledentitiesandassociates;

transfersofassetsfromcustomer;

extinguishingnancialliabilitieswithequityinstruments;

severehyperination; jointarrangements;and

strippingcosts.


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3 IFRS pocket guide 2012

The exceptions cover areas in which retrospective application o the IFRS

requirements is considered inappropriate. The ollowing exceptions are

mandatory, not optional:

hedgeaccounting; derecognitionofnancialassetsandliabilities;

estimates;

non-controllinginterests; classicationandmeasurementofnancialassets;

embeddedderivatives;and

governmentloans.

Comparative inormation is prepared and presented on the basis o IFRS.

Almostalladjustmentsarisingfromtherst-timeapplicationofIFRSareagainstopeningretainedearningsoftherstperiodthatispresentedonan

IFRS basis.

Certain reconciliations rom previous GAAP to IFRS are also required.

4 Presentation o nancial statements IAS 1

Theobjectiveofnancialstatementsistoprovideinformationthatisusefulinmakingeconomicdecisions.IAS1sobjectiveistoensurecomparability

ofpresentationofthatinformationwiththeentitysnancialstatementsofpreviousperiodsandwiththenancialstatementsofotherentities.

Financial statements are prepared on a going concern basis unless

management intends either to liquidate the entity or to cease trading, or

has no realistic alternative but to do so. Management prepares itsnancialstatements,exceptforcashowinformation,undertheaccrual

basis o accounting.

Thereisnoprescribedformatforthenancialstatements.However,there

are minimum disclosures to be made in the primary statements and thenotes. The implementation guidance to IAS 1 contains illustrative examples

o acceptable ormats.

Financial statements disclose corresponding inormation or the preceding

period (comparatives) unless a standard or interpretation permits or

requires otherwise.


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4

Statement o nancial position (balance sheet)

Thestatementofnancialpositionpresentsanentitysnancialpositionata

specicpointintime.Subjecttomeetingcertainminimumpresentationand

disclosurerequirements,managementmayuseitsjudgementregardingthe

orm o presentation, such as whether to use a vertical or a horizontal ormat,whichsub-classicationstopresentandwhichinformationtodiscloseinthe

primary statement or in the notes.

The ollowing items, as a minimum, are presented on the balance sheet:

Assetsproperty,plantandequipment;investmentproperty;intangibleassets;nancialassets;investmentsaccountedforusingtheequity

method; biological assets; deerred tax assets; current tax assets;inventories; trade and other receivables; and cash and cash equivalents.

Equityissuedcapitalandreservesattributabletotheparentsowners;

andnon-controllinginterest. Liabilitiesdeferredtaxliabilities;currenttaxliabilities;nancial

liabilities; provisions; and trade and other payables.

Assetsandliabilitiesheldforsalethetotalofassetsclassiedasheld

forsaleandassetsincludedindisposalgroupsclassiedasheldforsale;

andliabilitiesincludedindisposalgroupsclassiedasheldforsalein

accordancewithIFRS5,Non-currentassetsheldforsaleand discontinued operations.

Currentandnon-currentassetsandcurrentandnon-currentliabilitiesare

presentedasseparateclassicationsinthestatementunlesspresentationbasedon liquidity provides inormation that is reliable and more relevant.

Statement o comprehensive income

The statement o comprehensive income presents an entitys perormanceoveraspecicperiod.Entitieshaveachoiceofpresentingthisinasinglestatement or as two statements. The statement o comprehensive income

underthesingle-statementapproachincludesallitemsofincomeand

expense and includes each component o other comprehensive income.

Underthetwo-statementapproach,allcomponentsofprotorlossare

presented in an income statement, ollowed immediately by a statement ocomprehensiveincome.Thisbeginswiththetotalprotorlossfortheperiod,

displays all components o other comprehensive income and ends with total

comprehensive income or the period.


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Items to be presented in statement o comprehensive income

The ollowing items, as a minimum, are presented in the statement o

comprehensive income:

revenue;

nancecosts; shareoftheprotorlossofassociatesandjointventuresaccountedfor

using the equity method;

taxexpense;

post-taxprotorlossofdiscontinuedoperationsaggregated,withany

post-taxgainorlossrecognisedonthemeasurementtofairvalueless costs to sell (or on the disposal) o the assets or disposal group(s)

constituting the discontinued operation; protorlossfortheperiod;

eachcomponentofothercomprehensiveincomeclassiedbynature;

shareoftheothercomprehensiveincomeofassociatesandjointventuresaccounted or using the equity method; and

totalcomprehensiveincome.

Protorlossfortheperiodandtotalcomprehensiveincomeareallocatedin

thestatementofcomprehensiveincometotheamountsattributabletonon-

controlling interest and to the parents owners.

Additionallineitemsandsub-headingsarepresentedinthisstatement

when such presentation is relevant to an understanding o the entitys

nancialperformance.

Material items

The nature and amount o items o income and expense are disclosed

separately, where they are material. Disclosure may be in the statement or inthenotes.Suchincome/expensesmightincluderestructuringcosts;write-downs o inventories or property, plant and equipment; litigation settlements;

andgainsorlossesondisposalsofnon-currentassets.

Other comprehensive income

An entity presents each component o other comprehensive income in thestatement either (a) net o its related tax eects, or (b) beore its related tax

eects, with the aggregate tax eect o these components shown separately.


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6

TheIASBissuedPresentationofitemsofothercomprehensiveincome

(AmendmentstoIAS1)inJune2011.Thisrequiresitemsofother

comprehensiveincometobegroupedintothosethatwillbereclassied

subsequentlytoprotorlossandthosethatwillnotbereclassied.Theamendmentiseffectiveforannualperiodsbeginningonorafter1July2012.

Statement o changes in equity

The ollowing items are presented in the statement o changes in equity:

totalcomprehensiveincomefortheperiod,showingseparatelythetotal

amountsattributabletotheparentsownersandtonon-controlling

interest;

foreachcomponentofequity,theeffectsofretrospectiveapplicationorretrospectiverestatementrecognisedinaccordancewithIAS8,Accounting

policies, changes in accounting estimates, and errors; and

foreachcomponentofequity,areconciliationbetweenthecarrying

amount at the beginning and the end o the period, separately disclosing

changes resulting rom: protorloss;

othercomprehensiveincome;and

transactionswithownersintheircapacityasowners,showing

separately contributions by and distributions to owners and changes inownership interests in subsidiaries that do not result in a loss o control.

Statement o cash fows

Cash fow statements are addressed in Section 30 dealing with the

requirementsofIAS7.

Notes to the nancial statements

Thenotesareanintegralpartofthenancialstatements.Notesprovide

inormation additional to the amounts disclosed in the primary

statements. They include accounting policies and critical accounting

estimatesandjudgements.


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5 Accounting policies, accounting estimates and errors IAS 8

An entity ollows the accounting policies required by IFRS that are relevant

to the particular circumstances o the entity. However, or some situations,standards oer a choice; there are other situations where no guidance isgiven by IFRSs. In these situations, management should select appropriate

accounting policies.

Managementusesitsjudgementindevelopingandapplyinganaccounting

policy that results in inormation that is relevant and reliable. Reliableinormation demonstrates the ollowing qualities: aithul representation,

substance over orm, neutrality, prudence and completeness. I there is no

IFRSstandardorinterpretationthatisspecicallyapplicable,managementshould consider the applicability o the requirements in IFRS on similar and

relatedissues,andthenthedenitions,recognitioncriteriaandmeasurementconcepts or assets, liabilities, income and expenses in the Framework.

Management may also consider the most recent pronouncements o other

standard-settingbodies,otheraccountingliteratureandacceptedindustry

practices, where these do not confict with IFRS.

Accounting policies should be applied consistently to similar transactionsand events.

Changes in accounting policies

Changes in accounting policies made on adoption o a new standard areaccounted or in accordance with the transition provisions (i any) within

thatstandard.Ifspecictransitionprovisionsdonotexist,achangeinpolicy

(whether required or voluntary) is accounted or retrospectively (that is, by

restatingallcomparativegurespresented)unlessthisisimpracticable.

Issue o new/revised standards not yet eective

Standards are normally published in advance o the required implementation

date. In the intervening period, where a new/revised standard that is relevant

to an entity has been issued but is not yet eective, management discloses this

act. It also provides the known or reasonably estimable inormation relevantto assessing the impact that the application o the standard might have on the

entitysnancialstatementsintheperiodofinitialrecognition.


