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IFRSs in yourpocket 2008

Audit

Audit.Tax.Consulting.Financial Advisory.

An IAS Plus guide

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ContactsGlobal IFRS leadership team

IFRS global office

Global IFRS leaderKen [email protected]

IFRS centres of excellence

Americas

D.J. [email protected]

Asia-Pacific

Hong Kong MelbourneStephen Taylor Bruce [email protected] [email protected]

Europe-Africa

Johannesburg LondonGraeme Berry Veronica [email protected] [email protected]

Copenhagen ParisJan Peter Larsen Laurence [email protected] [email protected]

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Foreword

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ForewordThis seventh edition of IFRSs in your Pocket brings the booklet up to datefor developments up to the first quarter of 2008. We cover the samematerial that has made this publication a world-wide favourite –background information on the structure and workings of the IASB;analysis of the use of IFRSs around the world; summaries of all currentStandards and Interpretations; and up-to-date details of IASB and IFRICagenda projects. It is an ideal guide for entities contemplating a move toIFRSs, as well an update for veterans already reporting under the IFRSframework.

2008 can be considered a ‘peaceful’ year in terms of implementation ofIFRSs – the Board has adhered to its commitment not to require theadoption of new Standards or any major amendments to existingStandards before 1 January 2009. The only really significant requirementseffective from 1 January 2008 apply to service concession arrangements –IFRIC 12 will have a resounding impact on entities within that sector.But, in general, having grappled with the significant impact of IFRS 7 for2007 year ends, entities have been provided with a welcome breathingspace. It is important that they make use of that breathing space toprepare for the onslaught in 2009. IFRS 8 will require careful considerationin terms of identifying reportable segments and adapting reportingsystems. The completion of the Board’s business combinations project andthe publication of the revised IFRS 3 and IAS 27 (effective from 1 July 2009)have provided technical specialists with ample fodder for the foreseeablefuture. Keep your eyes out for our comprehensive guide on the subject,which we anticipate publishing in May this year.

You can keep up to date on later developments in the arena of internationalfinancial reporting via our IAS Plus website www.iasplus.com. We believethat it is the most comprehensive source of news about internationalfinancial reporting on the internet – please check in regularly.

Ken WildGlobal IFRS leaderDeloitte Touche TohmatsuApril 2008

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Our IAS Plus website

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Our IAS Plus website

Deloitte’s www.iasplus.com website provides, without charge,comprehensive information about international financial reporting ingeneral and IASB activities in particular. Unique features include:

• daily news about financial reporting globally;

• summaries of all Standards, Interpretations and proposals;

• many IFRS-related publications available for download;

• model IFRS financial statements and checklists;

• an electronic library of several hundred IFRS resources;

• all Deloitte comment letters to the IASB;

• links to nearly 200 global IFRS-related websites;

• e-learning modules for each IAS and IFRS;

• complete history of adoption of IFRSs in Europe and information aboutadoptions of IFRSs elsewhere around the world; and

• updates on developments in national accounting standards.


Contents

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ContentsPage

Abbreviations 4

IASB structure 5

Members of the IASB 7

IASB due process 9

IASB contact information 10

IASB chronology 11

Use of IFRSs around the world 15

Recent pronouncements 27

Summaries of current Standards 30

Current IASB agenda projects 96

IASB active research topics 102

Interpretations 103

IFRIC current agenda issues 105

Deloitte IFRS e-learning 106

Website addresses 107

Subscribe to our IAS Plus newsletter 108


Abbreviations

4

AbbreviationsARC Accounting Regulatory Committee of the EC

CESR Committee of European Securities Regulators

DP Discussion Paper

EC European Commission

ED Exposure Draft

EEA European Economic Area (EU 27 + 3 countries)

EFRAG European Financial Reporting Advisory Group

EITF Emerging Issues Task Force (of FASB)

EU European Union (27 countries)

FASB Financial Accounting Standards Board (US)

FEE European Accounting Federation

GAAP Generally Accepted Accounting Principle(s)

IAS(s) International Accounting Standard(s)

IASB International Accounting Standards Board

IASC International Accounting Standards Committee (predecessorto the IASB)

IASCF IASC Foundation (parent body of the IASB)

IFAC International Federation of Accountants

IFRIC International Financial Reporting Interpretations Committeeof the IASB, and interpretations issued by that committee

IFRS(s) International Financial Reporting Standard(s)

IOSCO International Organization of Securities Commissions

SAC Standards Advisory Council (advisory to the IASB)

SEC Securities and Exchange Commission (US)

SIC Standing Interpretations Committee of the IASC, andinterpretations issued by that committee

SME(s) Small and medium-sized entity(ies)


IASB structure

5

IASC Foundation

Geographical balance: six Trustees from North America, six from Europe,six from the Asia/Oceania region, four from any area (subject toestablishing overall geographical balance).

Backgrounds of Trustees: constitution requires an appropriate balance ofprofessional backgrounds, including auditors, preparers, users, academics,and other officials serving the public interest.

International Accounting Standards Board

Geographical balance: not specified, except that the Trustees shouldensure that the Board is not dominated by any particular constituency orgeographical interest.

Backgrounds of Board members: an appropriate mix of recent practicalexperience among auditors, preparers, users and academics – including atleast one with previous experience in each of these fields.

IASB structure

IASC Foundation22 Trustees, Appoint, Oversee, Raise Funds

Board 12 full-time and 2 part-timemembers

Set technical agenda. Approve Standards,Exposure Drafts and Interpretations

Standards AdvisoryCouncil

Approximately 40 members

Working GroupsFor major agenda projects

AppointsReports toAdvises

International FinancialReporting Interpretations

Committee 14 members


2008-2009 constitution review

IASCF Trustees are undertaking a comprehensive review of the structureand constitution to be completed by the end of 2009. The Trustees havefast-tracked several proposals that they expect to resolve before the end of2008. These are:

• to create a monitoring group that would oversee and appoint Trustees;

• to enlarge the IASB from 14 to 16 members; and

• to specify a geographical balance within the IASB.

IASB structure

6


Members of the IASB

7

Members of the IASBSir David Tweedie, Chairman Sir David became the first IASB Chairmanon 1 January 2001, having served from 1990-2000 as the first full-timeChairman of the UK Accounting Standards Board. Before that, he wasnational technical partner for KPMG and was a professor of accounting inhis native Scotland. He has worked on international standard-setting issuesboth as the first Chairman of the G4+1 and as a member of the IASC.Term expires 30 June 2011.

Thomas E. Jones, Vice-Chairman As the former Principal FinancialOfficer of Citicorp and Chairman of the IASC Board, Tom Jones bringsextensive experience in standard setting and the preparation of financialstatements for financial institutions. A British citizen, Mr. Jones has workedin Europe and the US. Term expires 30 June 2009.

Mary E. Barth As a part-time Board member, Mary Barth, a US citizen,retains her position as Senior Associate Dean of the Graduate School ofBusiness at Stanford University. Professor Barth was previously a partner atArthur Andersen. Term expires 30 June 2009.

Stephen Cooper Appointed August 2007. As a part-time Board member,Stephen Cooper also serves as Managing Director and head of valuationand accounting research at UBS Investment Bank. He has also been amember of the Corporate Reporting User Forum, and of the IASB’sAnalysts’ Representative Group and Financial Statement Presentationworking group. Term expires 30 June 2012.

Philippe Danjou Philippe Danjou has previously served as director of theaccounting division of the Autorité des Marchés Financiers (AMF), theFrench securities regulator. He was also Executive Director of the FrenchOrdre des Experts Comptables (OEC) from 1982 to 1986, and has acted invarious advisory roles for European and international accounting andauditing groups. Term expires 30 June 2011.

Jan Engstrom Jan Engstrom, a Swedish citizen, has held senior financialand operating positions with the Volvo Group, including serving on themanagement board and as Chief Financial Officer. He also was ChiefExecutive Officer of Volvo Bus Corporation. Term expires 30 June 2009.

Robert P. Garnett Mr. Garnett was the Executive Vice President of Financefor Anglo American plc, a South African company listed on the LondonStock Exchange. He has worked as a preparer and analyst of financialstatements in his native South Africa. He serves as Chairman of IFRIC.Term expires 30 June 2010.


Gilbert Gélard Having been a partner at KPMG in his native France,Gilbert Gélard has extensive experience with French industry. Mr. Gélardspeaks eight languages and is a former member of the French standard-setting body (CNC). He was also a member of the former IASC Board.Term expires 30 June 2010.

James J. Leisenring Jim Leisenring has worked on issues related toaccounting standard setting over the past three decades, as the ViceChairman and later as Director of International Activities of the FASB in theUnited States. While at the FASB, Mr. Leisenring served for several years asthe FASB’s observer at meetings of the former IASC Board. Term expires30 June 2010.

Warren McGregor Mr. McGregor developed an intimate knowledge ofstandard-setting issues with his work over 20 years at the AustralianAccounting Research Foundation, where he ultimately became the ChiefExecutive Officer. Term expires 30 June 2011.

John T. Smith Mr. Smith was previously a partner at Deloitte & Touche(USA). He was a member of the FASB’s Emerging Issues Task Force,Derivatives Implementation Group, and Financial Instruments Task Force.He served on the IASC Task Force on Financial Instruments and chaired theIASC’s IAS 39 Implementation Guidance Committee. He has also been amember of the IASC, SIC and IFRIC. Term expires 30 June 2012.

Tatsumi Yamada Tatsumi Yamada was a partner at the Japanese memberfirm of PricewaterhouseCoopers. He brings extensive experience withinternational standard setting as a Japanese member of the former IASCBoard between 1996 and 2000. Term expires 30 June 2011.

Zhang Wei-Guo Appointed July 2007. From 1997 to 2007, Zhang Wei-Guowas Chief Accountant of the China Securities Regulatory Commission(CSRC). Before joining the CSRC, Dr Zhang was a professor at ShanghaiUniversity of Finance and Economics (SUFE) where he also received his PhDin economics. Term expires 30 June 2012.

One vacancy.

Members of the IASB

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IASB due process

9

IASB due processFormal due process for projects normally, but not necessarily, involves thefollowing steps:

• ask staff to identify and review the issues associated with a potentialagenda topic and to consider the application of the Framework to theissues;

• study national accounting requirements and practice and exchangeviews about the issues with national standard-setters;

• consult the Standards Advisory Council about the advisability of addingthe topic to the IASB’s agenda;*

• form an advisory group (generally called a ‘working group’) to advisethe IASB and its staff on the project;

• publish for public comment a discussion document (usually called aDiscussion Paper, which will often include the Board’s preliminary viewson some of the issues in the project);

• publish for public comment an Exposure Draft approved by at least ninevotes of the IASB, including therein any dissenting opinions held byIASB members (in Exposure Drafts, dissenting opinions are referred to as‘alternative views’);*

• publish within an Exposure Draft a basis for conclusions;

• consider all comments received within the comment period ondiscussion documents and Exposure Drafts;*

• consider the desirability of holding a public hearing and of conductingfield-tests and, if considered desirable, holding such hearings andconducting such tests;

• approve of a Standard by at least nine votes of the IASB and include inthe published Standard any dissenting opinions;* and

• publish within a Standard a basis for conclusions, explaining, amongother things, the steps in the IASB’s due process and how the IASB dealtwith public comments on the Exposure Draft.

* Steps required by the IASCF Constitution.


IASB contact informationInternational Accounting Standards Board30 Cannon Street, London EC4M 6XH, United Kingdom

General enquiries

• Telephone: +44 20 7246 6410

• Fax: +44 20 7246 6411

• General e-mail: [email protected]

• Office hours: Monday-Friday 08:30-18:00 London time

• Website: www.iasb.org

Publications Department orders and enquiries

• Telephone: +44 20 7332 2730

• Fax: +44 20 7332 2749

• Publications e-mail: [email protected]

• Office hours: Monday-Friday 09:30-17:30 London time

Board Chairman and Vice Chairman, and TechnicalDirectors

Sir David Tweedie IASB Chairman [email protected]

Thomas E. Jones IASB Vice Chairman [email protected]

Elizabeth Hickey Director of [email protected] Activities

Wayne S. Upton Director of Research [email protected]

Paul Pacter Director of [email protected] for SMEs

IASB contact information

10


IASB chronology

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IASB chronology1973 Agreement to establish IASC signed by representatives of the

professional accountancy bodies in Australia, Canada, France,Germany, Japan, Mexico, Netherlands, United Kingdom/Irelandand United States.

Steering committees appointed for IASC’s first three projects.

1975 First final IASs published: IAS 1 (1975) Disclosure of AccountingPolicies, and IAS 2 (1975) Valuation and Presentation ofInventories in the Context of the Historical Cost System.

1982 The IASC Board is expanded to up to 17 members, including13 country members appointed by the Council of theInternational Federation of Accountants (IFAC) and up to4 representatives of organisations with an interest in financialreporting. IFAC recognises and will look to IASC as the globalaccounting standard-setter.

1989 European Accounting Federation (FEE) supports internationalharmonisation and greater European involvement in IASC.IFAC adopts a public-sector guideline to require governmentbusiness enterprises to follow IASs.

1994 IASC Advisory Council established, with responsibilities foroversight and finances.

1995 European Commission supports the agreement between IASCand International Organization of Securities Commissions(IOSCO) to complete core standards and concludes that IASsshould be followed by European Union multinationals.

1996 US SEC announces its support of the IASC’s objective to develop,as expeditiously as possible, accounting standards that could beused in preparing financial statements for the purpose of cross-border offerings.

1997 Standing Interpretations Committee (SIC) is formed. 12 votingmembers. Mission to develop interpretations of IASs for finalapproval by the IASC.

Strategy Working Party is formed to make recommendationsregarding the future structure and operation of IASC.


1998 IFAC/IASC membership expands to 140 accountancy bodies in101 countries.

IASC completes the core standards with approval of IAS 39.

1999 G7 Finance Ministers and International Monetary Fund urgesupport for IASs to “strengthen the international financialarchitecture”.

IASC Board unanimously approves restructuring into 14-memberboard (12 full-time) under an independent board of trustees.

2000 IOSCO recommends that its members allow multinational issuersto use IASC standards in cross-border offerings and listings.

Ad hoc nominating committee is formed, chaired by US SECChairman Arthur Levitt, to nominate the Trustees who willoversee the new IASB structure.

IASC member bodies approve IASC’s restructuring and a newIASC Constitution.

Nominating committee announces initial Trustees.

Trustees name Sir David Tweedie (chairman of the UK AccountingStandards Board) as the first Chairman of the restructured IASB.