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8

Changes in accounting estimates

An entity recognises prospectively changes in accounting estimates by including

theeffectsinprotorlossintheperiodthatisaffected(theperiodofthe

change and uture periods), except i the change in estimate gives riseto changes in assets, liabilities or equity. In this case, it is recognised by

adjustingthecarryingamountoftherelatedasset,liabilityorequityinthe

period o the change.

Errors

Errors may arise rom mistakes and oversights or misinterpretation o

information.Errorsthatarediscoveredinasubsequentperiodareprior-period

errors.Materialprior-perioderrorsareadjustedretrospectively(thatis,byrestatingcomparativegures)unlessthisisimpracticable.

6 Financial instruments IAS 32, IAS 39, IFRS 7, IFRS 9, IFRIC 19

Objectives and scope

Financial instruments are addressed in these standards:

IAS32,Financialinstruments:Presentation,whichdealswithdistinguishing debt rom equity and with netting;

IAS39,Financialinstruments:Recognitionandmeasurement;

IFRS7,Financialinstruments:Disclosure;and

IFRS9,Financialinstruments.

Theobjectiveofthestandardsistoestablishrequirementsforallaspectsof

accountingfornancialinstruments,includingdistinguishingdebtfrom

equity, netting, recognition, derecognition, measurement, hedge accounting

and disclosure.

Thestandardsscopesarebroad.Thestandardscoveralltypesofnancial

instrument, including receivables, payables, investments in bonds and shares,

borrowings and derivatives. They also apply to certain contracts to buy or sell

non-nancialassets(suchascommodities)thatcanbenet-settledincashoranothernancialinstrument.


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InNovember2009,theIASBpublishedtherstpartofitsthree-stageproject

toreplaceIAS39,intheformofanewstandardIFRS9.TheIASBupdated

IFRS9inOctober2010toincludeguidanceonclassicationandmeasurement

ofnancialliabilitiesandonderecognitionofnancialinstruments.Thisrstphasedealswiththeclassicationandmeasurementofnancialassetsand

nancialliabilities.

InNovember2011,theIASBdecidedtoconsidermakinglimitedmodicationstotherequirementsinIFRS9forclassifyingandmeasuringnancialassets

todealwithspecicapplicationissuesandtheinteractionwiththeinsurance

projectandtotrytoachieveconvergencewithproposalsbeingdevelopedby

theFASB.Anexposuredraftonthesemodicationsisexpectedtobeissuedin

late2012;theseproposalsarenotthereforecurrentlyincludedwithinIFRS9.

InDecember2011,theBoardamendedIFRS9todeferthemandatory

effectivedatefrom1January2013toannualperiodsbeginningonorafter

1January2015.EarlyapplicationofIFRS9willcontinuetobepermitted.

IFRS9hasnotyetbeenendorsedforuseintheEU.TheBoardalsoamendedthe transition provisions to provide relie rom restating comparative

informationandintroducednewdisclosurestohelpusersofnancial

statementsunderstandtheeffectofmovingtotheIFRS9classicationand

measurement model.

IFRS9replacesthemultipleclassicationandmeasurementmodelsfor

nancialassetsinIAS39withasinglemodelthathasonlytwoclassication

categories:amortisedcostandfairvalue.ClassicationunderIFRS9isdriven

bytheentitysbusinessmodelformanagingthenancialassetsandthe

contractualcharacteristicsofthenancialassets.

Anancialassetismeasuredatamortisedcostiftwocriteriaaremet:

Theobjectiveofthebusinessmodelistoholdthenancialassetforthe

collection o the contractual cash fows; and

Thecontractualcashowsundertheinstrumentsolelyrepresentpaymentso principal and interest.

IFRS9removestherequirementtoseparateembeddedderivativesfrom

nancialassethosts.Itrequiresahybridcontracttobeclassiedinitsentirety

at either amortised cost or air value.


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Two o the existing three air value option criteria become obsolete under

IFRS9,asafairvaluedrivenbusinessmodelrequiresfairvalueaccounting,

andhybridcontractsareclassiedintheirentiretyatfairvalue.Theremaining

fairvalueoptionconditioninIAS39iscarriedforwardtothenewstandardthatis,managementmaystilldesignateanancialassetasatfairvalue

throughprotorlossoninitialrecognitionifthissignicantlyreducesan

accountingmismatch.Thedesignationatfairvaluethroughprotorlosswillcontinue to be irrevocable.

IFRS9prohibitsreclassicationsexceptinrarecircumstanceswhentheentitys

business model changes.

Thereisspecicguidanceforcontractuallylinkedinstrumentsthatcreateconcentrations o credit risk, which is oten the case with investment tranches

in a securitisation.

IFRS9sclassicationprinciplesindicatethatallequityinvestmentsshould

be measured at air value. However, management has an option to present inothercomprehensiveincome(OCI)unrealisedandrealisedfairvaluegains

and losses on equity investments that are not held or trading.

IFRS9removesthecostexemptionforunquotedequitiesandderivativesonunquoted equities but provides guidance on when cost may be an appropriateestimate o air value.

TheclassicationandmeasurementofnancialliabilitiesunderIFRS9

remainsthesameasinIAS39,exceptwhereanentityhaschosentomeasure

anancialliabilityatfairvaluethroughprotorloss.Forsuchliabilities,

changes in air value related to changes in own credit risk are presentedseparatelyinOCI.

AmountsinOCIrelatingtoowncreditarenotrecycledtotheincome

statement even when the liability is derecognised and the amounts are

realised. However, the standard does allow transers within equity.

Entitiesarestillrequiredtoseparatederivativesembeddedinnancial

liabilities where they are not closely related to the host contract.


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Nature and characteristics o nancial instruments

Financial instruments include a wide range o assets and liabilities, such as

tradedebtors,tradecreditors,loans,nanceleasereceivablesandderivatives.

TheyarerecognisedandmeasuredaccordingtoIAS39srequirementsandaredisclosedinaccordancewithIFRS7.

Financial instruments represent contractual rights or obligations to receive or

paycashorothernancialassets.Non-nancialitemshaveamoreindirect,

non-contractualrelationshiptofuturecashows.

Anancialassetiscash;acontractualrighttoreceivecashoranothernancial

asset;acontractualrighttoexchangenancialassetsorliabilitieswithanother entity under conditions that are potentially avourable; or an equity

instrument o another entity.

Anancialliabilityisacontractualobligationtodelivercashoranother

nancialasset;ortoexchangenancialinstrumentswithanotherentityunder

conditions that are potentially unavourable.

An equity instrument is any contract that evidences a residual interest in the

entitys assets ater deducting all o its liabilities.

Aderivativeisanancialinstrumentthatderivesitsvaluefromanunderlying

price or index; requires little or no initial net investment; and is settled at a

uture date.

Embedded derivatives in host contracts

Somenancialinstrumentsandothercontractscombineaderivativeand

anon-derivativeinasinglecontract.Thederivativepartofthecontractisreerred to as an embedded derivative. Its eect is that some o the contractscashowsvaryinasimilarwaytoastand-alonederivative.Forexample,the

principal amount o a bond may vary with changes in a stock market index. In

this case, the embedded derivative is an equity derivative on the relevant stock

market index.

Embedded derivatives that are not closely related to the rest o the contract

areseparatedandaccountedforasstand-alonederivatives(thatis,measured

atfairvalue,generallywithchangesinfairvaluerecognisedinprotorloss).An embedded derivative is not closely related i its economic characteristics


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andrisksaredifferentfromthoseoftherestofthecontract.IAS39setsout

many examples to help determine when this test is (and is not) met.

Analysing contracts or potential embedded derivatives is one o the morechallengingaspectsofIAS39.

Classication o nancial instruments

ThewaythatnancialinstrumentsareclassiedunderIAS39driveshow

they are subsequently measured and where changes in measurement are

accounted or.

Undernancialinstrumentsaccounting,priortotheimpactofIFRS9,therearefourclassesofnancialasset(underIAS39):fairvaluethroughprotor

loss, held to maturity, loans and receivables and available or sale. The actors

totakeintoaccountwhenclassifyingnancialassetsinclude:

Arethecashowsarisingfromtheinstrumentxedordeterminable?Does

theinstrumenthaveamaturitydate? Aretheassetsheldfortrading?Doesmanagementintendtoholdthe

instrumentstomaturity?

Istheinstrumentaderivative,ordoesitcontainanembeddedderivative?

Istheinstrumentquotedonanactivemarket? Hasmanagementdesignatedtheinstrumentintoaparticularclassication

atinception?