2001 Members and new name of IASB announced. IASC Foundationformed. On 1 April 2001, the new IASB assumes its standard-setting responsibilities from the IASC. Existing IASs and SICsadopted by IASB.

IASB moves into its new offices at 30 Cannon Street, London.

IASB meets with chairs of its eight liaison national accountingstandard-setting bodies to begin coordinating agendas andsetting out convergence goals.

2002 SIC is renamed as the International Financial ReportingInterpretations Committee (IFRIC) with a mandate not only tointerpret existing IASs and IFRSs but also to provide timelyguidance on matters not addressed in an IAS or IFRS.

Europe requires IFRSs for listed companies starting 2005.

IASB and FASB issue joint agreement on convergence.

2003 First final IFRS and first IFRIC draft Interpretation published.

Improvements project completed – major revisions to 14 IASs.

IASB chronology

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IASB chronology

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2004 Extensive discussions about IAS 39 in Europe, leading to ECendorsement with two sections of IAS 39 ‘carved out’.

Webcasting of IASB meetings begins.

First IASB Discussion Paper and first final IFRIC Interpretation.

IFRSs 2 through 6 are published.

IFRICs 1 through 5 are published.

2005 IASB Board member becomes IFRIC chairman.

Constitutional changes.

US SEC ‘roadmap’ to eliminating IFRS-US GAAP reconciliation.

EC eliminates fair value option IAS 39 ‘carve-out’.

Meetings of Working Groups opened to public.

IFRS 7 is published.

IFRICs 6 and 7 are published (and IFRIC 3 withdrawn).

2006 Updated IASB/FASB agreement on convergence.

IASB issues statement on working relationships with otherstandard setters.

IASB announces that no new major Standards will be effectivebefore 2009.

IFRS 8 is published.

IFRICs 8 through 12 are published.

2007 IFRIC expanded from 12 to 14 members.

US SEC drops requirement for reconciliation to US GAAP forforeign IFRS registrants and invites comments on use of IFRSs byUS domestic registrants.

Revisions to IAS 1 and IAS 23 are published.

IFRICs 13 and 14 are published.

Board proposes separate IFRS for small and medium-sized entities(SMEs).


2008 IOSCO statement urging entities to clearly state whether theycomply in full with IFRSs as adopted by the IASB.

Through March – revised IFRS 3 and IAS 27 (Phase II of BusinessCombinations project) are issued, and IFRS 2 (vesting conditionsand cancellations) and IAS 32 (puttable instruments andobligations arising on liquidation) are amended.

IASB chronology

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Use of IFRSs around the world

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Use of IFRSs around the worldUse of IFRSs for domestic reporting by listed companies as of March 2008.We keep this table up to date, and also have information about the use ofIFRSs by unlisted companies, at www.iasplus.com/country/useias.htm

Required Requiredfor some for alldomestic domestic

IFRSs not IFRSs listed listedLocation permitted permitted companies companies

Abu Dhabi (UAE) X

Albania No stock exchange. Companies use Albania GAAP

American Samoa No stock exchange. Companies may use IFRSs.

Argentina X

Armenia X

Aruba X

Austria X (a)

Australia X (b)

Azerbaijan X

Bahamas X

Bahrain X

Barbados X

Bangladesh X

Belgium X (a)

Belarus Banks from 2008

Belize No stock exchange. Companies may use IFRSs.

Benin X

Bermuda X

Bhutan X

Bolivia X

Bosnia and All large andHerzegovina medium-sized

Botswana X

Brazil X From 2010

Brunei Darussalam No stock exchange. Companies may use IFRSs.




Bulgaria X

Burkina Faso X

Cambodia No stock exchange. Companies may use IFRSs.

Cayman Is. X

Canada X From 2011

Chile X From 2009

China X

Cote D’Ivoire X

Colombia X

Costa Rica X

Croatia X

Cuba X

Cyprus X (a)

Czech Republic X (a)

Denmark X (a)

Dominica X

Dominican Republic X

Dubai (UAE) Banks

Ecuador X

Egypt X

El Salvador X

Estonia X (a)

Finland X (a)

Fiji X

France X (a)

Germany X (a)

Georgia X

Ghana X

Gibraltar X

Greece X (a)

Greenland No stock exchange. Companies may use IFRSs.


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Guam No stock exchange. Companies use US GAAP.

Guatemala X

Guyana X

Haiti X

Honduras X

Hong Kong X (c)

Hungary X (a)

Iceland X (a)

India X

Indonesia X

Iran X

Ireland X (a)

Israel X

Italy X (a)

Jamaica X

Japan X

Jordan X

Kazakhstan X

Kenya X

Korea (South) Korean equivalents of IFRSs permitted for listed companies other than banks from 2009. Required from 2011.

Kuwait X

Kyrgyzstan X

Laos X

Latvia X (a)

Lebanon X

Liechtenstein X (a)

Lesotho X

Lithuania X (a)

Luxembourg X (a)

Macau No stock exchange. Companies may use IFRSs.



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Macedonia X

Malawi X

Maldives X

Malaysia X

Mali X

Malta X (a)

Mauritania No stock exchange. IFRSs not permitted

Mauritius X

Mexico X

Moldova X

Montenegro X

Morocco Non-banks Banks

Mozambique Non-banks Banks

Myanmar X

Namibia X

Netherlands X (a)

NL Antilles X

Nepal X

New Zealand X (b)

Nicaragua X

Niger X

Norway X (a)

Oman X

Pakistan X

Panama X

Papua New Guinea X

Paraguay X

Peru X

Philippines X (d)

Poland X (a)

Portugal X (a)



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Qatar X

Reunion No stock exchange. Companies may use IFRSs.

Romania X (a)

Russian Federation Non-banks Banks

Samoa No stock exchange. Companies may use IFRSs.

Saudi Arabia X

Serbia X

Sierra Leone No stock exchange (one is being developed). IFRSs required for all.

Singapore X (d)

Slovenia X (a)

Slovak Republic X (a)

South Africa X

Spain X (a)

Sri Lanka X

Suriname X

Sweden X (a)

Syria X

Swaziland X

Switzerland X

Taiwan X

Tajikistan X

Tanzania X

Thailand X

Togo X

Trinidad and Tobago X

Tunisia X

Turkey X (e)

Uganda X

Ukraine X

United Kingdom X (a)




United States X

Uruguay X (f)

Uzbekistan X

Vanuatu No stock exchange. Companies may use IFRSs.

Venezuela X

Vietnam X

Virgin Islands (British) X

Virgin Islands No stock exchange. Companies use US GAAP.(US)

Yemen No stock exchange. Companies may use IFRSs.

Zambia X

Zimbabwe X

(a) Audit report and basis of presentation refer to IFRSs as adoptedby the EU.

(b) Compliance with IFRSs is stated in a note and audit report.

(c) Local standards identical to IFRSs, but some effective dates andtransition provisions differ.

(d) Most IFRSs adopted, but some significant modifications were made.

(e) Turkish companies may follow English version of IFRSs, or Turkishtranslation. If the latter, because of the translation delay, auditreport and basis of presentation refer to ‘IFRSs as adopted for usein Turkey’.

(f) By law, all companies must follow IFRSs existing at 19 May 2004.The auditor’s report refers to conformity with Uruguayan GAAP.


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Use of IFRSs in Europe

European Accounting Regulation effective from 2005

Listed companies To implement a ‘financial reporting strategy’ adoptedby the European Commission in June 2000, the European Union in 2002approved an Accounting Regulation requiring all EU companies listed on aregulated market (about 8,000 companies in total) to follow IFRSs in theirconsolidated financial statements starting in 2005. The IFRS requirementapplies not only in the 27 EU countries but also in the three EuropeanEconomic Area countries. Most large companies in Switzerland (not anEU or EEA member) also use IFRSs.

Non-EU companies listed on regulated EU stock markets have beenpermitted to continue to use their national GAAPs pending EC assessmentof the equivalency of the national GAAP to IFRSs. In December 2007, theEuropean Commission extended this exemption until 31 December 2011for countries that have clear plans either to converge their national GAAPswith IFRSs (in which case the EC will assess equivalency) or to adopt IFRSsin full as their national GAAP.

Unlisted companies and separate-company statements EU MemberStates may extend the IFRS requirement to non-listed companies and toseparate-company statements. Details regarding the use of IFRSs byunlisted companies and in separate-company financial statements inEU/EEA countries are available on www.iasplus.com

Endorsement of IFRSs for use in Europe

Under the EU Accounting Regulation, IFRSs must be individually endorsedfor use in Europe. The endorsement process involves the following steps:

• EU translates the IFRSs into all European languages;

• the private-sector European Financial Reporting Advisory Group (EFRAG)gives its views to the European Commission (EC);

• the EC’s Standards Advice Review Group (SARG) gives its views to theEC on EFRAG’s recommendations;

• the EC’s Accounting Regulatory Committee makes an endorsementrecommendation; and

• the EC submits the endorsement proposal to the European Parliament’sRegulatory Procedure with Scrutiny Committee, and to the 27-memberCouncil of the EU. Both must approve endorsement or the proposal issent back to the EC for further consideration.


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By the end of March 2008, the EC had voted to endorse all IASs (exceptfor recent amendments to IAS 1, IAS 23, and IAS 27), IFRSs 1 through 8(except for the 2008 revision to IFRS 3 and recent amendments to IFRS 2and IAS 32), and all Interpretations except IFRICs 12, 13 and 14 – but withone carve-out from IAS 39 Financial Instruments: Recognition andMeasurement. The carve-out allows the use of fair value hedge accountingfor interest rate hedges of core deposits on a portfolio basis.

Enforcement of IFRSs in Europe

European securities markets are regulated by individual member states,subject to certain regulations adopted at the EU level. EU-wide regulationsinclude:

• standards adopted by the Committee of European Securities Regulators(CESR), a consortium of national regulators. Standard No. 1,Enforcement of Standards on Financial Information in Europe, sets out21 high level principles that EU member states should adopt inenforcing IFRSs. Standard No. 2, Coordination of Enforcement Activities,adopts guidelines for implementing Standard No. 1;

• the Directive on Statutory Audit of Annual Accounts and ConsolidatedAccounts was issued in September 2006. The new Directive replacedthe 8th Directive and amended the 4th and 7th Directives. Amongother things, the Directive adopted International Standards on Auditingthroughout the EU and required Member States to form auditoroversight bodies; and

• amendments to EU directives that establish the collective responsibilityof board members for a company’s financial statements.

The European Group of Auditors’ Oversight Bodies (EGAOB) was formedby the EC in late 2005.

In February 2006, the EC formed a Roundtable for Consistent Applicationof IFRSs. The Roundtable convened for the first time in May 2006. Thefunction of the Roundtable is to identify, at an early stage, emerging andpotentially problematic accounting issues in relation to consistentapplication of IFRSs and to bring them to the attention of the IASB andIFRIC.

A plan for cooperation on overlapping enforcement issues, includingfinancial reporting, was agreed to in late 2005 by the European groups ofbank regulators, insurance regulators and securities regulators. During2007, CESR published two batches of IFRS enforcement decisions coveringover 25 topics.

A plan is under development by CESR to make published financial reportsof listed companies available electronically throughout Europe.


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Use of IFRSs in the United States

SEC recognition of IFRSs

Of the approximately 15,000 companies whose securities are registered withthe US Securities and Exchange Commission, over 1,100 are foreigncompanies. Prior to November 2007, if these foreign companies submittedIFRS or local GAAP financial statements rather than US GAAP, a reconciliationof net income and net assets to US GAAP figures was required.

In November 2007, the SEC voted to allow foreign companies to submitfinancial statements prepared using IFRSs as issued by the IASB withouthaving to include a reconciliation of the IFRS figures to US GAAP. This newrule applies to financial statements covering years ended after15 November 2007.

In August 2007, the SEC published for public comment a ‘ConceptRelease’ to stimulate debate on whether to allow US domestic issuers tosubmit IFRS financial statements for the purpose of complying with therules and regulations of the SEC. It is expected that certain US companieswill have a choice between using IFRSs and US GAAP by 2011.

IFRS-US GAAP convergence

The Norwalk Agreement

In October 2002, following a joint meeting at the offices of the FASB inNorwalk, Connecticut, the FASB and the IASB formalised theircommitment to the convergence of US GAAP and IFRSs by issuing amemorandum of understanding (commonly referred to as the ‘NorwalkAgreement’). The two Boards pledged to use their best efforts to:

• make their existing financial reporting standards fully compatible assoon as is practicable; and

• co-ordinate their future work programmes to ensure that, onceachieved, compatibility is maintained.

‘Compatible’ does not mean word-for-word identical standards, but ratherthat there are no significant differences between the two sets of standards.

Road map for convergence 2006-2008

In February 2006, the IASB and the FASB released a ‘roadmap’ thatidentified short- and long-term convergence projects with steps andmilestones toward achieving convergence.


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Short-term projects

For the projects identified as short-term, the goal by 2008 is to reach aconclusion about whether major differences in those few focussed areasshould be eliminated through one or more short-term standard-settingprojects and, if so, to complete or substantially complete work in thoseareas. The remaining topics for short-term convergence include:

IASB

• Joint ventures (Exposure Draft (ED) proposing to remove proportionateconsolidation option for jointly controlled entities and clarify definitionissued September 2007).

FASB

• Investment properties.

• Research and development (research is under way).

• Subsequent events (removed in September 2007 from the FASB agendaas a separate project and included in the codification project, which wasreleased for a one-year verification phase in January 2008).

Joint

• Impairment (research is under way).

• Income taxes (ED planned for second quarter of 2008).

Long-term projects

The goal for 2008 for the projects listed below is to have made significantprogress in the following areas identified for improvement (IASB statusshown in brackets):

• Conceptual framework (ED on objectives and Discussion Papers (DPs) onmeasurement and reporting entity planned for 2008).

• Fair value measurement guidance (SFAS 157 used by IASB as basis for aDP).

• Financial statement presentation – Phase B (DP planned for 2008).

• Post-employment benefits (DP issued March 2008).

• Revenue recognition (DP planned for second quarter of 2008).

• Liabilities and equity (DP issued February 2008).

• Financial instruments (DP issued March 2008).

• Derecognition (staff research report expected in 2008).

• Consolidations, including special purpose entities (DP planned forsecond half of 2008).

• Intangible assets (research is under way).

• Leases (DP planned for 2009).

More specific goals have been set for each individual project.