Financialliabilitiesareatfairvaluethroughprotorlossiftheyare

designatedassuch(subjecttovariousconditions),iftheyareheldfortrading

oriftheyarederivatives(exceptforaderivativethatisanancialguaranteecontract or a designated and eective hedging instrument). They are

otherwiseclassiedasotherliabilities.

Financial assets and liabilities are measured either at air value or at amortised

cost,dependingontheirclassication.Changesaretakentoeithertheincomestatement or to other comprehensive income.

Reclassicationofnancialassetsfromonecategorytoanotherispermitted

under limited circumstances. Various disclosures are required where a

reclassicationhasbeenmade.Derivativesandassetsdesignatedasatfair

valuethroughprotorlossunderthefairvalueoptionarenoteligiblefor

thisreclassication.


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Financial liabilities and equity

Theclassicationofanancialinstrumentbytheissueraseitheraliability

(debt)orequitycanhaveasignicantimpactonanentitysgearing(debt-

to-equityratio)andreportedearnings.Itcouldalsoaffecttheentitysdebtcovenants.

The critical eature o a liability is that under the terms o the instrument,

theissuerisorcanberequiredtodelivereithercashoranothernancial

asset to the holder; it cannot avoid this obligation. For example, a debenture,

under which the issuer is required to make interest payments and redeem thedebentureforcash,isanancialliability.

Aninstrumentisclassiedasequitywhenitrepresentsaresidualinterestin

the issuers assets ater deducting all its liabilities; or, put another way, when

the issuer has no obligation under the terms o the instrument to deliver cashorothernancialassetstoanotherentity.Ordinarysharesorcommonstock

where all the payments are at the discretion o the issuer are examples o

equity o the issuer.

Inaddition,thefollowingtypesofnancialinstrumentareaccountedforas

equity,providedtheyhaveparticularfeaturesandmeetspecicconditions: puttablenancialinstruments(forexample,somesharesissuedbyco

operative entities and some partnership interests); and

instrumentsorcomponentsofinstrumentsthatimposeontheentityan

obligation to deliver to another party a pro rata share o the net assets othe entity only on liquidation (or example, some shares issued by limited

lie entities).

Theclassicationofthenancialinstrumentaseitherdebtorequityisbased

on the substance o the contractual arrangement o the instrument rather thanits legal orm. This means, or example, that a redeemable preerence share,

which is economically the same as a bond, is accounted or in the same way

as a bond. The redeemable preerence share is thereore treated as a liability

rather than equity, even though legally it is a share o the issuer.

Otherinstrumentsmaynotbeasstraightforward.Ananalysisoftheterms

ofeachinstrumentinthelightofthedetailedclassicationrequirementsis


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14

necessary,particularlyassomenancialinstrumentscontainbothliabilityand

equity eatures. Such instruments, or example bonds that are convertible into

axednumberofequityshares,areaccountedforasseparateliabilityand

equity (being the option to convert) components.

The treatment o interest, dividends, losses and gains in the income statement

followstheclassicationoftherelatedinstrument.Ifapreferenceshareis

classiedasaliability,itscouponisshownasinterest(assumingthatcoupon

is not discretionary). However, the discretionary coupon on an instrument thatis treated as equity is shown as a distribution.

Recognition

Recognitionissuesfornancialassetsandnancialliabilitiestendtobestraightforward.Anentityrecognisesanancialassetoranancialliabilityat

the time it becomes a party to a contract.

Derecognition

Derecognitionisthetermusedforceasingtorecogniseanancialassetornancialliabilityonanentitysbalancesheet.Theserulesaremorecomplex.

Assets

Anentitythatholdsanancialassetmayraisenanceusingtheassetas

securityforthenance,orastheprimarysourceofcashowsfromwhichtorepaythenance.ThederecognitionrequirementsofIAS39determine

whetherthetransactionisasaleofthenancialassets(andthereforethe

entityceasestorecognisetheassets)orwhethernancehasbeensecuredon

the assets (and the entity recognises a liability or any proceeds received). This

evaluation might be straightorward. For example, it is clear with little or noanalysisthatanancialassetisderecognisedinanunconditionaltransferofit

to an unconsolidated third party, with no risks and rewards o the asset being

retained. Conversely, derecognition is not allowed where an asset has been

transerred but substantially all the risks and rewards o the asset have been

retained through the terms o the agreement. However, the analysis may bemore complex in other cases. Securitisation and debt actoring are examples

o more complex transactions where derecognition will need

careul consideration.


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Liabilities

Anentitymayonlyceasetorecognise(derecognise)anancialliabilitywhen

itisextinguishedthatis,whentheobligationisdischarged,cancelledor

expired, or when the debtor is legally released rom the liability by law or bythe creditor agreeing to such a release.

Measurement o nancial assets and liabilities

Allnancialassetsandnancialliabilitiesaremeasuredinitiallyatfairvalue

underIAS39(plustransactioncosts,fornancialassetsandliabilitiesnotatfairvaluethroughprotorloss).Thefairvalueofanancialinstrument

is normally the transaction price that is, the amount o the consideration

given or received. However, in some circumstances, the transaction price maynot be indicative o air value. In such a situation, an appropriate air value

is determined using data rom current observable transactions in the sameinstrument or based on a valuation technique whose variables include only

data rom observable markets.

Themeasurementofnancialinstrumentsafterinitialrecognitiondepends

ontheirinitialclassication.Allnancialassetsaresubsequentlymeasured atfairvalueexceptforloansandreceivables,held-to-maturityassetsand,

in rare circumstances, unquoted equity instruments whose air values

cannot be measured reliably, or derivatives linked to and that must be

settled by the delivery o such unquoted equity instruments that cannot be

measured reliably.

Loansandreceivablesandheld-to-maturityinvestmentsaremeasuredat

amortisedcost.Theamortisedcostofanancialassetornancialliabilityis

measured using the eective interest method.

Available-for-salenancialassetsaremeasuredatfairvalue,withchangesinfairvaluerecognisedinothercomprehensiveincome.Foravailable-for-sale

debt securities, interest is recognised in income using the eective interest

method.Dividendsonavailable-for-saleequitysecuritiesarerecognisedin

protorlossastheholderbecomesentitledtothem.

Derivatives (including separated embedded derivatives) are measured at air

value.Allfairvaluegainsandlossesarerecognisedinprotorlossexcept

where they qualiy as hedging instruments in cash fow hedges.


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Financial liabilities are measured at amortised cost using the eective interest

methodunlesstheyareclassiedatfairvaluethroughprotorloss.

Financialassetsandnancialliabilitiesthataredesignatedashedgeditemsmayrequirefurtheradjustmentsunderthehedgeaccountingrequirements.

Allnancialassetsaresubjecttoreviewforimpairment,exceptthosemeasured

atfairvaluethroughprotorloss.Wherethereisobjectiveevidencethatsuchanancialassetmaybeimpaired,theimpairmentlossiscalculatedand

recognisedinprotorloss.

Hedge accounting

Hedgingistheprocessofusinganancialinstrument(usuallyaderivative)to mitigate all or some o the risk o a hedged item. Hedge accounting

changes the timing o recognition o gains and losses on either the hedged

itemorthehedginginstrumentsothatbotharerecognisedinprotorlossin

the same accounting period in order to record the economic substance o the

combination o the hedged item and instrument.

To qualiy or hedge accounting, an entity must (a) ormally designate

and document a hedge relationship between a qualiying hedginginstrument and a qualiying hedged item at the inception o the hedge; and

(b) both at inception and on an ongoing basis, demonstrate that the hedgeis highly eective.

There are three types o hedge relationship:

fairvaluehedgeahedgeoftheexposuretochangesinthefairvalue

ofarecognisedassetorliability,orarmcommitment; cashowhedgeahedgeoftheexposuretovariabilityincashows

ofarecognisedassetorliability,armcommitmentorahighlyprobableorecast transaction; and

netinvestmenthedgeahedgeoftheforeigncurrencyriskonanet

investment in a oreign operation.

Forafairvaluehedge,thehedgeditemisadjustedforthegainorloss

attributable to the hedged risk. That element is included in the income

statement where it will oset the gain or loss on the hedging instrument.


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For an eective cash fow hedge, gains and losses on the hedging instrument

are initially included in other comprehensive income. The amount included

in other comprehensive income is the lesser o the air value o the hedging

instrumentandhedgeitem.Wherethehedginginstrumenthasafairvaluegreaterthanthehedgeditem,theexcessisrecordedwithinprotorloss

as ineectiveness. Gains or losses deerred in other comprehensive income

arereclassiedtoprotorlosswhenthehedgeditemaffectstheincomestatement.Ifthehedgeditemistheforecastacquisitionofanon-nancial

assetorliability,theentitymaychooseanaccountingpolicyofadjustingthe

carryingamountofthenon-nancialassetorliabilityforthehedginggainor

loss at acquisition, or leaving the hedging gains or losses deerred in equity

andreclassifyingthemtoprotorlosswhenthehedgeditemaffectsprot

or loss.

Hedges o a net investment in a oreign operation are accounted or similarly

to cash fow hedges.

Disclosure

Thepresentationanddisclosurerequirementsfornancialinstrumentsare

setoutinIAS1,IAS32andIFRS7.IAS1requiresmanagementtopresent

itsnancialassetsandnancialliabilitiesascurrentornon-current.IAS32providesguidanceonoffsettingofnancialassetsandthenancialliabilities.Wherecertainconditionsaresatised,thenancialassetandthenancial

liability are presented on the balance sheet on a net basis.

IFRS7setsoutdisclosurerequirementsthatareintendedtoenableusers

toevaluatethesignicanceofnancialinstrumentsforanentitysnancial

position and perormance, and to understand the nature and extent o risksarisingfromthosenancialinstrumentstowhichtheentityisexposed.

These risks include credit risk, liquidity risk and market risk. It also requiresdisclosureofathree-levelhierarchyforfairvaluemeasurementandsome

specicquantitativedisclosuresfornancialinstrumentsatthelowestlevelin

the hierarchy.

Thedisclosurerequirementsdonotjustapplytobanksandnancial

institutions.Allentitiesthathavenancialinstrumentsareaffectedeven

simple instruments such as borrowings, accounts payable and receivable, cash

and investments.


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18

Financial liabilities with equity instruments IFRIC 19

IFRIC19,Extinguishingnancialliabilitieswithequityinstruments,claries

the accounting when an entity renegotiates the terms o its debt with the

result that the liability is extinguished by the debtor issuing its own equityinstrumentstothecreditor(referredtoasadebtforequityswap).Before

IFRIC19,somerecognisedtheequityinstrumentatthecarryingamount

ofthenancialliabilityanddidnotrecogniseanygainorlossinprotor

loss.Othersrecognisedtheequityinstrumentsatthefairvalueofequity

instruments issued and recognised any dierence between that amount andthecarryingamountofthenancialliabilityinprotorloss.Asaresult,there

was diversity in practice in the accounting or such transactions and the issue

became more pervasive in light o the current economic environment.

IFRIC19,whichcameintoeffectfromannualperiodsbeginningonorafter1July2010,requiresmanagementtorecogniseagainorlossinprot

or loss when a liability is settled through the issuance o the entitys own

equityinstruments.Theamountofthegainorlossrecognisedinprotor

lossisthedifferencebetweenthecarryingvalueofthenancialliability

and the air value o the equity instruments issued. I the air value o theequity instruments cannot be reliably measured, the air value o the existing

nancialliabilityisusedtomeasurethegainorloss.Managementisnolongerpermittedtoreclassifythecarryingvalueoftheexistingnancialliabilityinto

equity(withnogainorlossbeingrecognisedinprotorloss).Theamountof

the gain or loss should be separately disclosed on the ace o the statement ocomprehensive income or in the notes

7 Foreign currencies IAS 21, IAS 29

Many entities do business with overseas suppliers or customers, or haveoverseas operations. This gives rise to two main accounting issues:

Sometransactions(forexample,thosewithoverseassuppliersor

customers) may be denominated in oreign currencies. These transactions

are expressed in the entitys own currency (unctional currency) or

nancialreportingpurposes. Anentitymayhaveforeignoperationssuchasoverseassubsidiaries,

branchesorassociatesthatmaintaintheiraccountingrecordsintheir

localcurrency.Becauseitisnotpossibletocombinetransactionsmeasured


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19

indifferentcurrencies,theforeignoperationsresultsandnancialposition

are translated into a single currency, namely that in which the groups

consolidatednancialstatementsarereported(presentationcurrency).

The methods required or each o the above circumstances are summarisedbelow.

Expressing oreign currency transactions in the entitys unctional currency

A oreign currency transaction is expressed in the unctional currency using the

exchange rate at the transaction date. Foreign currency balances representing

cash or amounts to be received or paid in cash (monetary items) are reported

at the end o the reporting period using the exchange rate on that date.

Exchange dierences on such monetary items are recognised as income orexpensefortheperiod.Non-monetarybalancesthatarenotre-measuredat

air value and are denominated in a oreign currency are expressed in the

functionalcurrencyusingtheexchangerateatthetransactiondate.Wherea

non-monetaryitemisre-measuredatfairvalueinthenancialstatements,the

exchange rate at the date when air value was determined is used.

Translating unctional currency nancial statements into a presentation currency

Assets and liabilities are translated rom the unctional currency to thepresentation currency at the closing rate at the end o the reporting period.The income statement is translated at exchange rates at the dates o the

transactions or at the average rate i that approximates the actual rates. All

resulting exchange dierences are recognised in other comprehensive income.

Thenancialstatementsofaforeignoperationthathasthecurrencyof

ahyperinationaryeconomyasitsfunctionalcurrencyarerstrestatedinaccordancewithIAS29.Allcomponentsarethentranslatedtothe

presentation currency at the closing rate at the end o the reporting period.

8 Insurance contracts IFRS 4

Insurancecontractsarecontractswhereanentityacceptssignicantinsurance

risk rom another party (the policyholder) by agreeing to compensate the

policyholder i the insured event adversely aects the policyholder. The risk

transerred in the contract must be insurance risk, which is any risk except or

nancialrisk.


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20

IFRS 4 applies to all issuers o insurance contracts whether or not the entity

is legally an insurance company. It does not apply to accounting or insurance

contracts by policyholders.

IFRS4isaninterimstandardpendingcompletionofPhaseIIoftheIASBs

projectoninsurancecontracts.Itallowsentitiestocontinuewiththeirexisting

accounting policies or insurance contracts i those policies meet certain

minimumcriteria.Oneoftheminimumcriteriaisthattheamountoftheinsuranceliabilityissubjecttoaliabilityadequacytest.Thistestconsiders

current estimates o all contractual and related cash fows. I the liability

adequacytestidentiesthattheinsuranceliabilityisinadequate,theentire

deciencyisrecognisedintheincomestatement.

AccountingpoliciesmodelledonIAS37,Provisions,contingentliabilities

and contingent assets, are appropriate in cases where the issuer is not an

insurancecompanyandwherethereisnospeciclocalGAAPforinsurance

contracts (or the local GAAP is only directed at insurance companies).

Disclosure is particularly important or inormation relating to insurance

contracts, as entities can continue to use local GAAP accounting policies or

measurement. IFRS 4 has two main principles or disclosure. Entities should

disclose: informationthatidentiesandexplainstheamountsinitsnancial

statements arising rom insurance contracts; and

informationthatenablesusersofitsnancialstatementstoevaluatethe

nature and extent o risks arising rom insurance contracts.

9 Revenue IAS 18, IAS 11 and IAS 20

Revenue is measured at the air value o the consideration received orreceivable.Whenthesubstanceofasingletransactionindicatesthatit

includesseparatelyidentiablecomponents,revenueisallocatedtothese

components generally by reerence to their air values. It is recognised or eachcomponent separately by applying the recognition criteria below.

For example, when a product is sold with a subsequent service, revenue is

allocated initially to the product component and the service component; it is

recognised separately thereater when the criteria or revenue recognition are

met or each component.


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Revenue IAS 18

Revenue arising rom the sale o goods is recognised when an entity transers

thesignicantrisksandrewardsofownershipandgivesupmanagerial

involvement usually associated with ownership or control, i it is probable thateconomicbenetswillowtotheentityandtheamountofrevenueandcosts

can be measured reliably.

Revenue rom the rendering o services is recognised when the outcome o the

transaction can be estimated reliably. This is done by reerence to the stage o

completion o the transaction at the balance sheet date, using requirementssimilar to those or construction contracts. The outcome o a transaction

can be estimated reliably when: the amount o revenue can be measuredreliably;itisprobablethateconomicbenetswillowtotheentity;thestage

o completion can be measured reliably; and the costs incurred and costs tocomplete can be reliably measured.

Examplesoftransactionswheretheentityretainssignicantrisksandrewards

o ownership and revenue is not recognised are when:

theentityretainsanobligationforunsatisfactoryperformancenotcovered

by normal warranty provisions;

thebuyerhasthepowertorescindthepurchaseforareasonspeciedin the sales contract and the entity is uncertain about the probability o

return; and

thenthegoodsareshippedsubjecttoinstallationandthatinstallationisa

signicantpartofthecontract.