Use of IFRSs in Canada

Currently, domestic Canadian companies listed in the United States areallowed to use US GAAP for domestic reporting, but not IFRSs. All otherCanadian companies must use Canadian GAAP. Foreign issuers in Canadaare permitted to use IFRSs or a limited group of non-Canadian nationalGAAPs. In August 2006, the Accounting Standards Board of Canada (AcSB)published a detailed Implementation Plan for Incorporating InternationalFinancial Reporting Standards into Canadian GAAP. In February 2008, theAcSB confirmed that all IFRSs will be adopted as Canadian GAAP word-for-word effective for profit-orientated publicly-accountableenterprises in 2011. At the same time, Canadian securities regulatorsannounced tentative proposals to:

• accept IFRS filings starting in 2009;

• require financial statements to be described as conforming to IFRSs asadopted by the IASB; and

• prohibit Canadian companies registered in the United States from usingUS GAAP, rather than IFRSs, by 2013.

Use of IFRSs in Asia-Pacific

Asia-Pacific jurisdictions are taking a variety of approaches towardconvergence of GAAP for domestic listed companies with IFRSs.

Requirement for IFRSs in place of national GAAP

No Asia-Pacific jurisdictions require IFRSs for all domestic listed companies.

All national standards are virtually word-for-word IFRSs

Australia, Hong Kong, Korea (effective 2011, permitted in 2009), NewZealand and Sri Lanka (effective 2011) are taking this approach. Effectivedates and transitions may differ from IFRSs. New Zealand has eliminatedsome accounting policy options and added some disclosures and guidance.

Nearly all national standards are word-for-word IFRSs

The Philippines and Singapore have adopted most IFRSs word-for-word,but have made some significant modifications.

Some national standards are close to word-for-word IFRSs

India, Malaysia, Pakistan and Thailand have adopted selected IFRSs quiteclosely, but significant differences exist in other national standards, andthere are time lags in adopting new or amended IFRSs. India hasannounced a plan to adopt IFRSs in full as Indian Financial ReportingStandards effective 2011.


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IFRSs are looked to in developing national GAAP

This is done to varying degrees in Indonesia, Japan, Taiwan and Vietnam,but significant differences exist.

In February 2006, China adopted a new Basic Standard and 38 newChinese Accounting Standards generally consistent with IFRSs with fewexceptions.

Some domestic listed companies may use IFRSs

This is true in China (companies listed in Hong Kong), Hong Kong(companies based in Hong Kong but incorporated elsewhere), Laos andMyanmar.


26


Recent pronouncementsEffective for 31 December 2007 year ends

New Standard

IFRS 7 Financial Instruments: Disclosures

Amendments to Standards

Amendments to IAS 1 Capital Disclosures

Revised Guidance on Implementing IFRS 4

New Interpretations

IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies

IFRIC 8 Scope of IFRS 2

IFRIC 9 Reassessment of Embedded Derivatives

IFRIC 10 Interim Financial Reporting and Impairment

Recent pronouncements

27



28

Available for early adoption for 31 December 2007 year ends

New Standard Effective for annual periods beginning on or after

IFRS 8 Operating Segments 1 January 2009

Amendments to Standards

Amendments to Vesting Conditions 1 January 2009IFRS 2 and Cancellations

Amendments Revised requirements 1 January 2009to IAS 1 for presentation of

some financial statements, and revised terminology throughout

Amendments to Removal of option to 1 January 2009IAS 23 expense all borrowing

costs

Amendments to Puttable Financial 1 January 2009IAS 32 and IAS 1 Instruments and

Obligations Arising on Liquidation

New Interpretations

IFRIC 11 IFRS 2 – Group and 1 March 2007Treasury Share Transactions

IFRIC 12 Service Concession 1 January 2008Arrangements

IFRIC 13 Customer Loyalty 1 July 2008Programmes

IFRIC 14 IAS 19 – The Limit 1 January 2008on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction


Available for adoption after 2007

Revised Standards Effective

IFRS 3(2008) Business Prospectively for Combinations business

combinations wherethe acquisition dateis on or after thebeginning of the firstannual periodbeginning on orafter1 July 2009.Earlier applicationpermitted – but onlyfor annual periodsbeginning on or after30 June 2007. Mustadopt IAS 27(2008)from the same date.

IAS 27(2008) Consolidated and Annual periodsSeparate Financial beginning on or afterStatements 1 July 2009. Earlier

application permitted. Must adopt IFRS 3(2008) from the same date – therefore effectively prohibited from adopting for annual periods beginning before 30 June 2007.


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Summaries of currentStandardsOn pages 30 to 95, we have summarised the provisions of all InternationalFinancial Reporting Standards in issue at 31 March 2008, as well as thePreface to IFRSs and the Framework for the Preparation and Presentationof Financial Statements.

These summaries are intended as general information and are not asubstitute for reading the entire Standard.

The requirements of IAS 30 Disclosures in Financial Statements of Banksand Similar Institutions, and the disclosure requirements previouslyincluded in IAS 32 have been deleted from this edition, as they have beensuperseded by IFRS 7 with effect from 1 January 2007.

Since our last edition, the IASB has issued substantially revised versions ofIFRS 3 Business Combinations, IAS 1 Presentation of Financial Statementsand IAS 27 Consolidated and Separate Financial Statements. These revisedStandards will not be effective until 2009. However, to avoid confusionand because early adoption is permitted (see Standards for detail), we haveincluded in this guide the revised versions of these Standards (andconsequential amendments to other Standards). For information about theprevious versions, please refer to earlier editions of IFRSs in your Pocket.

Throughout these summaries, we have also adopted the generalterminology changes arising from IAS 1(2007). Revised titles are used forfinancial statements (e.g. ’statement of financial position’ instead of‘balance sheet’), and Standards (e.g. IAS 10 is referred to as Events afterthe Reporting Period).

Preface to International Financial Reporting Standards

Adoption Adopted by the IASB in May 2002.

Summary Covers, among other things:

• the objectives of the IASB;

• the scope of IFRSs;

• due process for developing IFRSs andInterpretations;

• equal status of ‘black letter’ and ‘grey letter’paragraphs;

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• policy on effective dates; and

• use of English as the official language.

Framework for the Preparation and Presentation ofFinancial Statements

Adoption Approved by the IASC Board in April 1989.

Adopted by the IASB in April 2001.

All of the requirements of the Framework arecurrently under reconsideration as part of thejoint IASB/FASB Conceptual Framework project.

Summary The Framework:

• Defines the objective of general purposefinancial statements. The objective is toprovide information about the financialposition, performance and changes infinancial position of an entity that is useful toa wide range of users in making economicdecisions.

• Identifies the qualitative characteristics thatmake information in financial statementsuseful. The Framework identifies fourprincipal qualitative characteristics:understandability, relevance, reliability andcomparability.

• Defines the basic elements of financialstatements and the concepts for recognisingand measuring them in financial statements.Elements directly related to financial positionare assets, liabilities and equity. Elementsdirectly related to performance are incomeand expenses.

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IFRS 1 First-time Adoption of International Financial ReportingStandards

Effective date First IFRS financial statements for a periodbeginning on or after 1 January 2004.

Objective To prescribe the procedures when an entityadopts IFRSs for the first time as the basis forpreparing its general purpose financialstatements.

Summary Overview for an entity that adopts IFRSs for thefirst time (by an explicit and unreservedstatement of compliance with IFRSs) in itsannual financial statements for the year ended31 December 2007:

• Select accounting policies based on IFRSs inforce at 31 December 2007.

• Prepare at least 2007 and 2006 financialstatements and restate retrospectively theopening statement of financial position byapplying the IFRSs in force at 31 December2007, except for those matters dealt with inspecific exemptions in IFRS 1:

– the opening statement of financialposition is prepared at 1 January 2006 atthe latest (but may be earlier if the entityelects to present more than one year ofcomparative information under IFRSs);

– the opening statement of financialposition is presented in the entity’s firstIFRS financial statements (therefore, threestatements of financial position); and

– if a 31 December 2007 adopter reportsselected financial data (but not fullfinancial statements) on an IFRS basis forperiods prior to 2006, in addition to fullfinancial statements for 2006 and 2007,that does not change the fact that itsopening IFRS statement of financialposition is as of 1 January 2006.

Interpretations None.

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Useful Deloitte First-time adoption: A guide to IFRS 1publication

Application guidance for the “stable platform”Standards effective in 2005. Available fordownload at www.iasplus.com/dttpubs/pubs.htm

IFRS 2 Share-based Payment

Effective date Annual periods beginning on or after 1 January 2005.

Amended in January 2008 to clarify thedefinition of vesting conditions and theaccounting treatment of cancellations by thecounterparty to a share-based arrangement.Amendments effective 1 January 2009, withearlier application permitted.

Objective To prescribe the accounting for transactions inwhich an entity receives or acquires goods orservices either as consideration for its equityinstruments or by incurring liabilities foramounts based on the price of the entity’sshares or other equity instruments of the entity.

Summary • All share-based payment transactions arerecognised in the financial statements, usinga fair value measurement basis.

• An expense is recognised when the goods orservices received are consumed.

• IFRS 2 applies to both public and non-publicentities. However, if the fair value of equityinstruments of non-public entities cannot bemeasured reliably, intrinsic valuemeasurements are used.

• In principle, transactions in which goods orservices are received as consideration forequity instruments of the entity are measuredat the fair value of the goods or servicesreceived. Only if the fair value of the goodsor services cannot be measured reliably is thefair value of the equity instruments grantedused.

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• For transactions with employees and othersproviding similar services, the entity measuresthe fair value of the equity instrumentsgranted, because it is typically not possible toestimate reliably the fair value of employeeservices received.

• For transactions measured at the fair value ofthe equity instruments granted (such astransactions with employees), fair value isestimated at grant date.

• For transactions measured at the fair value ofthe goods or services received, fair value isestimated at the date of receipt of thosegoods or services.

• For goods or services measured by referenceto the fair value of the equity instrumentsgranted, in general, vesting conditions,except market conditions, are not taken intoaccount when estimating the fair value ofthe shares or options at the relevantmeasurement date (as specified above).Instead, vesting conditions are taken intoaccount by adjusting the number of equityinstruments included in the measurement ofthe transaction amount so that, ultimately,the amount recognised for goods or servicesreceived as consideration for the equityinstruments granted is based on the numberof equity instruments that eventually vest.

• The January 2008 amendments restrict thedefinition of vesting condition to includeonly service conditions and performanceconditions, and amend the definition ofperformance conditions to require thecompletion of a service period in additionto specified performance targets.

• The fair value of equity instruments grantedis based on market prices, if available, andtakes into account the terms and conditionson which those equity instruments weregranted. In the absence of market prices, fairvalue is estimated using a valuation model toestimate what the price of those equityinstruments would have been on themeasurement date in an arm’s length

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transaction between knowledgeable, willingparties. IFRS 2 does not specify whichparticular valuation model should be used.

Interpretations IFRIC 8 Scope of IFRS 2

IFRIC 8 clarifies that IFRS 2 applies to share-basedpayment transactions in which the entity cannotspecifically identify some or all of the goods orservices received.

IFRIC 11 IFRS 2 Group and Treasury ShareTransactions (effective from 1 March 2007)

IFRIC 11 clarifies the application of IFRS 2 tocertain share-based payment arrangementsinvolving the entity’s own equity instrumentsand to arrangements involving equityinstruments of the entity’s parent.

Useful Deloitte Share-based payments: A guide to IFRS 2publication

2nd edition (June 2007). Guidance on applyingIFRS 2 to many common share-based paymenttransactions. Available for download atwww.iasplus.com/dttpubs/pubs.htm

IFRS 3(2008) Business Combinations

Effective date Revised IFRS 3(2008) issued January 2008,replacing IFRS 3(2004) effective for businesscombinations in periods beginning on or after1 July 2009. Earlier application permitted – butnot for periods beginning before 30 June 2007.

See earlier editions of IFRSs in your Pocket for asummary of the requirements of IFRS 3(2004).

Core principle An acquirer of a business recognises the assetsacquired and liabilities assumed at theiracquisition-date fair values and disclosesinformation that enables users to evaluate thenature and financial effects of the acquisition.

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Summary • A business combination is a transaction orevent in which an acquirer obtains control ofone or more businesses. A business is definedas an integrated set of activities and assetsthat is capable of being conducted andmanaged for the purpose of providing areturn directly to investors or other owners,members or participants.

• IFRS 3 does not apply to the formation of ajoint venture, combinations of entities orbusinesses under common control, nor to theacquisition of an asset or a group of assetsthat do not constitute a business.

• The acquisition method (called the ‘purchasemethod’ in the previous version of theStandard) is used for all businesscombinations.

• Steps in applying the acquisition method are:

1. Identification of the ‘acquirer’ – thecombining entity that obtains control ofthe acquiree.

2. Determination of the ‘acquisition date’ –the date on which the acquirer obtainscontrol of the acquiree.

3. Recognition and measurement of theidentifiable assets acquired, the liabilitiesassumed and any non-controlling interest(NCI, formerly called minority interest) inthe acquiree.

4. Recognition and measurement of goodwillor a gain from a bargain purchase.

• Assets and liabilities are measured at theiracquisition-date fair values (with a limitednumber of specified exceptions). An entitymay elect to measure NCI either at (a) fairvalue or (b) the NCI’s proportionate share ofthe fair value of the identifiable net assets ofthe acquiree (option is available on atransaction-by-transaction basis).

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• Goodwill is measured as the differencebetween:

– the aggregate of (a) the acquisition-datefair value of the consideration transferred,(b) the amount of any NCI, and (c) in abusiness combination achieved in stages(see below), the acquisition-date fair valueof the acquirer’s previously-held equityinterest in the acquiree; and

– the net of the acquisition-date amounts ofthe identifiable assets acquired and theliabilities assumed (measured inaccordance with IFRS 3).

• If the difference above is negative, theresulting gain is recognised as a bargainpurchase in profit or loss.

• For business combinations achieved instages, if the acquirer increases an existingequity interest so as to achieve control of theacquiree, the previously-held equity interest isremeasured at acquisition-date fair value andany resulting gain or loss is recognised inprofit or loss.

• If the initial accounting for a businesscombination can be determined onlyprovisionally by the end of the first reportingperiod, the combination is accounted forusing provisional values. Adjustments toprovisional values within one year relating tofacts and circumstances that existed at theacquisition date. No adjustments after oneyear except to correct an error in accordancewith IAS 8.

• Consideration for the acquisition includes theacquisition-date fair value of contingentconsideration. Changes to contingentconsideration resulting from events after theacquisition date are recognised in profit orloss.