Interest income is recognised using the eective interest rate method.

Royalties are recognised on an accruals basis in accordance with the substance

o the relevant agreement. Dividends are recognised when the shareholders

right to receive payment is established.

IFRIC13,Customerloyaltyprogrammes,clariestheaccountingforaward

creditsgrantedtocustomerswhentheypurchasegoodsorservicesfor

example,underfrequent-yerorsupermarketloyaltyschemes.Thefairvalue

o the consideration received or receivable in respect o the initial sale isallocated between the award credits and the other components o the sale.

IFRIC18,Transfersofassetsfromcustomers,clariestheaccountingfor

arrangements where an item o property, plant and equipment is transerred


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22

by a customer in return or connection to a network and/or ongoing access to

goodsorservices.IFRIC18willbemostrelevanttotheutilityindustry, but it may also apply to other transactions, such as when a customer

transers ownership o property, plant and equipment as part o anoutsourcing agreement.

Construction contracts IAS 11

Aconstructioncontractisacontractspecicallynegotiatedforthe

construction o an asset or combination o assets, including contracts or the

rendering o services directly related to the construction o the asset (such as

projectmanagersandarchitectsservices).Suchcontractsaretypicallyxed-priceorcost-pluscontracts.

Revenue and expenses on construction contracts are recognised using the

percentage-of-completionmethod.Thismeansthatrevenue,expensesand

thereforeprotarerecognisedgraduallyascontractactivityoccurs.

Whentheoutcomeofthecontractcannotbeestimatedreliably,revenue

is recognised only to the extent o costs incurred that it is probable will be

recovered;contractcostsarerecognisedasanexpenseasincurred.Whenit

is probable that total contract costs will exceed total contract revenue, theexpected loss is recognised as an expense immediately.

IFRIC15,Agreementsforconstructionofrealestate,clarieswhichstandard

(IAS18,Revenue,orIAS11,Constructioncontracts)shouldbeappliedto

particular transactions.

Government grants IAS 20

Government grants are recognised when there is reasonable assurance that theentity will comply with the conditions related to them and that the grants will

be received.

Grantsrelatedtoincomearerecognisedinprotorlossovertheperiods

necessary to match them with the related costs that they are intended to

compensate. They are either oset against the related expense or presented as

separateincome.Thetimingofsuchrecognitioninprotorlosswilldepend

onthefulllmentofanyconditionsorobligationsattachingtothegrant.


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Grants related to assets are either oset against the carrying amount o the

relevantassetorpresentedasdeferredincomeinthebalancesheet.Protor

loss will be aected either by a reduced depreciation charge or by deerred

income being recognised as income systematically over the useul lie o therelated asset.

10 Segment reporting IFRS 8

Onlycertainentitiesarerequiredtodisclosesegmentinformation.Theseare

entities with listed or quoted equity or debt instruments or entities that are in

the process o obtaining a listing or quotation o debt or equity instruments in

a public market.

Operatingsegmentsarecomponentsofanentity,identiedbasedoninternal

reports on each segment that are regularly used by the entitys chie

operatingdecision-maker(CODM)toallocateresourcestothesegmentand

to assess its perormance.

Operatingsegmentsareseparatelyreportediftheymeetthedenitionofa

reportable segment. A reportable segment is an operating segment or group

o operating segments that exceed the quantitative thresholds set out in thestandard. However, an entity may disclose any additional operating segment

i it chooses to do so.

For all reportable segments, the entity is required to provide a measure o

protorlossintheformatviewedbytheCODM,aswellasdisclosureofa

measure o assets and liabilities i such amounts are regularly provided to

theCODM.Othersegmentdisclosuresincludetherevenuefromcustomersor each group o similar products and services, revenue by geography and

dependenceonmajorcustomers.OtherdetaileddisclosuresofperformanceandresourcesarerequirediftheCODMreviewstheseamounts.A

reconciliationofthetotalsofrevenue,protandloss,assetsandliabilities

andothermaterialitemsreviewedbytheCODMtotheprimarynancialstatements is required.

11 Employee benets IAS 19

Employeebenetsareallformsofconsiderationgivenorpromisedbyanentityinexchangeforservicesrenderedbyitsemployees.Thesebenets


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24

includesalary-relatedbenets(suchaswages,prot-sharing,bonuses

andcompensatedabsences,suchaspaidholidayandlong-serviceleave),

terminationbenets(suchasseveranceandredundancypay)andpost-

employmentbenets(suchasretirementbenetplans).Share-basedpaymentsare addressed in IFRS 2 (See Section 12).

Post-employmentbenetsincludepensions,post-employmentlifeinsurance

andmedicalcare.Pensionsareprovidedtoemployeeseitherthroughdenedcontributionplansordenedbenetplans.

Recognitionandmeasurementforshort-termbenetsisstraight-forward,

because actuarial assumptions are not required and the obligations are not

discounted.However,long-termbenets,particularlypost-employmentbenets,giverisetomorecomplicatedmeasurementissues.

Dened contribution plans

Accountingfordenedcontributionplansisstraight-forward:thecostof

denedcontributionplansisthecontributionpayablebytheemployerfor that accounting period.

Dened benet plans

Accountingfordenedbenetplansiscomplexbecauseactuarial

assumptions and valuation methods are required to measure the balancesheet obligation and the expense. The expense recognised is not necessarily

the contributions made in the period.

Theamountrecognisedonthebalancesheetisthedenedbenet

obligationlessplanassetsadjustedforactuarialgainsandlosses(see

corridor approach below).

Tocalculatethedenedbenetobligation,estimates(actuarialassumptions)

about demographic variables (such as employee turnover and mortality) and

nancialvariables(suchasfutureincreasesinsalariesandmedicalcosts)areinputintoavaluationmodel.Thebenetisthendiscountedtopresentvalue.

This normally requires the expertise o an actuary.

Wheredenedbenetplansarefunded,theplanassetsaremeasuredatfair

value using discounted cash fow estimates i market prices are not available.Planassetsaretightlydened,andonlyassetsthatmeetthedenitionofplan


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assetsmaybeoffsetagainsttheplansdenedbenetobligationsthatis,the

netsurplusordecitisshownonthebalancesheet.

There-measurementateachbalancesheetdateoftheplanassetsandthedenedbenetobligationgivesrisetoactuarialgainsandlosses.Thereare

threepermissiblemethodsunderIAS19forrecognisingactuarialgainsand

losses:

Undertheothercomprehensiveincome(OCI)approach,actuarialgainsand losses are recognised immediately in other comprehensive income.

Underthecorridorapproach,anyactuarialgainsandlossesthatfall

outsidethehigherof10percentofthepresentvalueofthedenedbenet

obligation or 10 per cent o the air value o the plan assets (i any) are

amortised over no more than the remaining working lie o the employees. Undertheincomestatementapproach,actuarialgainsandlossesare

recognisedimmediatelyinprotorloss.

IAS19analysesthechangesintheplanassetsandliabilitiesintovarious

components, the net total o which is recognised as an expense or income inthe income statement. These components include:

current-servicecost(thepresentvalueofthebenetsearnedbyactive

employees in the current period);

interestcost(theunwindingofthediscountonthedenedbenetobligation);

expectedreturnonanyplanassets(expectedinterest,dividendsand

capital growth o plan assets);

actuarialgainsandlosses,totheextenttheyarerecognisedintheincome

statement (see above); and

past-servicecosts(thechangeinthepresentvalueoftheplanliabilitiesrelatingtoemployeeserviceinpriorperiodsarisingfromchangestopost-

employmentbenets).

Past-servicecostsarerecognisedasanexpenseonastraight-linebasisover

theaverageperioduntilthebenetsbecomevested.Ifthebenetsarealreadyvested,thepast-servicecostisrecognisedasanexpenseimmediately.Gains

andlossesonthecurtailmentorsettlementofadenedbenetplanare

recognisedinprotandlosswhenthecurtailmentorsettlementoccurs.

Whenplanassetsexceedthedenedbenetobligationcreatinganetsurplus,

IFRIC14,IAS19Thelimitonadenedbenetasset,minimumfunding


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26

requirements and their interaction, provides guidance on assessing the amount

that can be recognised as an asset. It also explains how the pension asset

or liability may be aected by a statutory or contractual minimum unding

requirement.

TheIASBissuedarevisedversionofIAS19,Employeebenets,inJune

2011.Therevisedversioncontainssignicantchangestotherecognitionand

measurementofdenedbenetpensionexpenseandterminationbenets,andtothedisclosuresforallemployeebenets.Thechangeswillaffectmost

entitiesthatapplyIAS19.Theamendmentscouldsignicantlychangea

numberofperformanceindicatorsandmightalsosignicantlyincreasethe

volume o disclosures. The new standard is eective or annual periods starting

onorafter1January2013.Earlierapplicationispermitted.

12 Share-based payment IFRS 2

IFRS2appliestoallshare-basedpaymentarrangements.Ashare-based

paymentarrangementisdenedas: an agreement between the entity (or

another group entity or any shareholder o any group entity) and another party

(including an employee) that entitles the other party to receive:

(a) cash or other assets o the entity or amounts that are based on the price (orvalue) o equity instruments (including shares or share options) o the entity

or another group entity, or

(b) equity instruments (including shares or share options) o the entity or another

group entity.

The most common application is to employee share schemes, such as share

option schemes. However, entities sometimes also pay or other expenses suchasprofessionalfeesandforthepurchaseofassetsbymeansofshare-

based payment.

The accounting treatment under IFRS 2 is based on the air value o the

instruments.Boththevaluationofandtheaccountingforawardscanbedifcult,duetothecomplexmodelsthatneedtobeusedtocalculatethefair

value o options, and also due to the variety and complexity o schemes. In

addition, the standard requires extensive disclosures. The result generally is

reducedreportedprots,especiallyinentitiesthatuseshare-basedpayment

extensively as part o their remuneration strategy.


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27

Alltransactionsinvolvingshare-basedpaymentarerecognisedasexpensesor

assets over any vesting period.

Equity-settledshare-basedpaymenttransactionsaremeasuredatthegrantdatefairvalueforemployeeservices;and,fornon-employeetransactions,at

the air value o the goods or services received at the date on which the entity

recognises the goods or services. I the air value o the goods or services

cannotbeestimatedreliablysuchasemployeeservicesandcircumstancesinwhichthegoodsorservicescannotbespecicallyidentiedtheentityuses

the air value o the equity instruments granted. Additionally, management

needstoconsiderifthereareanyunidentiablegoodsorservicesreceivedor

to be received by the entity, as these also have to be recognised and measured

inaccordancewithIFRS2.Equity-settledshare-basedpaymenttransactionsarenotre-measuredoncethegrantdatefairvaluehasbeendetermined.

Thetreatmentisdifferentforcash-settledshare-basedpaymenttransactions:

cash-settledawardsaremeasuredatthefairvalueoftheliability.Theliability

isre-measuredateachbalancesheetdateandatthedateofsettlement,withchanges in air value recognised in the income statement.

13 Taxation IAS 12

IAS 12 only deals with taxes on income, comprising current and deerredtax. Current tax expense or a period is based on the taxable and deductible

amounts that will be shown on the tax return or the current year. An entity

recognises a liability in the balance sheet in respect o current tax expense or

the current and prior periods to the extent unpaid. It recognises an asset i

current tax has been overpaid.

Current tax assets and liabilities or the current and prior periods aremeasured at the amount expected to be paid to (recovered rom) the taxation

authorities, using the tax rates and tax laws that have been enacted or

substantively enacted by the balance sheet date.

Taxpayablebasedontaxableprotseldommatchesthetaxexpensethat

mightbeexpectedbasedonpre-taxaccountingprot.Themismatchcan

occur because IFRS recognition criteria or items o income and expense are

dierent rom the treatment o items under tax law.


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28

Deerred tax accounting seeks to deal with this mismatch. It is based on

the temporary dierences between the tax base o an asset or liability and

itscarryingamountinthenancialstatements.Forexample,apropertyis

revalued upwards but not sold, the revaluation creates a temporary dierence(thecarryingamountoftheassetinthenancialstatementsisgreaterthanthe

tax base o the asset), and the tax consequence is a deerred tax liability.

Deerred tax is provided in ull or all temporary dierences arising betweenthetaxbasesofassetsandliabilitiesandtheircarryingamountsinthenancial

statements, except when the temporary dierence arises rom:

initialrecognitionofgoodwill(fordeferredtaxliabilitiesonly);

initialrecognitionofanassetorliabilityinatransactionthatisnota

businesscombinationandthataffectsneitheraccountingprotnortaxableprot;and

investmentsinsubsidiaries,branches,associatesandjointventures,but

only where certain criteria apply.

Deerred tax assets and liabilities are measured at the tax rates that areexpected to apply to the period when the asset is realised or the liability

is settled, based on tax rates (and tax laws) that have been enacted or

substantively enacted by the balance sheet date. The discounting o deerred

tax assets and liabilities is not permitted.

The measurement o deerred tax liabilities and deerred tax assets refects

the tax consequences that would ollow rom the manner in which the entity

expects, at the balance sheet date, to recover (that is, through use or through

sale or through a combination o both) the carrying amount o its assets

andliabilities.Theexpectedmannerofrecoveryfornon-depreciableassetsmeasured using the revaluation model in IAS 16 is always through sale; there is

a rebuttable presumption that the expected manner o recovery or investment

property that is measured using the air value model in IAS 40 is through sale.

Management only recognises a deerred tax asset or deductible temporarydifferencestotheextentthatitisprobablethattaxableprotwillbeavailable

against which the deductible temporary dierence can be utilised. This also

applies to deerred tax assets or unused tax losses carried orward.

Currentanddeferredtaxisrecognisedinprotorlossfortheperiod,unless

the tax arises rom a business combination or a transaction or event that isrecognisedoutsideprotorloss,eitherinothercomprehensiveincomeor


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29

directly in equity in the same or dierent period. The tax consequences that

accompany, or example, a change in tax rates or tax laws, a reassessment o

the recoverability o deerred tax assets or a change in the expected manner o

recoveryofanassetarerecognisedinprotorloss,excepttotheextentthattheyrelatetoitemspreviouslychargedorcreditedoutsideprotorloss.

14 Earnings per share IAS 33

Earningspershare(EPS)isaratiothatiswidelyusedbynancialanalysts,

investorsandotherstogaugeanentitysprotabilityandtovalueitsshares.

EPS is normally calculated in the context o ordinary shares o the entity.

Earnings attributable to ordinary shareholders are thereore determined bydeducting rom net income the earnings attributable to holders o more seniorequity instruments.

An entity whose ordinary shares are listed on a recognised stock exchange or

are otherwise publicly traded is required to disclose both basic and diluted

EPSwithequalprominenceinitsseparateorindividualnancialstatements,

orinitsconsolidatednancialstatementsifitisaparent.Furthermore, entitiesthatleorareintheprocessoflingnancialstatementswitha

securities commission or other regulatory body or the purposes o issuingordinary shares (that is, not a private placement) are also required to comply

with IAS 33.

BasicEPSiscalculatedbydividingtheprotorlossfortheperiodattributable

to the equity holders o the parent by the weighted average number o

ordinarysharesoutstanding(includingadjustmentsforbonusandrights

issues).

DilutedEPSiscalculatedbyadjustingtheprotorlossandtheweightedaverage number o ordinary shares by taking into account the conversion o

any dilutive potential ordinary shares. Potential ordinary shares are those

nancialinstrumentsandcontractsthatmayresultinissuingordinaryshares

such as convertible bonds and options (including employee share options).

BasicanddilutedEPSforbothcontinuingandtotaloperationsarepresented

withequalprominenceinthestatementofcomprehensiveincomeorinthe

separateincomestatementwhereoneispresentedforeachclassofordinary

shares.SeparateEPSguresfordiscontinuedoperationsaredisclosedinthesame statements or in the notes.


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Balancesheetandrelatednotes

30

Balance sheet and related notes

15 Intangible assets IAS 38

Anintangibleassetisanidentiablenon-monetaryassetwithoutphysical

substance.Theidentiablecriterionismetwhentheintangibleassetis separable (that is, when it can be sold, transerred or licensed) or where it

arises rom contractual or other legal rights.

Separately acquired intangible assets

Separately acquired intangible assets are recognised initially at cost. Costcomprisesthepurchaseprice,includingimportdutiesandnon-refundable

purchase taxes, and any directly attributable costs o preparing the asset or

its intended use. The purchase price o a separately acquired intangible asset

incorporatesassumptionsabouttheprobableeconomicfuturebenetsthat

may be generated by the asset.