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• All acquisition-related costs (e.g. finder’s fees,professional or consulting fees, costs ofinternal acquisition department) arerecognised in profit or loss except for costs toissue debt or equity securities, which arerecognised in accordance with IAS 39 andIAS 32 respectively.

• In addition, IFRS 3 provides guidance onsome specific aspects of businesscombinations including:

– business combinations achieved withoutthe transfer of consideration;

– reverse acquisitions;

– identifying intangible assets acquired;

– pre-existing relationships between theacquirer and the acquiree (e.g. reacquiredrights); and

– the reassessment of the acquiree’scontractual arrangements at theacquisition date.


Useful Deloitte Publication of a guide to IFRS 3(2008) and publication related aspects of IAS 27(2008) anticipated May

2008. The guide will supplement the IASB’s ownguidance for applying these Standards andaddress practical implementation issues.Following publication, will be available fordownload at www.iasplus.com/dttpubs/pubs.htm

IFRS 4 Insurance Contracts


Objective To prescribe the financial reporting for insurancecontracts until the IASB completes the secondphase of its project on insurance contracts.

Summary • Insurers are exempted from applying theIASB Framework and certain existing IFRSs.

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• Catastrophe reserves and equalisationprovisions are prohibited.

• Requires a test for the adequacy ofrecognised insurance liabilities and animpairment test for reinsurance assets.

• Insurance liabilities may not be offset againstrelated reinsurance assets.

• Accounting policy changes are restricted.

• New disclosures are required.

• Financial guarantee contracts are in thescope of IAS 39, unless the issuer hadpreviously (prior to initial adoption of IFRS 4)asserted explicitly that it regards suchcontracts as insurance contracts and hasused accounting applicable to insurancecontracts. In this instance, the issuer mayelect to apply either IAS 39 or IFRS 4.


IFRS 5 Non-current Assets Held for Sale and DiscontinuedOperations


Objective To prescribe the accounting for non-currentassets held for sale, and the presentation anddisclosure of discontinued operations.

Summary • Introduces the classification ‘held for sale’(available for immediate sale and disposalwithin 12 months is highly probable) and theconcept of a disposal group (a group ofassets to be disposed of in a singletransaction, including any related liabilitiesalso transferred).

• Non-current assets or disposal groups heldfor sale are measured at the lower of carryingamount and fair value less costs to sell.

• Such non-current assets held for sale(whether individually or as part of a disposalgroup) are not depreciated.

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• A non-current asset classified as held for sale,and the assets and liabilities in a disposalgroup classified as held for sale, arepresented separately in the statement offinancial position.

• A discontinued operation is a component ofan entity that either has been disposed of oris classified as held for sale and (a) representsa separate major line of business or majorgeographical area of operations, (b) is part ofa single co-ordinated plan to dispose of aseparate major line of business orgeographical area of operations, or (c) is asubsidiary acquired exclusively with a view toresale.

• An entity presents as a single amount in thestatement of comprehensive income the sumof the profit or loss of discontinuedoperations for the period and the gain or lossarising on the disposal of discontinuedoperations (or the remeasurement of theassets and liabilities of discontinuedoperations as held for sale). Therefore, thestatement of comprehensive income iseffectively divided into two sections –continuing operations and discontinuedoperations.


Useful Deloitte Assets held for sale and discontinued publication operations: A guide to IFRS 5

Published March 2008. Guidance on applyingIFRS 5. Available for download atwww.iasplus.com/dttpubs/pubs.htm

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IFRS 6 Exploration for and Evaluation of Mineral Resources


Objective To prescribe the financial reporting for theexploration for and evaluation of mineralresources until the IASB completes acomprehensive project in this area.

Summary • IFRS 6 does not require or prohibit anyspecific accounting policies for therecognition and measurement of explorationand evaluation assets. An entity is permittedto continue to use its existing accountingpolicies provided that they comply with therequirements of paragraph 10 of IAS 8,i.e. that they result in information that isrelevant to the economic decision-makingneeds of users and that is reliable.

• The Standard grants a temporary exemptionfrom applying paragraphs 11 and 12 of IAS 8– which specify a hierarchy of sources of IFRSGAAP in the absence of a specific Standard.

• Requires an impairment test when there is anindication that the carrying amount ofexploration and evaluation assets exceedsrecoverable amount.

• Allows impairment to be assessed at a levelhigher than the ‘cash-generating unit’ underIAS 36, but measures impairment inaccordance with IAS 36 once it is assessed.

• Requires disclosure of information thatidentifies and explains amounts arising fromexploration and evaluation of mineralresources.


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IFRS 7 Financial Instruments: Disclosures


Objective To prescribe disclosures that enable financialstatement users to evaluate the significance offinancial instruments to an entity, the natureand extent of their risks, and how the entitymanages those risks.

Summary • IFRS 7 requires disclosure of informationabout the significance of financialinstruments for an entity’s financial positionand performance. These include:

– disclosures relating to the entity’s financialposition – including information aboutfinancial assets and financial liabilities bycategory, special disclosures when the fairvalue option is used, reclassifications,derecognitions, pledges of assets,embedded derivatives and breaches ofterms of agreements;

– disclosures relating to the entity’sperformance in the period – includinginformation about recognised income,expenses, gains and losses; interestincome and expense; fee income; andimpairment losses; and

– other disclosures – including informationabout accounting policies, hedgeaccounting and the fair values of eachclass of financial asset and financialliability.

• IFRS 7 requires disclosure of informationabout the nature and extent of risks arisingfrom financial instruments:

– qualitative disclosures about exposures toeach class of risk and how those risks aremanaged; and

– quantitative disclosures about exposuresto each class of risk, separately for creditrisk, liquidity risk and market risk(including sensitivity analyses).



Useful Deloitte iGAAP 2007: Financial instruments: IAS 32, publication IAS 39 and IFRS 7 explained

3rd edition (March 2007). Guidance on how toapply these complex Standards, includingillustrative examples and interpretations.Information atwww.iasplus.com/dttpubs/pubs.htm

IFRS 8 Operating Segments

Effective date Annual periods beginning on or after 1 January2009. Supersedes IAS 14 from that date, ordate of earlier application.

Core principle An entity shall disclose information to enableusers of its financial statements to evaluate thenature and financial effects of the businessactivities in which it engages and the economicenvironments in which it operates.

Summary • IFRS 8 applies to the consolidated financialstatements of a group with a parent (and tothe separate or individual financialstatements of an entity):

– whose debt or equity instruments aretraded in a public market; or

– that files, or is in the process of filing, its(consolidated) financial statements with asecurities commission or other regulatoryorganisation for the purpose of issuingany class of instruments in a publicmarket.

• An operating segment is a component of anentity:

– that engages in business activities fromwhich it may earn revenues and incurexpenses (including revenues andexpenses relating to transactions withother components of the same entity);

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– whose operating results are regularlyreviewed by the entity’s chief operatingdecision maker to make decisions aboutresources to be allocated to the segmentand assess its performance; and

– for which discrete financial information isavailable.

• Guidance is provided on which operatingsegments are reportable (generally 10%thresholds).

• At least 75% of the entity’s revenue must beincluded in reportable segments.

• IFRS 8 does not define segment revenue,segment expense, segment result, segmentassets or segment liabilities, nor does itrequire segment information to be preparedin conformity with the accounting policiesadopted for the entity’s financial statements.

• Some entity-wide disclosures are requiredeven when an entity has only one reportablesegment. These include information abouteach product and service or groups ofproducts and services.

• Analyses of revenues and certain non-currentassets by geographical area are required fromall entities – with an expanded requirementto disclose revenues/assets by individualforeign country (if material), irrespective ofthe entity’s organisation.

• There is also a requirement to discloseinformation about transactions with majorexternal customers (10% or more of theentity’s revenue).


Useful Deloitte IFRS 8 Operating Segments: A disclosure publication checklist

Sets out in detail the disclosures required byIFRS 8. Available for download atwww.iasplus.com/fs/fs.htm

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IAS 1(2007) Presentation of Financial Statements

Effective date Annual periods beginning on or after 1 January2009 with earlier application permitted.Supersedes IAS 1(2003) from date of application.

Objective To set out the overall framework for presentinggeneral purpose financial statements, includingguidelines for their structure and the minimumcontent.

Summary • Fundamental principles underlying thepreparation of financial statements, includinggoing concern assumption, consistency inpresentation and classification, accrual basisof accounting, and materiality.

• Assets and liabilities, and income andexpenses, are not offset unless offsetting ispermitted or required by another IFRS.

• Comparative prior-period information ispresented for amounts shown in the financialstatements and notes.

• Financial statements are generally preparedannually. If the end of the reporting periodchanges, and financial statements arepresented for a period other than one year,additional disclosures are made.

• A complete set of financial statementscomprises:

– a statement of financial position;

– a statement of comprehensive income;

– a statement of changes in equity;

– a statement of cash flows;

– notes; and

– (only when an accounting policy has beenapplied retrospectively or items in thefinancial statements have been restated orreclassified) a statement of financialposition as at the beginning of the earliestcomparative period. (Therefore, in theselimited circumstances, generally threestatements of financial position).

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• Entities may use titles for the individualfinancial statements other than those usedabove.

• IAS 1 specifies minimum line items to bepresented in the statement of financialposition, statement of comprehensive incomeand statement of changes in equity, andincludes guidance for identifying additionalline items. IAS 7 provides guidance on lineitems to be presented in the statement ofcash flows.

• In the statement of financial position,current/non-current distinction is used forassets and liabilities unless presentation inorder of liquidity provides reliable and morerelevant information.

• The statement of comprehensive incomeincludes all items of income and expense –(i.e. all ‘non-owner’ changes in equity)including (a) components of profit or loss and(b) other comprehensive income (i.e. items ofincome and expense that are not recognisedin profit or loss as required or permitted byother IFRSs) These items may be presentedeither:

– in a single statement of comprehensiveincome (in which there is a sub-total forprofit or loss); or

– in a separate income statement (displayingcomponents of profit or loss) and astatement of comprehensive income(beginning with profit or loss anddisplaying components of othercomprehensive income).

• Analysis of expenses recognised in profit orloss may be provided by nature or by function.If presented by function, specific disclosures bynature are provided in the notes.

• The statement of changes in equity presents:

– total comprehensive income for the period;

– the effects on each component of equity ofretrospective application or retrospectiverestatement in accordance with IAS 8;

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– transactions with owners in their capacityas owners; and

– for each component of equity, areconciliation between the opening andclosing balances, separately disclosingeach change.

• IAS 1 specifies minimum note disclosureswhich include information about:

– accounting policies followed;

– the judgements that management hasmade in the process of applying theentity’s accounting policies that have themost significant effect on the amountsrecognised in the financial statements;and

– capital structure and compliance withcapital requirements.

• An appendix to IAS 1 includes illustrativestatements of financial position, statementsof comprehensive income and statements ofchanges in equity.

Interpretations SIC-29 Service Concession Arrangements:Disclosure

Disclosure is required if an entity agrees toprovide services that give the public access tomajor economic or social facilities.

Useful Deloitte IAS 1(2007) Presentation of Financial publications Statements: A compliance checklist

Supplements Deloitte’s presentation anddisclosure checklist to reflect the disclosuresrequired by the revised IAS 1.

IFRS model financial statements

Illustrating the layout of financial statements,and the presentation and disclosurerequirements of IFRSs.

Available for download atwww.iasplus.com/fs/fs.htm

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IAS 2 Inventories

Effective date Annual periods beginning on or after 1 January2005.

Objective To prescribe the accounting treatment forinventories, including cost determination andexpense recognition.

Summary • Inventories are stated at the lower of costand net realisable value (NRV).

• Costs include purchase cost, conversion cost(materials, labour and overheads), and othercosts to bring inventory to its presentlocation and condition, but not foreignexchange differences.

• For inventory items that are notinterchangeable, specific costs are attributedto the specific individual items of inventory.

• For interchangeable items, cost is determinedon either a First In First Out (FIFO) or weightedaverage basis. Last In First Out (LIFO) is notpermitted.

• When inventories are sold, the carryingamount is recognised as an expense in theperiod in which the related revenue isrecognised.

• Write-downs to NRV are recognised as anexpense in the period of the write-down.Reversals arising from an increase in NRV arerecognised as a reduction of the inventoryexpense in the period in which they occur.


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IAS 7 Statement of Cash Flows

Effective date Periods beginning on or after 1 January 1994.Title amended by IAS 1(2007) effective 1 January 2009.

Objective To require the presentation of informationabout historical changes in an entity’s cash andcash equivalents by means of a statement ofcash flows that classifies cash flows during theperiod according to operating, investing andfinancing activities.

Summary • The statement of cash flows analyseschanges in cash and cash equivalents duringa period.

• Cash equivalents include investments that areshort-term (less than three months from dateof acquisition), readily convertible to a knownamount of cash, and subject to aninsignificant risk of changes in value.Generally exclude equity investments.

• Cash flows from operating, investing andfinancing activities are separately reported.

• Cash flows arising from operating activitiesare reported using either the direct(recommended) or the indirect method.

• Cash flows arising from taxes on income areclassified as operating unless they can bespecifically identified with financing orinvesting activities.

• The exchange rate used for translation oftransactions denominated in a foreigncurrency and the cash flows of a foreignsubsidiary is the rate in effect at the date ofthe cash flows.

• Aggregate cash flows relating to obtainingor losing control of subsidiaries and otherbusiness units are presented separately andclassified as investing activities, with specifiedadditional disclosures.

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• Investing and financing transactions that donot require the use of cash are excluded fromthe statement of cash flows, but separatelydisclosed.

• Illustrative statements of cash flows areincluded in appendices to IAS 7.


IAS 8 Accounting Policies, Changes in Accounting Estimates andErrors


Objective To prescribe the criteria for selecting andchanging accounting policies, together with theaccounting treatment and disclosure of changesin accounting policies, changes in estimates,and errors.

Summary • Hierarchy for choosing accounting policies:

– IASB Standards and Interpretations, takinginto account any relevant IASBimplementation guidance;

– in the absence of a directly applicableIFRS, look to the requirements andguidance in IFRSs dealing with similar andrelated issues; and the definitions,recognition criteria and measurementconcepts for assets, liabilities, income andexpenses in the Framework for thePreparation and Presentation of FinancialStatements; and

– management may also consider the mostrecent pronouncements of other standard-setting bodies that use a similarconceptual framework to developaccounting standards, other accountingliterature, and accepted industry practices.