Internally generated intangible assets

The process o generating an intangible asset is divided into a research phase

and a development phase. No intangible assets arising rom the research

phase may be recognised. Intangible assets arising rom the developmentphase are recognised when the entity can demonstrate:

itstechnicalfeasibility;

itsintentiontocompletethedevelopments;

itsabilitytouseorselltheintangibleasset; howtheintangibleassetwillgenerateprobablefutureeconomicbenets

(or example, the existence o a market or the output o the intangible

asset or or the intangible asset itsel); theavailabilityofresourcestocompletethedevelopment;and

itsabilitytomeasuretheattributableexpenditurereliably.

Any expenditure written o during the research or development phase

cannotbecapitalisediftheprojectmeetsthecriteriaforrecognitionatalater

date. The costs relating to many internally generated intangible items cannot

becapitalisedandareexpensedasincurred.Thisincludesresearch,start-up

and advertising costs. Expenditure on internally generated brands, mastheads,

customer lists, publishing titles and goodwill are not recognised as intangibleassets.


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Intangible assets acquired in a business combination

I an intangible asset is acquired in a business combination, both the probability

and measurement criterion are always considered to be met. An intangible asset

will thereore always be recognised, regardless o whether it has been previouslyrecognisedintheacquireesnancialstatements.

Subsequent measurement

Intangibleassetsareamortisedunlesstheyhaveanindeniteusefullife.Amortisation is carried out on a systematic basis over the useul lie o the

intangibleasset.Anintangibleassethasanindeniteusefullifewhen,basedon

an analysis o all the relevant actors, there is no oreseeable limit to the period

over which the asset is expected to generate net cash infows or the entity.

Intangibleassetswithniteusefullivesareconsideredforimpairmentwhen

there is an indication that the asset has been impaired. Intangible assets with

indeniteusefullivesandintangibleassetsnotyetinusearetestedannually

or impairment and whenever there is an indication o impairment.

16 Property, plant and equipment IAS 16

Property, plant and equipment (PPE) is recognised when the cost o an asset

can be reliably measured and it is probable that the entity will obtain uture

economicbenetsfromtheasset.

PPE is measured initially at cost. Cost includes the air value o the

consideration given to acquire the asset (net o discounts and rebates) and

any directly attributable cost o bringing the asset to working condition or its

intendeduse(inclusiveofimportdutiesandnon-refundablepurchasetaxes).

Directly attributable costs include the cost o site preparation, delivery,

installation costs, relevant proessional ees and the estimated cost o

dismantling and removing the asset and restoring the site (to the extent that

such a cost is recognised as a provision). Classes o PPE are carried at historical

cost less accumulated depreciation and any accumulated impairment losses(the cost model), or at a revalued amount less any accumulated depreciation

and subsequent accumulated impairment losses (the revaluation model). The

depreciable amount o PPE (being the gross carrying value less the estimatedresidual value) is depreciated on a systematic basis over its useul lie.


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Subsequent expenditure relating to an item o PPE is capitalised i it meets the

recognition criteria.

PPE may comprise parts with dierent useul lives. Depreciation is calculatedbased on each individual parts lie. In case o replacement o one part, the

new part is capitalised to the extent that it meets the recognition criteria o an

asset, and the carrying amount o the parts replaced is derecognised.

Thecostofamajorinspectionoroverhaulofanitemoccurringatregular

intervals over the useul lie o the item is capitalised to the extent that it

meets the recognition criteria o an asset. The carrying amounts o the parts

replaced are derecognised.

IFRIC18clariestheaccountingforarrangementswhereanitemofPPEthat

is provided by the customer is used to provide an ongoing service.

Borrowing costs

Under IAS 23, costs are directly attributable to the acquisition, construction or

production o a qualiying asset to be capitalised.

17 Investment property IAS 40

Certainpropertiesareclassiedasinvestmentpropertiesfornancialreporting

purposes in accordance with IAS 40 as the characteristics o these properties

differsignicantlyfromowner-occupiedproperties.Itisthecurrentvalue

o such properties and changes to those values that are relevant to users o

nancialstatements.

Investment property is property (land or a building, or part o a building orboth) held by an entity to earn rentals and/or or capital appreciation. This

category includes such property in the course o construction or development.

Any other properties are accounted or as property, plant and equipment (PPE)

in accordance with: IAS16iftheyareheldforuseintheproductionorsupplyofgoodsor

services; or

IAS2asinventory,iftheyareheldforsaleintheordinarycourseof

business.Owner-occupiedpropertydoesnotmeetthedenitionof

investment property.


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Initial measurement o an investment property is the air value o its purchase

consideration plus any directly attributable costs. Subsequent to initial

measurement, management may choose as its accounting policy either to

carry investment properties at air value or at cost. The policy chosen isapplied consistently to all the investment properties that the entity owns.

I the air value option is chosen, investment properties in the course o

construction or development are measured at air value i this can be reliably

measured; otherwise, they are measured at cost.

Under IAS 40, air value is the price at which the property could be

exchanged between knowledgeable, willing parties in an arms length

transaction. Under IFRS 13, which is eective rom annual periods beginningonorafter1January2013,fairvalueisdenedasthepricethatwouldbereceived to sell an asset or paid to transer a liability in an orderly transaction

between market participants at the measurement date. Changes in air value

arerecognisedinprotorlossintheperiodinwhichtheyarise.

The cost model requires investment properties to be carried at cost lessaccumulated depreciation and any accumulated impairment losses consistent

with the treatment o PPE; the air values o these properties is disclosed in the

notes.

18 Impairment o assets IAS 36

Nearlyallassetscurrentandnon-currentaresubjecttoanimpairment

test to ensure that they are not overstated on balance sheets.

The basic principle o impairment is that an asset may not be carried on the

balancesheetataboveitsrecoverableamount.Recoverableamountisdened as the higher o the assets air value less costs to sell and its value in use. Fair

value less costs to sell is the amount obtainable rom a sale o an asset in an

arms length transaction between knowledgeable, willing parties, less costs

o disposal. Value in use requires management to estimate the uture cashowstobederivedfromtheassetanddiscountthemusingapre-taxmarket

rate that refects current assessments o the time value o money and the risks

specictotheasset.

Allassetssubjecttotheimpairmentguidancearetestedforimpairmentwherethere is an indication that the asset may be impaired. Certain assets (goodwill,


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indenitelivedintangibleassetsandintangibleassetsthatarenotyet

available or use) are also tested or impairment annually even i there is no

impairment indicator.

Whenconsideringwhetheranassetisimpaired,bothexternalindicators(for

example,signicantadversechangesinthetechnological,market,economic

or legal environment or increases in market interest rates) and internal

indicators (or example, evidence o obsolescence or physical damage o anasset or evidence rom internal reporting that the economic perormance o an

asset is, or will be, worse than expected) are considered.

Recoverable amount is calculated at the individual asset level. However, an

asset seldom generates cash fows independently o other assets, and mostassetsaretestedforimpairmentingroupsofassetsdescribedascash-

generatingunits(CGUs).ACGUisthesmallestidentiablegroupofassets

that generates infows that are largely independent rom the cash fows rom

other CGUs.

The carrying value o an asset is compared to the recoverable amount (being

the higher o value in use or air value less costs to sell). An asset or CGU

is impaired when its carrying amount exceeds its recoverable amount. Any

impairment is allocated to the asset or assets o the CGU, with the impairmentlossrecognisedinprotorloss.

Goodwill acquired in a business combination is allocated to the acquirers

CGUsorgroupsofCGUsthatareexpectedtobenetfromthesynergiesof

the business combination. However, the largest group o CGUs permitted or

goodwill impairment testing is the lowest level o operating segment beoreaggregation.

19 Lease accounting IAS 17

A lease gives one party (the lessee) the right to use an asset over an agreedperiodoftimeinreturnforpaymenttothelessor.Leasingisanimportant

sourceofmedium-andlong-termnancing;accountingforleasescanhavea

signicantimpactonlesseesandlessorsnancialstatements.

Leasesareclassiedasnanceoroperatingleasesatinception,dependingon

whether substantially all the risks and rewards o ownership transer to thelessee.Underanancelease,thelesseehassubstantiallyalloftherisksand


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rewardofownership.Allotherleasesareoperatingleases.Leasesoflandand

buildings are considered separately under IFRS.

Underanancelease,thelesseerecognisesanassetheldunderananceleaseand a corresponding obligation to pay rentals. The lessee depreciates

the asset.

The lessor recognises the leased asset as a receivable. The receivable ismeasuredatthenetinvestmentintheleasetheminimumleasepayments

receivable, discounted at the internal rate o return o the lease, plus the

unguaranteed residual which accrues to the lessor.

Under an operating lease, the lessee does not recognise an asset and leaseobligation. The lessor continues to recognise the leased asset and depreciates

it. The rentals paid are normally charged to the income statement o the lessee

andcreditedtothatofthelessoronastraight-linebasis.