• Accounting policies are applied consistentlyto similar transactions.

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• An accounting policy is changed only ifrequired by an IFRS, or if the change resultsin reliable and more relevant information.

• If a change in accounting policy is requiredby an IFRS, the pronouncement’s transitionrequirements are followed. If none arespecified, or if the change is voluntary, thenew accounting policy is appliedretrospectively by restating prior periods.If restatement is impracticable, thecumulative effect of the change is included inprofit or loss. If the cumulative effect cannotbe determined, the new policy is appliedprospectively.

• Changes in accounting estimates (e.g. changein useful life of an asset) are accounted forin the current year, or future years, or both(no restatement).

• All material errors are corrected by restatingcomparative prior period amounts and, if theerror occurred before the earliest periodpresented, by restating the openingstatement of financial position.


IAS 10 Events after the Reporting Period

Effective date Annual periods beginning on or after 1 January2005. Title amended by IAS 1(2007) effective1 January 2009.

Objective To prescribe:

• when an entity should adjust its financialstatements for events after the end of thereporting period; and

• disclosures about the date when the financialstatements were authorised for issue, andabout events after the end of the reportingperiod.

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Summary • Events after the end of the reporting periodare those events, both favourable andunfavourable, that occur between the end ofthe reporting period and the date when thefinancial statements are authorised for issue.

• Adjusting events – the financial statementsare adjusted to reflect those events thatprovide evidence of conditions that existed atthe end of the reporting period (such asresolution of a court case after the end of thereporting period).

• Non-adjusting events – the financialstatements are not adjusted to reflect eventsthat arose after the end of the reportingperiod (such as a decline in market pricesafter year end, which does not change thevaluation of investments at the end of thereporting period). The nature and impact ofsuch events are disclosed.

• Dividends proposed or declared on equityinstruments after the end of the reportingperiod are not recognised as a liability at theend of the reporting period. Disclosure isrequired.

• Financial statements are not prepared on agoing concern basis if events after the end ofthe reporting period indicate that the goingconcern assumption is not appropriate.

• An entity discloses the date its financialstatements are authorised for issue.


IAS 11 Construction Contracts

Effective date Periods beginning on or after 1 January 1995.

Objective To prescribe the accounting treatment forrevenue and costs associated with constructioncontracts in the financial statements of thecontractor.

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Summary • Contract revenue comprises the amountagreed in the initial contract together withvariations in contract work, claims, andincentive payments to the extent that it isprobable that they will result in revenues andcan be measured reliably.

• Contract costs comprise costs that relatedirectly to the specific contract, costs that areattributable to general contract activity andthat can be reasonably allocated to thecontract, together with such other costs asare directly attributable to the customerunder the terms of the contract.

• Where the outcome of a construction contractcan be estimated reliably, revenue and costsare recognised by reference to the stage ofcompletion of contract activity (the percentageof completion method of accounting).

• If the outcome cannot be estimated reliably,no profit is recognised. Instead, contractrevenue is recognised only to the extent thatcontract costs incurred are expected to berecovered, and contract costs are expensedas incurred.

• If it is probable that total contract costs willexceed total contract revenue, the expectedloss is recognised immediately.


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IAS 12 Income Taxes

Effective date Periods beginning on or after 1 January 1998.Certain revisions effective for periods beginningon or after 1 January 2001.

Objective To prescribe the accounting treatment forincome taxes.

To establish the principles and provide guidancein accounting for the current and future taxconsequences of:

• the future recovery (settlement) of carryingamounts of assets (liabilities) recognised in anentity’s statement of financial position, and

• transactions and other events of the currentperiod that are recognised in an entity’sfinancial statements.

Summary • Current tax liabilities and assets arerecognised for current and prior period taxes,measured at the rates applicable for theperiod.

• A temporary difference is a differencebetween the carrying amount of an asset or liability and its tax base.

• Deferred tax liabilities are recognised for thefuture tax consequences of all taxabletemporary differences with three exceptions:

– where the deferred tax liability arises fromthe initial recognition of goodwill;

– the initial recognition of an asset/liabilityother than in a business combinationwhich, at the time of the transaction, doesnot affect either the accounting or thetaxable profit; and

– differences arising from investments insubsidiaries, branches and associates andinterests in joint ventures (e.g. due toundistributed profits) where the entity isable to control the timing of the reversalof the difference and it is probable thatthe reversal will not occur in theforeseeable future.

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• A deferred tax asset is recognised fordeductible temporary differences, unused taxlosses, and unused tax credits, to the extentthat it is probable that taxable profit will beavailable against which the deductibletemporary differences can be utilised, withthe following exceptions:

– a deferred tax asset arising from the initialrecognition of an asset/liability, other thanin a business combination, which, at thetime of the transaction, does not affectthe accounting or the taxable profit; and

– assets arising from deductible temporarydifferences associated with investmentsare recognised only to the extent that it isprobable that the temporary differencewill reverse in the foreseeable future andtaxable profit will be available to utilise thedifference.

• Deferred tax liabilities (assets) are measuredat the tax rates expected to apply when theliability is settled or the asset is realised,based on tax rates/laws that have beenenacted or substantively enacted by the endof the reporting period.

• Deferred tax assets and liabilities are notdiscounted.

• Deferred taxes asset and liabilities arepresented as non-current items in thestatement of financial position.

Interpretations SIC 21 Income Taxes – Recovery of RevaluedNon-Depreciable Assets

The measurement of a deferred tax liability orasset arising from revaluation is based on thetax consequences from the sale of the assetrather than through use.

SIC 25 Income Taxes – Changes in the TaxStatus of an Entity or its Shareholders

The current and deferred tax consequences ofthe change are included in profit or loss for theperiod unless those consequences relate totransactions or events that were recognisedoutside profit or loss.

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IAS 14 Segment Reporting

Effective date Periods beginning on or after 1 July 1998.Superseded by IFRS 8 (effective in 2009).

Objective To establish principles for reporting financialinformation by line of business and bygeographical area.

Summary • IAS 14 applies to entities whose equity ordebt securities are publicly traded and toentities in the process of issuing securities tothe public. Also, any entity voluntarilyproviding segment information must complywith the requirements of IAS 14.

• An entity looks to its organisational structureand internal reporting system for the purposeof identifying its business segments andgeographical segments.

• If internal segments are not geographical orproducts/service-based, then the entity looksto next lower level of internal segmentationto identify reportable segments.

• Guidance is provided on which segments arereportable (generally 10% thresholds).

• One basis of segmentation is primary and theother secondary.

• Segment information is reported based onthe same accounting policies as theconsolidated group or entity.

• IAS 14 sets out disclosure requirements forprimary and secondary segments, withconsiderably less disclosure for the secondarysegments.


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IAS 16 Property, Plant and Equipment


Objective To prescribe the principles for the initialrecognition and subsequent accounting forproperty, plant and equipment.

Summary • Items of property, plant, and equipment arerecognised as assets when it is probable thatthe future economic benefits associated withthe asset will flow to the entity, and the costof the asset can be measured reliably.

• Initial recognition is at cost, which includes allcosts necessary to get the asset ready for itsintended use. If payment is deferred, interestis recognised.

• Subsequent to acquisition, IAS 16 allows achoice of accounting model:

– cost model: the asset is carried at cost lessaccumulated depreciation andimpairment; or

– revaluation model: the asset is carried at arevalued amount, which is fair value atrevaluation date less subsequentdepreciation and impairment.

• Under the revaluation model, revaluationsare carried out regularly. All items of a givenclass are revalued.

– Revaluation increases are credited to equity.

– Revaluation decreases are charged firstagainst the revaluation surplus in equityrelated to the specific asset, and anyexcess against profit or loss.

• When the revalued asset is disposed of, therevaluation surplus in equity remains inequity and is not reclassified to profit or loss.

• Components of an asset with differingpatterns of benefits are depreciatedseparately.

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• Depreciation is charged systematically overthe asset’s useful life. The depreciationmethod reflects the pattern of benefitconsumption. The residual value is reviewedat least annually and is the amount the entitywould receive currently if the asset werealready of the age and condition expected atthe end of its useful life. Useful life is alsoreviewed annually. If operation of an item ofproperty, plant and equipment (e.g. anaircraft) requires regular major inspections,when each major inspection is performed, itscost is recognised in the carrying amount ofthe asset as a replacement, if the recognitioncriteria are satisfied.

• Impairment of property, plant and equipmentis assessed under IAS 36.

• All exchanges of property, plant andequipment are measured at fair value,including exchanges of similar items, unlessthe exchange transaction lacks commercialsubstance or the fair value of neither theasset received nor the asset given up isreliably measurable.


IAS 17 Leases


Objective To prescribe, for lessees and lessors, theappropriate accounting policies and disclosuresfor finance and operating leases.

Summary • A lease is classified as a finance lease if ittransfers substantially all risks and rewardsincidental to ownership. Examples:

– lease covers substantially all of the asset’slife; and/or

– present value of lease payments issubstantially equal to the asset’s fair value.

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• All other leases are classified as operatingleases.

• A lease of both land and buildings is splitinto land and building elements. Landelement is generally an operating lease.Building element is an operating or financelease based on the criteria in IAS 17.However, separate measurement of the landand buildings elements is not required if thelessee’s interest in both land and buildings isclassified as an investment property underIAS 40 and the fair value model is adopted.

• Finance leases – Lessee’s Accounting:

– asset and liability are recognised at thelower of the present value of minimumlease payments and the fair value of theasset;

– depreciation policy is as for owned assets;and

– finance lease payments are apportionedbetween interest expense and reduction inliability.

• Finance leases – Lessor’s Accounting:

– receivable is recognised at an amountequal to the net investment in the lease;and

– finance income is recognised based on apattern reflecting a constant periodic rateof return on the lessor’s net investment.

• Operating leases – Lessee’s Accounting:

– lease payments are recognised as anexpense in profit or loss on a straight-linebasis over the lease term, unless anothersystematic basis is more representative ofthe pattern of benefit.

• Operating leases – Lessor’s Accounting:

– assets held for operating leases arepresented in the lessor’s statement offinancial position according to the natureof the asset; and

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– lease income is recognised on a straight-line basis over the lease term, unlessanother systematic basis is morerepresentative of the pattern of benefit.

• Lessors spread initial direct costs over thelease term (immediate expensing prohibited).

• Accounting for sale and leasebacktransactions depends on whether these areessentially finance or operating leases.

Interpretations SIC 15 Operating Leases – Incentives

Lease incentives (such as rent-free periods) arerecognised by both the lessor and the lessee asa reduction of rental income and expense,respectively, over the lease term.

SIC 27 Evaluating the Substance ofTransactions Involving the Legal Form of aLease

If a series of transactions involves the legal formof a lease and can only be understood withreference to the series as a whole, then theseries is accounted for as a single transaction.

IFRIC 4 Determining whether anArrangement contains a Lease

IFRIC 4 addresses arrangements that do nottake the legal form of a lease but which conveyrights to use assets in return for a payment or aseries of payments. An arrangement that meetsthe following criteria is, or contains, a lease thatis accounted for in accordance with IAS 17,both from the lessee and lessor perspectives:

• the fulfilment of the arrangement dependsupon a specific asset (either explicitly orimplicitly in the arrangement); and

• the arrangement conveys the right to controlthe use of the underlying asset. IFRIC 4provides further guidance to identify whenthis situation exists.

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IAS 18 Revenue


Objective To prescribe the accounting treatment forrevenue arising from sales of goods, rendering ofservices and from interest, royalties and dividends.

Summary • Revenue is measured at the fair value of theconsideration received/receivable.

• Recognition:

– from sale of goods: when significant risksand rewards have been transferred tobuyer, seller has lost effective control, andamount can be reliably measured;

– from rendering of services: percentage ofcompletion method;

– for interest, royalties, and dividends: whenit is probable that economic benefits willflow to the entity.

Interest – using the effective interestmethod as set out in IAS 39.

Royalties – on an accrual basis inaccordance with the substance of theagreement.

Dividends – when shareholder’s right toreceive payment is established.

Interpretations SIC 31 Revenue – Barter TransactionsInvolving Advertising Services

Revenue from barter transactions involvingadvertising services is recognised only ifsubstantial revenue is also received from non-barter transactions.

IFRIC 13 Customer Loyalty Programmes(effective 1 July 2008)

Award credits granted to customers as part ofa sales transaction are accounted for as aseparately identifiable component of the salestransaction(s), with the consideration receivedor receivable allocated between the awardcredits and the other components of the sale.

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IAS 19 Employee Benefits

Effective date Periods beginning on or after 1 January 1999.Later revisions effective for various periods from1 January 2001 to 1 January 2006.

Objective To prescribe the accounting and disclosure foremployee benefits, including short-termbenefits (wages, annual leave, sick leave, annualprofit-sharing, bonuses and non-monetarybenefits); pensions; post-employment lifeinsurance and medical benefits; other long-term employee benefits (long-serviceleave, disability, deferred compensation, andlong-term profit-sharing and bonuses), andtermination benefits.

Summary • Underlying principle: the cost of providingemployee benefits is recognised in the periodin which the entity receives services from theemployee, rather than when the benefits arepaid or payable.

• Short-term employee benefits (payablewithin 12 months) are recognised as anexpense in the period in which the employeerenders the service. Unpaid benefit liability ismeasured at undiscounted amount.

• Profit-sharing and bonus payments arerecognised only when the entity has a legalor constructive obligation to pay them andthe costs can be reliably estimated.

• Post-employment benefit plans (such aspensions and health care) are categorised aseither defined contribution plans or definedbenefit plans.

• For defined contribution plans, expenses arerecognised in the period the contribution ispayable.

• For defined benefit plans, a liability isrecognised in the statement of financialposition equal to the net of:

– the present value of the defined benefitobligation (the present value of expectedfuture payments required to settle theobligation resulting from employee servicein the current and prior periods);

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– deferred actuarial gains and losses anddeferred past service cost; and

– the fair value of any plan assets at the endof the reporting period.

• Actuarial gains and losses may be(a) recognised immediately in profit or loss, (b) deferred up to a maximum, with anyexcess amortised in profit or loss (the‘corridor approach’), or (c) recognisedimmediately in other comprehensive income.

• Plan assets include assets held by a long-termemployee benefit fund and qualifyinginsurance policies.

• For group plans, the net cost is recognised inthe separate financial statements of theentity that is legally the sponsoring employerunless a contractual agreement or statedpolicy for allocating the cost exists.

• Long-term employee benefits are recognisedand measured the same way as post-employment benefits under a defined benefitplan. However, unlike defined benefit plans,actuarial gains and losses and past servicecost are always recognised immediately inprofit or loss.

• Termination benefits are recognised whenthe entity is demonstrably committed toterminating one or more employees beforethe normal retirement date or to providingtermination benefits as a result of an offermade to encourage voluntary redundancy.

Interpretations IFRIC 14 IAS 19 – The Limit on a DefinedBenefit Asset, Minimum FundingRequirements and their Interaction

IFRIC 14 addresses three issues:

• when refunds or reductions in futurecontributions should be regarded as ‘available’in the context of paragraph 58 of IAS 19;

• how a minimum funding requirement mightaffect the availability of reductions in futurecontributions; and

• when a minimum funding requirement mightgive rise to a liability.

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IAS 20 Accounting for Government Grants and Disclosure ofGovernment Assistance


Objective To prescribe the accounting for, and disclosureof, government grants and other forms ofgovernment assistance.

Summary • Government grants are recognised onlywhen there is reasonable assurance that theentity will comply with the conditionsattached to the grants, and the grants will bereceived. Non-monetary grants are usuallyrecognised at fair value, although recognitionat nominal value is permitted.

• Grants are recognised in profit or loss overthe periods necessary to match them withthe related costs.

• Income-related grants are either presentedseparately as income or as a deduction inreporting the related expense.

• Asset-related grants are either presented asdeferred income in the statement of financialposition, or deducted in arriving at thecarrying amount of the asset.

• Repayment of a government grant isaccounted for as a change in accountingestimate with different treatment for income-and asset-related grants.

Interpretations SIC 10 Government Assistance – No SpecificRelation to Operating Activities

Government assistance to entities that is aimedat encouragement or long-term support ofbusiness activities either in certain regions orindustry sectors is treated as a governmentgrant under IAS 20.

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IAS 21 The Effects of Changes in Foreign Exchange Rates


Objective To prescribe the accounting treatment for anentity’s foreign currency transactions andforeign operations.

Summary • First, the entity’s functional currency isdetermined (i.e. the currency of the primaryeconomic environment in which the entityoperates).

• Then all foreign currency items are translatedinto the functional currency:

– transactions are recognised on the datethat they occur using the transaction-dateexchange rate for initial recognition andmeasurement;

– at the end of subsequent reportingperiods:

– non-monetary items carried at historicalcost continue to be measured usingtransaction-date exchange rates;

– monetary items are retranslated usingthe closing rate; and

– non-monetary items carried at fairvalue are measured at valuation-dateexchange rates.

• Exchange differences arising on settlement ofmonetary items and on translation ofmonetary items at a rate different than wheninitially recognised are included in profit orloss, with one exception. Exchangedifferences arising on monetary items thatform part of the reporting entity’s netinvestment in a foreign operation arerecognised in the consolidated financialstatements that include the foreign operationin other comprehensive income. Suchdifferences are reclassified from equity toprofit or loss on disposal of the netinvestment.

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• The results and financial position of an entitywhose functional currency is not the currencyof a hyperinflationary economy are translatedinto a different presentation currency usingthe following procedures:

– assets and liabilities for each statement offinancial position presented (includingcomparatives) are translated at the closingrate at the date of that statement offinancial position;

– income and expenses for each periodpresented (including comparatives) aretranslated at exchange rates at the datesof the transactions; and

– all resulting exchange differences arerecognised as other comprehensiveincome.

• Special rules for translating into apresentation currency the results andfinancial position of an entity whosefunctional currency is hyperinflationary.

Interpretations SIC 7 Introduction of the Euro

Explains how to apply IAS 21 when the Eurowas first introduced, and when new EUmembers join the Eurozone.

IAS 23 Borrowing Costs


Revised Standard issued March 2007 andeffective 1 January 2009 (earlier applicationpermitted) will remove the option to use theexpense model referred to below.

Objective To prescribe the accounting treatment forborrowing costs.

Summary • Borrowing costs include interest,amortisation of discounts or premiums onborrowings, and amortisation of ancillarycosts incurred in the arrangement ofborrowings.

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• Two accounting models:

– expense model: all borrowing costsrecognised as an expense when incurred(no longer permitted from 1 January2009); and

– capitalisation model: borrowing costsdirectly attributable to the acquisition orconstruction of a qualifying asset arecapitalised as part of the cost of thatasset, but only when it is probable thatthese costs will result in future economicbenefits to the entity, and the costs can bemeasured reliably. All other borrowingcosts that do not satisfy the conditions forcapitalisation are expensed when incurred.

• A qualifying asset is one that requires asubstantial period of time to make it readyfor its intended use or sale. Examples includemanufacturing plants, investment propertiesand some inventories.

• If funds are borrowed generally and used forthe purpose of obtaining the qualifying asset,a capitalisation rate (weighted average ofborrowing costs applicable to the generaloutstanding borrowings during the period) isapplied to expenditure incurred during theperiod, to determine the amount ofborrowing costs eligible for capitalisation.


IAS 24 Related Party Disclosures


Objective To ensure that financial statements drawattention to the possibility that the financialposition and results of operations may havebeen affected by the existence of relatedparties.

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Summary • Related parties are parties that control orhave significant influence over the reportingentity (including parent entities, owners andtheir families, major investors, and keymanagement personnel) and parties that arecontrolled or significantly influenced by thereporting entity (including subsidiaries, jointventures, associates, and post-employmentbenefit plans).

• The Standard requires disclosure of:

– relationships involving control, even whenthere have been no transactions;

– related party transactions; and

– management compensation (including ananalysis by type of compensation).

• For related party transactions, disclosure isrequired of the nature of the relationship andof sufficient information to enable anunderstanding of the potential effect of thetransactions.

• Examples of related party transactionsdisclosable under the Standard:

– purchases or sales of goods;

– purchases or sales of assets;

– rendering or receiving of services;

– leases;

– transfers of research and development;

– transfers under licence agreements;

– transfers under finance arrangements(including loans and equity contributions);

– provision of guarantees or collateral; and

– settlement of liabilities on behalf of theentity or by the entity on behalf ofanother party.


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IAS 26 Accounting and Reporting by Retirement Benefit Plans


Objective To specify the measurement and disclosureprinciples for the financial reports of retirementbenefit plans.

Summary • Sets out the reporting requirements for bothdefined contribution and defined benefitplans, including a statement of net assetsavailable for benefits and disclosure of theactuarial present value of promised benefits(split between vested and non-vested).

• Specifies the need for actuarial valuation ofthe benefits for defined benefits and the useof fair values for plan investments.


IAS 27(2008) Consolidated and Separate Financial Statements

Effective date Annual periods beginning on or after 1 July2009. Revised IAS 27 issued January 2008 willsupersede IAS 27(2003) from that date. Earlierapplication permitted – but only if IFRS 3(2008)is applied from the same date (therefore,effectively, not permitted for periods beginning before 30 June 2007).

See earlier editions of IFRSs in your Pocket for asummary of the requirements of IAS 27(2003).

Objective To prescribe:

• requirements for preparing and presentingconsolidated financial statements for a groupof entities under the control of a parent;

• how to account for changes in the level ofownership interests in subsidiaries, includingthe loss of control of a subsidiary; and

• how to account for investments insubsidiaries, jointly controlled entities andassociates in separate financial statements.

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Summary • A subsidiary is an entity controlled by anotherentity, the parent. Control is the power togovern the operating and financial policies.

• Consolidated financial statements arefinancial statements of a group (parent andsubsidiaries) presented as those of a singleeconomic entity.

• When a parent-subsidiary relationship exists,consolidated financial statements are required.

• Consolidated financial statements include allsubsidiaries. No exemption for ‘temporarycontrol’ or ‘different lines of business’ or’subsidiary that operates under severe long-term funds transfer restrictions’. However, if,on acquisition, a subsidiary meets the criteriato be classified as held for sale under IFRS 5,it is accounted for under that Standard.

• Intragroup balances, transactions, incomeand expenses are eliminated in full.

• All entities in the group use the sameaccounting policies.

• The end of the reporting period of asubsidiary cannot be more than three monthsdifferent from the end of the reportingperiod of the group.

• Non-controlling interests (NCI, previouslycalled minority interest) are reported in equityin the statement of financial positionseparately from the equity of the owners ofthe parent. Total comprehensive income isallocated between NCI and the owners ofthe parent even if this results in the NCIhaving a deficit balance.

• Partial disposal of an investment in asubsidiary while control is retained isaccounted for as an equity transaction withowners, and gain or loss is not recognised.

• Partial disposal of an investment in asubsidiary that results in loss of controltriggers remeasurement of the residualholding to fair value. Any difference betweenfair value and carrying amount is a gain or losson the disposal, recognised in profit or loss.Thereafter, apply IAS 28, IAS 31 or IAS 39, asappropriate, to the residual holding.

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• In the parent’s separate financial statements:investments in subsidiaries, associates andjoint ventures (other than those that areclassified as held for sale under IFRS 5) areaccounted for either at cost or asinvestments under IAS 39.

Interpretations SIC-12 Consolidation – Special PurposeEntities

An entity consolidates a special purpose entity(SPE) when, in substance, it controls the SPE.SIC-12 provides indicators of control.

Useful Deloitte Publication of a guide to IFRS 3(2008) and publication related aspects of IAS 27(2008) anticipated May

2008. The guide will supplement the IASB’s ownguidance for applying these Standards andaddress practical implementation issues.Following publication, will be available fordownload at www.iasplus.com/dttpubs/pubs.htm

IAS 28 Investments in Associates

Effective date Annual periods beginning on or after 1 January2005 (1 July 2009 for consequentialamendments arising from IAS 27(2008)).

Objective To prescribe the investor’s accounting forinvestments in associates over which it hassignificant influence.

Summary • Applies to all investments in which aninvestor has significant influence unless theinvestor is a venture capital firm, mutual fundor unit trust, and it elects to measure suchinvestments at fair value through profit orloss under IAS 39.

• Interests in associates that are classified asheld for sale in accordance with IFRS 5 areaccounted for in accordance with thatStandard.

• Otherwise, the equity method is used for allinvestments in associates over which theentity has significant influence.

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• Rebuttable presumption of significantinfluence if investment held, directly andindirectly, is more than 20% of associate.

• Under the equity method, the investment isinitially recorded at cost. It is subsequentlyadjusted by the investor’s share of theinvestee’s post acquisition change in netassets.

• Investor’s statement of comprehensiveincome reflects its share of the investee’spost-acquisition profit or loss.

• Associate’s accounting policies are the sameas those of the investor.

• The end of the reporting period of anassociate cannot be more than three monthsdifferent from the investor’s end of thereporting period.

• Even if consolidated financial statements arenot prepared (e.g. because the investor hasno subsidiaries) equity accounting is used.However, the investor does not apply theequity method when presenting ’separate’financial statements as defined in IAS 27.Instead, the investor accounts for theinvestment either at cost or as an investmentunder IAS 39.

• Impairment is assessed in accordance withIAS 36. The impairment indicators in IAS 39also apply.

• The 2008 amendments (effective 1 July2009) address the accounting treatmentwhen significant influence over an associateis lost. On loss of significant influence, theinvestment is remeasured to its fair value atthat date, with the gain or loss recognised inprofit or loss. Thereafter, IAS 39 is applied tothe remaining holding.


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IAS 29 Financial Reporting in Hyperinflationary Economies


Objective To prescribe specific standards for entitiesreporting in the currency of a hyperinflationaryeconomy, so that the financial informationprovided is meaningful.

Summary • The financial statements of an entity thatreports in the currency of a hyperinflationaryeconomy are stated in terms of themeasuring unit current at the end of thereporting period.

• Comparative figures for prior period(s) are restated into the same current measuringunit.

• Generally an economy is hyperinflationarywhen there is 100% inflation over 3 years.

Interpretations IFRIC 7 Applying the Restatement Approachunder IAS 29

When the economy of an entity’s functionalcurrency becomes hyperinflationary, the entityapplies the requirements of IAS 29 as thoughthe economy had always been hyperinflationary.

IAS 31 Interests in Joint Ventures

Effective date Annual periods beginning on or after 1 January2005 (1 July 2009 for consequentialamendments arising from IAS 27(2008)).

Objective To prescribe the accounting treatment requiredfor interests in joint ventures (JVs), regardless ofthe structure or legal form of the JV activities.

Summary • Applies to all investments in which aninvestor has joint control unless the investoris a venture capital firm, mutual fund or unittrust, and it elects to measure suchinvestments at fair value through profit orloss under IAS 39.


• The key characteristic of a JV is a contractualarrangement to share control. JVs may beclassified as jointly controlled operations,jointly controlled assets or jointly controlledentities. Different recognition principles foreach type of JV.

• Jointly controlled operations: venturerrecognises the assets it controls, andexpenses and liabilities it incurs, and its shareof income earned, in both its separate andconsolidated financial statements.

• Jointly controlled assets: venturer recognisesits share of the joint assets, any liabilities thatit has incurred directly, and its share of anyliabilities incurred jointly with the otherventurers, income from the sale or use of itsshare of the output of the joint venture, itsshare of expenses incurred by the jointventure, and expenses incurred directly inrespect of its interest in the joint venture.These rules apply to both separate andconsolidated financial statements.

• Jointly controlled entities: two accountingpolicy choices are permitted:

– proportionate consolidation: under thismethod the venturer’s statement offinancial position includes its share of theassets that it controls jointly and its shareof the liabilities for which it is jointlyresponsible. Its statement ofcomprehensive income includes its shareof the income and expenses of the jointlycontrolled entity; and

– the equity method, as described in IAS 28.

• Interests in jointly controlled entities that areclassified as held for sale in accordance withIFRS 5 are accounted for in accordance withthat Standard.

• Even if consolidated financial statements arenot prepared (e.g. because the venturer hasno subsidiaries), proportionate consolidation/equity accounting is used for jointlycontrolled entities. However, in the venturer’s’separate’ financial statements as defined in

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IAS 27, interests in jointly controlled entitiesare accounted for either at cost or asinvestments under IAS 39.

• The 2008 amendments (effective 1 July2009) address the accounting treatmentwhen joint control over a jointly controlledentity is lost. On loss of joint control theinvestment is remeasured to its fair value atthat date, with the gain or loss recognised inprofit or loss. Thereafter, IAS 28 or IAS 39, asappropriate, is applied to the remainingholding.

Interpretations SIC 13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers

Recognition of proportionate share of gains orlosses on contributions of non-monetary assetsin exchange for an equity interest is generallyappropriate.