Linkedtransactionswiththelegalformofaleaseareaccountedforonthe

basisoftheirsubstanceforexample,asaleandleasebackwheretheselleris committed to repurchase the asset may not be a lease in substance i the

seller retains the risks and rewards o ownership and substantially the same

rights o use as beore the transaction.

Equally, some transactions that do not have the legal orm o a lease are insubstance leases i they are dependent on a particular asset that the purchaser

can control physically or economically.

20 Inventories IAS 2

Inventories are initially recognised at cost. Inventory costs include importduties,non-refundabletaxes,transportandhandlingcosts,andanyother

directly attributable costs less trade discounts, rebates and similar items.

Inventories are valued at the lower o cost and net realisable value (NRV).NRV is the estimated selling price in the ordinary course o business, less the

estimated costs o completion and estimated selling expenses.

IAS 2, Inventories, requires the cost o items that are not interchangeable

orthathavebeensegregatedforspeciccontractstobedeterminedonanindividual-itembasis.Thecostofotheritemsofinventoryusedisassigned


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byusingeithertherst-in,rst-out(FIFO)orweightedaveragecostformula.Last-in,rst-out(LIFO)isnotpermitted.Anentityusesthesamecostformula

or all inventories that have a similar nature and use to the entity. A dierent

costformulamaybejustiedwhereinventorieshaveadifferentnatureoruse.The cost ormula used is applied on a consistent basis rom period to period.

21 Provisions and contingencies IAS 37

A liability is a present obligation o the entity arising rom past events, the

settlement o which is expected to result in an outfow rom the entity o

resourcesembodyingeconomicbenets.Aprovisionfallswithinthecategoryofliabilitiesandisdenedasaliabilityofuncertaintimingoramount

Recognition and initial measurement

A provision is recognised when: the entity has a present obligation to transer

economicbenetsasaresultofpastevents;itisprobable(morelikelythannot) that such a transer will be required to settle the obligation; and a reliable

estimate o the amount o the obligation can be made.

The amount recognised as a provision is the best estimate o the expenditure

required to settle the obligation at the balance sheet date, measured at theexpected cash fows discounted or the time value o money. Provisions are not

recognised or uture operating losses.

A present obligation arises rom an obligating event and may take the orm

o either a legal obligation or a constructive obligation. An obligating eventleaves the entity no realistic alternative to settling the obligation. I the

entity can avoid the uture expenditure by its uture actions, it has no present

obligation, and no provision is required. For example, an entity cannotrecognise a provision based solely on the intent to incur expenditure at some

uture date or the expectation o uture operating losses (unless these lossesrelate to an onerous contract).

An obligation does not generally have to take the orm o a legal obligation

beore a provision is recognised. An entity may have an established pattern

o past practice that indicates to other parties that it will accept certainresponsibilities and as a result has created a valid expectation on the part o

those other parties that it will discharge those responsibilities (that is, theentity is under a constructive obligation).


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I an entity has an onerous contract (the unavoidable costs o meeting the

obligationsunderthecontractexceedtheeconomicbenetsexpectedtobe

received under it), the present obligation under the contract is recognised as a

provision. Impairments o any assets dedicated to the contract are recognisedbeore making a provision.

Restructuring provisions

Therearespecicrequirementsforrestructuringprovisions.Aprovisionis

recognised when there is: (a) a detailed ormal plan identiying the main

eatures o the restructuring; and (b) a valid expectation in those aected that

the entity will carry out the restructuring by starting to implement the plan or

by announcing its main eatures to those aected.

A restructuring plan does not create a present obligation at the balance

sheet date i it is announced ater that date, even i it is announced beore

thenancialstatementsareapproved.Noobligationarisesforthesaleofan

operation until the entity is committed to the sale (that is, there is a bindingsale agreement).

The provision includes only incremental costs resulting rom the restructuring

and not those associated with the entitys ongoing activities. Any expectedgains on the sale o assets are not considered in measuring a restructuring

provision.

Reimbursements

An obligation and any anticipated recovery are presented separately as a

liability and an asset respectively; however, an asset can only be recognisedi it is virtually certain that settlement o the obligation will result in a

reimbursement, and the amount recognised or the reimbursement shouldnot exceed the amount o the provision. The amount o any expected

reimbursement is disclosed. Net presentation is permitted only in the

income statement.

Subsequent measurement

Management perorms an exercise at each balance sheet date to identiy the

best estimate o the discounted expenditure required to settle the present

obligation at the balance sheet date. The increase in provision due to thepassage o time (that is, as a consequence o the discount rate) is recognised

as interest expense.


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Contingent liabilities

Contingent liabilities are possible obligations whose existence will be

conrmedonlyontheoccurrenceornon-occurrenceofuncertainfuture

events outside the entitys control, or present obligations that are not

recognisedbecause:(a)itisnotprobablethatanoutowofeconomicbenetswill be required to settle the obligation; or (b) the amount cannot

be measured reliably.

Contingent liabilities are not recognised but are disclosed and described in

thenotestothenancialstatements,includinganestimateoftheirpotentialnancialeffectanduncertaintiesrelatingtotheamountortimingofany

outfow, unless the possibility o settlement is remote.

Contingent assets

Contingentassetsarepossibleassetswhoseexistencewillbeconrmedonlyontheoccurrenceornon-occurrenceofuncertainfutureeventsoutsidethe

entityscontrol.Contingentassetsarenotrecognised.Whentherealisation

o income is virtually certain, the related asset is not a contingent asset; it is

recognised as an asset.

Contingentassetsaredisclosedanddescribedinthenotestothenancial

statements,includinganestimateoftheirpotentialnancialeffectifthe

inowofeconomicbenetsisprobable.

22 Events ater the reporting period and nancialcommitments IAS 10

Itisnotgenerallypracticableforpreparerstonalisenancialstatements

without a period o time elapsing between the balance sheet date and the

dateonwhichthenancialstatementsareauthorisedforissue.Thequestionthereore arises as to the extent to which events occurring between the

balance sheet date and the date o approval (that is, events ater the

reportingperiod)shouldbereectedinthenancialstatements.

Eventsafterthereportingperiodareeitheradjustingeventsornon-adjusting

events.Adjustingeventsprovidefurtherevidenceofconditionsthatexisted

atthebalancesheetdateforexample,determiningaftertheyearendtheconsiderationforassetssoldbeforetheyearend.Non-adjustingevents


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relatetoconditionsthataroseafterthebalancesheetdateforexample,

announcing a plan to discontinue an operation ater the year end.

The carrying amounts o assets and liabilities at the balance sheet date areadjustedonlyforadjustingeventsoreventsthatindicatethatthegoing-

concern assumption in relation to the whole entity is not appropriate.

Signicantnon-adjustingpost-balance-sheetevents,suchastheissueof

sharesormajorbusinesscombinations,aredisclosed.

Dividends proposed or declared ater the balance sheet date but beore

thenancialstatementshavebeenauthorisedforissuearenotrecognised

as a liability at the balance sheet date. However, details o these dividends

are disclosed.

Anentitydisclosesthedateonwhichthenancialstatementswereauthorised

or issue and the persons authorising the issue and, where necessary, the

factthattheownersorotherpersonshavetheabilitytoamendthenancial

statements ater issue.

23 Share capital and reserves

Equity, along with assets and liabilities, is one o the three elements used

toportrayanentitysnancialposition.EquityisdenedintheIASBsFramework as the residual interest in the entitys assets ater deducting all

its liabilities. The term equity is oten used to encompass an entitys equity

instrumentsandreserves.Equityisgivenvariousdescriptionsinthenancial

statements. Corporate entities may reer to it as owners equity, shareholders

equity, capital and reserves, shareholders unds and proprietorship. Equityincludes various components with dierent characteristics.

Determining what constitutes an equity instrument or the purpose o IFRS

andhowitshouldbeaccountedforfallswithinthescopeofthenancial

instrument standard IAS 32.

Dierent classes o share capital may be treated as either debt or equity,

or a compound instrument with both debt and equity components. Equity

instruments(forexample,issued,non-redeemableordinaryshares)are

generally recorded at the proceeds o issue net o transaction costs. Equity

instrumentsarenotre-measuredafterinitialrecognition.


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Reserves include retained earnings, together with air value reserves, hedging

reserves, asset revaluation reserves and oreign currency translation reserves

and other statutory reserves.

Treasury shares

Treasury shares are deducted rom equity. No gain or loss is reco

ifrs pocket guide

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