IAS 32 Financial Instruments: Presentation

Effective date Annual periods beginning on or after 1 January2005. Disclosure provisions superseded onadoption of IFRS 7, effective 1 January 2007.

1 January 2009 for 2008 amendments dealingwith puttable financial instruments andobligations arising on liquidation.

Objective To prescribe principles for classifying andpresenting financial instruments as liabilities orequity, and for offsetting financial assets andliabilities.

Summary • Issuer’s classification of an instrument eitheras a liability or an equity instrument:

– based on substance, not form, of theinstrument;

– classification is made at the time of issueand is not subsequently altered;

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– an instrument is a financial liability if theissuer may be obligated to deliver cash oranother financial asset or the holder has aright to demand cash or another financialasset. An example is mandatorilyredeemable preference shares;

– an instrument that does not give rise tosuch a contractual obligation is an equityinstrument; and

– interest, dividends, gains and lossesrelating to an instrument classified as aliability are reported as income or expenseas appropriate.

• The 2008 amendments (effective 2009 withearly application permitted) provide thatputtable instruments and instruments thatimpose on the entity an obligation to delivera pro-rata share of net assets only onliquidation that (a) are subordinate to allother classes of instruments and (b) meetadditional criteria, are classified as equityinstruments even though they wouldotherwise meet the definition of a liability.

• At issue, an issuer classifies separately thedebt and equity components of a singlecompound instrument such as convertibledebt and debt issued with detachable rightsor warrants.

• A financial asset and a financial liability areoffset and the net amount reported when,and only when, an entity has a legallyenforceable right to set off the amounts, andintends either to settle on a net basis orsimultaneously.

• Cost of treasury shares is deducted fromequity, and resales of treasury shares areequity transactions.

• Costs of issuing or reacquiring equityinstruments are accounted for as a deductionfrom equity, net of any related income taxbenefit.

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Interpretations IFRIC 2 Members' Shares in Co-operativeEntities and Similar Instruments

These are liabilities unless the co-op has thelegal right not to redeem on demand. Theserequirements may also be impacted by the 2008amendments (see above).



IAS 33 Earnings per Share


Objective To prescribe principles for determining andpresenting earnings per share (EPS) amounts inorder to improve performance comparisonsbetween different entities in the same periodand between different accounting periods forthe same entity. Focus of IAS 33 is on thedenominator of the EPS calculation.

Summary • Applies to publicly-traded entities, entities inthe process of issuing such shares, and anyother entity voluntarily presenting EPS.

• An entity presents basic and diluted EPS:

– for each class of ordinary share that has adifferent right to share in profit for theperiod;

– with equal prominence;

– for all periods presented.

• If an entity presents only a statement ofcomprehensive income, EPS is reported inthat statement. If it presents both astatement of comprehensive income and aseparate income statement, EPS is reportedonly in the separate income statement.

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• EPS is reported for profit or loss attributableto equity holders of the parent entity, forprofit or loss from continuing operationsattributable to equity holders of the parententity, and for any discontinued operations(this last item can be in the notes).

• In consolidated financial statements, EPSreflects earnings attributable to the parent’sshareholders.

• Dilution is a reduction in EPS or an increase inloss per share on the assumption thatconvertible instruments are converted, thatoptions or warrants are exercised, or thatordinary shares are issued when specifiedconditions are met.

• Basic EPS calculation:

– earnings numerator: after deduction of allexpenses including tax, and afterdeduction of non-controlling interests andpreference dividends; and

– denominator: weighted average numberof shares outstanding during the period.

• Diluted EPS calculation:

– earnings numerator: the profit for theperiod attributable to ordinary shares isincreased by the after-tax amount ofdividends and interest recognised in theperiod in respect of the dilutive potentialordinary shares (such as options, warrants,convertible securities and contingentinsurance agreements), and adjusted forany other changes in income or expensethat would result from the conversion ofthe dilutive potential ordinary shares;

– denominator: adjusted for the number ofshares that would be issued on theconversion of all of the dilutive potentialordinary shares into ordinary shares; and

– anti-dilutive potential ordinary shares areexcluded from the calculation.


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IAS 34 Interim Financial Reporting


Statements included in an interim financialreport are affected by the 2007 revisions to IAS1 (effective 1 January 2009).

Objective To prescribe the minimum content of an interimfinancial report and the recognition andmeasurement principles for an interim financialreport.

Summary • Standard applies only when an entity isrequired or elects to publish an interimfinancial report in accordance with IFRSs.

• Local regulators (not IAS 34) mandate:

– which entities should publish interimfinancial reports;

– how frequently; and

– how soon after the end of an interimperiod.

• An interim financial report is a complete orcondensed set of financial statements for aperiod shorter than an entity’s full financial year.

• Minimum components of an interim financialreport are:

– condensed statement of financial position;

– condensed statement of comprehensiveincome presented either as a condensedsingle statement or a condensed separateincome statement and a condensedstatement of comprehensive income;

– condensed statement of changes inequity;

– condensed statement of cash flows; and

– selected explanatory notes.

• Prescribes the comparative periods for whichinterim financial statements are required tobe presented.

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• Materiality is based on interim financial data,not forecasted annual amounts.

• The notes in an interim financial report providean explanation of events and transactionssignificant to understanding the changes sincethe last annual financial statements.

• Same accounting policies as used in annualfinancial statements.

• Revenue and costs are recognised when theyoccur, not anticipated or deferred.

• Change in accounting policy – restatepreviously reported interim periods.

Interpretations IFRIC 10 Interim Financial Reporting andImpairment

Where an entity has recognised an impairmentloss in an interim period in respect of goodwillor an investment in either an equity instrumentor a financial asset carried at cost, thatimpairment is not reversed in subsequentinterim financial statements nor in annualfinancial statements.

Useful Deloitte Interim financial reporting: A guide topublication IAS 34

2nd edition (June 2007). Guidance on therequirements of the Standard, model interimfinancial report and compliance checklist.Available for download atwww.iasplus.com/dttpubs/pubs.htm

IAS 36 Impairment of Assets

Effective date Applies to goodwill and intangible assetsacquired in business combinations for which theagreement date is on or after 31 March 2004,and to all other assets prospectively for periodsbeginning on or after 31 March 2004.

Objective To ensure that assets are carried at no morethan their recoverable amount, and to prescribehow recoverable amount is calculated.

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Summary • IAS 36 applies to all assets except inventories(see IAS 2), assets arising from constructioncontracts (see IAS 11), deferred tax assets(see IAS 12), assets arising from employeebenefits (see IAS 19), financial assets (seeIAS 39), investment property measured at fairvalue (see IAS 40), and biological assetsrelated to agricultural activity measured atfair value less estimated point-of-sale costs(see IAS 41).

• An impairment loss is recognised when thecarrying amount of an asset exceeds itsrecoverable amount.

• An impairment loss is recognised in profit orloss for assets carried at cost; and treated asa revaluation decrease for assets carried atrevalued amount.

• Recoverable amount is the higher of anasset’s fair value less costs to sell and its valuein use.

• Value in use is the present value of estimatedfuture cash flows expected to arise from thecontinuing use of an asset, and from itsdisposal at the end of its useful life.

• Discount rate is the pre-tax rate that reflectscurrent market assessments of the time valueof money and the risks specific to the asset.The discount rate used does not reflect risksfor which future cash flows have beenadjusted and is the rate of return thatinvestors would require if they were tochoose an investment that would generatecash flows equivalent to those expected fromthe asset.

• At the end of each reporting period, assetsare reviewed to look for any indication thatan asset may be impaired. If impairment isindicated, the asset’s recoverable amount iscalculated.

• Goodwill and other intangibles withindefinite useful lives are tested forimpairment at least annually, and recoverableamount calculated.

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• If it is not possible to determine therecoverable amount for an individual asset,then the recoverable amount of the asset’scash-generating unit is determined. Theimpairment test for goodwill is performed atthe lowest level within the entity at whichgoodwill is monitored for internalmanagement purposes, provided that theunit or group of units to which goodwill isallocated is not larger than an operatingsegment under IFRS 8 (or, prior to theadoption of IFRS 8, a segment under IAS 14).

• Reversal of prior years’ impairment losses ispermitted in certain instances (prohibited forgoodwill).

Interpretations IFRIC 10 Interim Financial Reporting andImpairment

Where an entity has recognised an impairmentloss in an interim period in respect of goodwillor an investment in either an equity instrumentor a financial asset carried at cost, thatimpairment is not reversed in subsequentinterim financial statements nor in annualfinancial statements.

IAS 37 Provisions, Contingent Liabilities and Contingent Assets

Effective date Periods beginning on or after 1 July 1999.

Objective To prescribe criteria for recognising andmeasuring provisions, contingent liabilities andcontingent assets, and to ensure that sufficientinformation is disclosed in the notes to thefinancial statements to enable users tounderstand their nature, timing and amount.

Summary • A provision is recognised only when a pastevent has created a legal or constructiveobligation, an outflow of resources isprobable, and the amount of the obligationcan be estimated reliably.

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• The amount recognised as a provision is thebest estimate of the settlement amount atthe end of the reporting period.

• Provisions are reviewed at the end of eachreporting period to adjust for changes inestimate.

• Provisions are utilised only for originalpurposes.

• Examples of provisions may include onerouscontracts, restructuring provisions,warranties, refunds and site restoration.

• Planned future expenditure, even whereauthorised by the board of directors orequivalent governing body, is excluded fromrecognition, as are accruals for self-insuredlosses, general uncertainties, and otherevents that have not yet taken place.

• A contingent liability arises when:

– there is a possible obligation to beconfirmed by a future event that is outsidethe control of the entity; or

– a present obligation may, but probably willnot, require an outflow of resources; or

– a sufficiently reliable estimate of theamount of a present obligation cannot bemade (this is rare).

• Contingent liabilities require disclosure only(no recognition). If the possibility of outflowis remote, then no disclosure.

• A contingent asset arises when the inflow ofeconomic benefits is probable, but notvirtually certain, and occurrence depends onan event outside the control of the entity.

• Contingent assets require disclosure only.If the realisation of income is virtually certain,the related asset is not a contingent assetand recognition is appropriate.

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Interpretations IFRIC 1 Changes in ExistingDecommissioning, Restoration and SimilarLiabilities

Provisions are adjusted for changes in theamount or timing of future costs and forchanges in the market-based discount rate.

IFRIC 5 Rights to Interests Arising fromDecommissioning, Restoration andEnvironmental Funds

IFRIC 5 deals with the accounting, in thefinancial statements of the contributor, forinterests in decommissioning, restoration andenvironmental rehabilitation funds establishedto fund some or all of the costs ofdecommissioning assets or to undertakeenvironmental rehabilitation.

IFRIC 6 Liabilities arising from Participatingin a Specific Market – Waste Electrical andElectronic Equipment (WE&EE)

IFRIC 6 provides guidance on the accountingfor liabilities for waste management costs.Specifically, it considers the appropriate triggerfor recognition of an obligation to contribute tothe costs of disposing of waste equipmentbased on the entity’s share of the market in ameasurement period. The Interpretationconcludes that the event that triggers liabilityrecognition is participation in the market duringa measurement period.

IAS 38 Intangible Assets

Effective date Applies to intangible assets acquired in businesscombinations for which the agreement date ison or after 31 March 2004, and to all otherintangible assets prospectively for periodsbeginning on or after 31 March 2004.

Objective To prescribe the accounting treatment forrecognising, measuring and disclosing allintangible assets that are not dealt withspecifically in another IFRS.

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Summary • An intangible asset, whether purchased orself-created, is recognised if:

– it is probable that the future economicbenefits that are attributable to the assetwill flow to the entity; and

– the cost of the asset can be measuredreliably.

• Additional recognition criteria for internally-generated intangible assets.

• All research costs are charged to expensewhen incurred.

• Development costs are capitalised only aftertechnical and commercial feasibility of theresulting product or service have beenestablished.

• Intangible assets, including in-processresearch and development, acquired in abusiness combination are recognisedseparately from goodwill if they arise as aresult of contractual or legal rights, or theyare separable from the business. In thesecircumstances, the recognition criteria(probability of inflow of future economicbenefits and reliable measurement – seeabove) are always considered to be satisfied.

• Internally-generated goodwill, brands,mastheads, publishing titles, customer lists,start-up costs, training costs, advertisingcosts and relocation costs are neverrecognised as assets.

• If an intangible item does not meet both thedefinition and the recognition criteria for anintangible asset, expenditure on the item isrecognised as an expense when it is incurred,except if the cost is incurred as part of abusiness combination, in which case it formspart of the amount recognised as goodwill atthe acquisition date.

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• For the purpose of accounting subsequent toinitial acquisition, intangible assets areclassified as:

– indefinite life: no foreseeable limit to theperiod over which the asset is expected togenerate net cash inflows for the entity.(Note – ‘indefinite’ does not mean‘infinite’); and

– finite life: a limited period of benefit to theentity.

• Intangible assets may be accounted for usinga cost model or a revaluation model(permitted only in limited circumstances – seebelow). Under the cost model, assets arecarried at cost less any accumulatedamortisation and any accumulatedimpairment losses.

• If an intangible asset has a quoted marketprice in an active market (which isuncommon), an accounting policy choice ofa revaluation model is permitted. Under therevaluation model, the asset is carried at arevalued amount, which is fair value atrevaluation date less any subsequentdepreciation and any subsequent impairmentlosses.

• The cost (residual value is normally zero) of anintangible asset with a finite useful life isamortised over that life. Impairment testingunder IAS 36 is required whenever there is anindication that the carrying amount exceedsthe recoverable amount of the intangible asset.

• Intangible assets with indefinite useful livesare not amortised but are tested forimpairment on an annual basis. If recoverableamount is lower than the carrying amount,an impairment loss is recognised. The entityalso considers whether the intangiblecontinues to have an indefinite life.

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• Under the revaluation model, revaluationsare carried out regularly. All items of a givenclass are revalued (unless there is no activemarket for a particular asset). Revaluationincreases are recognised in othercomprehensive income and accumulated inequity. Revaluation decreases are chargedfirst against the revaluation surplus in equityrelated to the specific asset, and any excessagainst profit or loss. When the revaluedasset is disposed of, the revaluation surplusremains in equity and is not reclassified toprofit or loss.

• Normally, subsequent expenditure on anintangible asset after its purchase orcompletion is recognised as an expense.Only rarely are the asset recognition criteriamet.

Interpretations SIC 32 Intangible Assets – Web Site Costs

Certain initial infrastructure development andgraphic design costs incurred in web sitedevelopment may be capitalised.

IAS 39 Financial Instruments: Recognition and Measurement

Effective date Annual periods beginning on or after 1 January2005, except the 2004 and 2005 revisions forthe fair value option, cash flow hedgeaccounting of forecast intragroup transactions,and financial guarantee contracts are effective1 January 2006.

Objective To establish principles for recognising,derecognising and measuring financial assetsand financial liabilities.

Summary • All financial assets and financial liabilities,including all derivatives and certainembedded derivatives, are recognised in thestatement of financial position.

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• Financial instruments are initially measured atfair value on date of acquisition or issue.Usually this is the same as cost, butsometimes an adjustment is required.

• An entity has an option of recognisingnormal purchases and sales of securities inthe market place consistently either at tradedate or settlement date. If settlement-dateaccounting is used, IAS 39 requiresrecognition of certain value changes betweentrade and settlement dates.

• For the purpose of measuring a financialasset subsequent to initial recognition, IAS 39classifies financial assets into four categories:

1. Loans and receivables not held for trading.

2. Held-to-maturity (HTM) investments, suchas debt securities and mandatorilyredeemable preference shares, that theentity intends and is able to hold tomaturity. If an entity sells any HTMinvestments (other than in exceptionalcircumstances), all of its other HTMinvestments are reclassified as available-for-sale (category 4 below) for the currentand next two financial reporting periods.

3. Financial assets measured at fair valuethrough profit or loss, which includesthose held for trading (short-term profit-taking) and any other financial assetthat the entity designates (the ‘fair valueoption’). Derivative assets are always inthis category unless they are designatedas hedging instruments.

4. Available-for-sale financial assets (AFS) – allfinancial assets that do not fall into one ofthe other three categories. This includes allinvestments in equity instruments that arenot measured at fair value through profitor loss. Additionally, an entity maydesignate any loans and receivables as AFS.

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• The use of the ‘fair value option’ (3 above) isrestricted to those financial instrumentsdesignated on initial recognition into one ofthe following categories:

– those that are classified as held fortrading;

– where the fair value option eliminates anaccounting mismatch that wouldotherwise arise from measuring assets orliabilities or recognising the gains or losseson them on different bases;

– those that are part of a group of financialassets, financial liabilities, or both that aremanaged, and their performance isevaluated by management, on a fair valuebasis in accordance with a documentedrisk management or investment strategy;and

– those that contain one or more embeddedderivatives, except if the embeddedderivative does not modify significantly theassociated cash flows or it is clear withlittle or no analysis that separation isprohibited.

• Subsequent to initial recognition:

– all financial assets in categories 1 and 2above are carried at amortised cost,subject to a test for impairment;

– all financial assets in category 3 above arecarried at fair value, with value changesrecognised in profit or loss; and

– all financial assets in category 4 above(AFS) are measured at fair value in thestatement of financial position, with valuechanges recognised in othercomprehensive income, subject toimpairment testing. If the fair value of anAFS asset cannot be measured reliably, theasset is carried at cost.


• After acquisition, most financial liabilities aremeasured at original recorded amount lessprincipal repayments and amortisation. Threecategories of liabilities are measured at fairvalue with value changes recognised in profitor loss:

– derivative liabilities;

– liabilities held for trading (short sales); and

– any liabilities that the entity designates, atissuance, to be measured at fair valuethrough profit or loss (the ‘fair valueoption’ – see above).

• Fair value is the amount for which an assetcould be exchanged, or a liability settled,between knowledgeable, willing parties in anarm’s length transaction. The IAS 39 fairvalue hierarchy:

– best is quoted market price in an activemarket;

– otherwise use a valuation technique thatmakes maximum use of market inputs andincludes recent arm’s length markettransactions, reference to the current fairvalue of another instrument that issubstantially the same, discounted cashflow analysis, and option pricing models.

• IAS 39 establishes conditions for determiningwhen control over a financial asset or liabilityhas been transferred to another party and,therefore, when it should be removed fromthe statement of financial position(derecognised). Derecognition is notpermitted to the extent to which thetransferor has continuing involvement in anasset or a portion of an asset it hastransferred.

• Hedge accounting (recognising the offsettingeffects of fair value changes of both thehedging instrument and the hedged item inthe same period’s profit or loss) is permittedin certain circumstances, provided that thehedging relationship is clearly defined,measurable, and actually effective.

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IAS 39 provides for three types of hedges:

– fair value hedge: if an entity hedges achange in fair value of a recognised assetor liability or firm commitment, thechange in fair values of both the hedginginstrument and the hedged item arerecognised in profit or loss when theyoccur;

– cash flow hedge: if an entity hedgeschanges in the future cash flows relatingto a recognised asset or liability or a highlyprobable forecast transaction, then thechange in fair value of the hedginginstrument is recognised in othercomprehensive income until such time as those future cash flows occur; and

– hedge of a net investment in a foreignentity: this is treated as a cash flow hedge.

• A hedge of foreign currency risk in a firmcommitment may be accounted for as a fairvalue hedge or as a cash flow hedge.

• The foreign currency risk of a highly probableintragroup transaction is permitted to qualifyas the hedged item in a cash flow hedge inthe consolidated financial statements,provided that the transaction is denominatedin a currency other than the functionalcurrency of the entity entering into thattransaction and the foreign currency risk willaffect the consolidated financial statements.

• If the hedge of a forecast intragrouptransaction qualifies for hedge accounting,any gain or loss that is recognised in othercomprehensive income in accordance withthe hedging rules in IAS 39 is reclassifiedfrom equity to profit or loss in the sameperiod or periods in which the foreigncurrency risk of the hedged transactionaffects profit or loss.

• A portfolio hedge of interest rate risk(hedging an amount rather than a specificasset or liability) can qualify as a fair valuehedge.


Interpretations IFRIC 9 Reassessment of EmbeddedDerivatives

Generally, determination as to whether toaccount for an embedded derivative separatelyfrom the host contract is made when the entityfirst becomes a party to the host contract, andis not subsequently reassessed.

A first-time adopter of IFRSs makes itsassessment based on conditions existing whenthe entity became party to the hybrid contract,not when it adopts IFRSs.

An entity only revisits its assessment if the termsof the contract change, and the expected futurecash flows of the embedded derivative, the hostcontract, or both, change significantly relative tothe previously expected cash flows on thecontract.

IAS 39 guidance Implementation guidance is provided in theIASB’s annual bound volume of IFRSs.



IAS 40 Investment Property


Objective To prescribe the accounting treatment forinvestment property and related disclosures.

Summary • Investment property is land or buildings held(whether by the owner or under a financelease) to earn rentals or for capitalappreciation or both.

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• IAS 40 does not apply to owner-occupiedproperty or property that is beingconstructed or developed for future use asinvestment property, or property held for salein the ordinary course of business.

• An entity chooses either the fair value modelor the cost model:

– fair value model: investment property ismeasured at fair value, and changes in fairvalue are recognised in profit or loss; and

– cost model: investment property ismeasured at depreciated cost less anyaccumulated impairment losses. Fair valueof the investment property is disclosed.

• The chosen measurement model is applied toall of the entity’s investment property.

• If an entity uses the fair value model but,when a particular property is acquired, thereis clear evidence that the entity will not beable to determine fair value on a continuingbasis, the cost model is used for thatproperty – and it must continue to be useduntil disposal of the property.

• Change from one model to the other ispermitted if it will result in a moreappropriate presentation (highly unlikely forchange from fair value to cost model).

• A property interest held by a lessee under anoperating lease can qualify as investmentproperty provided that the lessee uses thefair value model of IAS 40. In this case, thelessee accounts for the lease as if it were afinance lease.



IAS 41 Agriculture

Effective Date Periods beginning on or after 1 January 2003.

Objective To prescribe accounting for agricultural activity –the management of the biologicaltransformation of biological assets (living plantsand animals) into agricultural produce.

Summary • All biological assets are measured at fairvalue less estimated point-of-sale costs,unless fair value cannot be measured reliably.

• Agricultural produce is measured at fair valueat the point of harvest less estimated point-of-sale costs. Because harvested produce is amarketable commodity, there is no‘measurement reliability’ exception forproduce.

• Any change in the fair value of biologicalassets during a period is reported in profit orloss.

• Exception to fair value model for biologicalassets: if there is no active market at the timeof recognition in the financial statements,and no other reliable measurement method,then the cost model is used for the specificbiological asset only. The biological asset ismeasured at depreciated cost less anyaccumulated impairment losses.

• Quoted market price in an active marketgenerally represents the best measure of thefair value of a biological asset or agriculturalproduce. If an active market does not exist,IAS 41 provides guidance for choosinganother measurement basis.

• Fair value measurement stops at harvest.IAS 2 applies after harvest.


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IFRIC 12 Service Concession Arrangements

Note: This Interpretation draws from severalStandards and is included separately dueto its complexity and significance.


Objective To address the accounting by private sectoroperators involved in the provision of publicsector infrastructure assets and services. TheInterpretation does not address the accountingfor the government (grantor) side of sucharrangements.

Summary • For all arrangements falling within the scopeof the Interpretation (essentially those wherethe infrastructure assets are not controlled bythe operator), the infrastructure assets arenot recognised as property, plant andequipment of the operator. Rather, dependingon the terms of the arrangement, theoperator recognises:

– a financial asset – where the operator hasan unconditional right to receive aspecified amount of cash or other financialasset over the life of the arrangement; or

– an intangible asset – where the operator’sfuture cash flows are not specified(e.g. where they will vary according tousage of the infrastructure asset); or

– both a financial asset and an intangibleasset where the operator’s return isprovided partially by a financial asset andpartially by an intangible asset.


Agenda projects

Current IASB agenda projectsOur www.iasplus.com website has the latest information about theIASB and IFRIC agenda projects and research topics, includingsummaries of decisions reached at each IASB and IFRIC meeting.

The following is a summary of the IASB’s agenda projects at 31 March 2008.

* Convergence project with FASB

96

Topic Project Status

AnnualImprovements

Minor amendmentsto IFRS:

• 2007

• 2008

Final IFRS planned forsecond quarter of2008.

ED planned for secondhalf of 2008.

Common ControlTransactions

Addresses theaccounting forcombinations betweenentities or businessesunder common controlin the acquirer’sconsolidated andseparate financialstatements.

Added to agenda inDecember 2007.

Timing of work yet tobe determined.


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ConceptualFramework*

The project is beingaddressed in eightphases:

A Objectives andqualitativecharacteristics

B Elements andrecognition

C Measurement

D Reporting entity

E Presentation anddisclosure

F Purpose and statusof framework

G Applicability to not-for-profit entities

H Other issues, ifnecessary

DP on Phase A wasissued in July 2006.

ED on Phase Aplanned for secondquarter of 2008.

DP on Phase B plannedfor 2009.

DP on Phase Cplanned for secondhalf of 2008.

DP on Phase Dplanned for secondquarter of 2008.

IASB has not yetdetermined timing ofother phases.

Consolidation,including SpecialPurpose Entities*

The objective of theproject is to providemore rigorousguidance on theconcept of ‘control’ asthe basis for preparingconsolidated financialstatements.

DP planned for secondhalf of 2008.

Earnings perShare

Amendment of IAS 33re treasury stockmethod and severalother issues.

ED planned for secondquarter of 2008.


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98

FinancialInstruments:ExposuresQualifying forHedge Accounting

The development ofguidance on riskexposures for whichhedge accounting ispermitted underIAS 39.

Final IFRS planned forsecond half of 2008.


Emission tradingschemes

Addresses theaccounting foremission tradingrights, including anygovernment grantsassociated with suchrights but will notaddress governmentgrants more generally.

Added to agenda inDecember 2007.

Timing of work yet tobe determined.

Fair valuemeasurementguidance*

To provide guidance toentities on how theyshould measure thefair value of assets andliabilities whenrequired by otherStandards.

DP wrap-around ofSFAS 157 Fair ValueMeasurement wasissued in November2006.

ED planned for 2009.

Financialstatementpresentation(performancereporting)*

In two phases:

1. Which financialstatements andcomparativeinformation.

2. Presentation in thefinancial statements.

1. Final IFRS wasissued in September2007.

2. DP planned forsecond quarter of2008.


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99

Group cash-settledshare-based paymenttransactions (IFRS 2and IFRIC 11).


Governmentgrants

The objective of thisproject is to improveIAS 20.

Work has beendeferred pendingcompletion of theLiabilities (IAS 37amendments) project.The revised timetablehas not yet beenannounced.

IFRS 1amendment

Cost of investment in asubsidiary in separatefinancial statements ofparent.

Revised ED was issuedin February 2007.

Final amendmentplanned for secondquarter of 2008.

IFRS 2amendment

ED was issued inDecember 2007.

Income taxes* Aimed at reducing thedifferences betweenIAS 12 Income Taxesand the US standard,SFAS 109 Accountingfor Income Taxes.

ED planned for secondquarter of 2008.

Final IFRS planned for2009.

Insurancecontacts-Phase II

The objective of theproject is to take afresh look ataccounting forinsurance contracts.

DP was issued in May2007.

Ed planned for 2009.

Impairment* Reconsideration ofIAS 36 Impairment ofAssets.

Staff research is inprogress.


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Leases* The objective of theproject is to improvethe accounting forleases by developingan approach that ismore consistent withthe conceptualframework definitionsof assets and liabilities.

DP planned for 2009.

Liabilities(IAS 37amendments)

The objective of theproject is to improvethe requirementsrelating toidentification andrecognition ofliabilities.

ED was issued in June2005.

Final IFRS planned for2009.

Managementcommentary

• Added to agenda inDecember 2007.

• Objective of thisproject is to developa model for anarrative report thatwould accompanybut be presentedoutside of thefinancialstatements.

• The output wouldbe a best practiceguidancedocument.

IASB issued a DP forcomment in October2005.

Timing of further workyet to be determined.

Jointarrangements*

Replacement of IAS 31Interests in JointVentures with aStandard that reducesoptions and focusseson underlying rightsand obligations.

ED was issued inSeptember 2007.

Final IFRS planned forsecond half 2008.


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101


Post-employmentbenefits(includingpensions)

The project includes:

• a targeted series ofimprovements to IAS19 to be completedwithin a four-yearperiod; and

• a comprehensivereview of theexisting pensionaccounting model inconjunction withFASB.

DP issued March 2008.

ED planned for 2009.

Related PartyDisclosures

The main objectives ofthe project are toaddress:

• the requirements inIAS 24 for entitieswith significantstate ownershipwhen they transactwith similar entities;and

• a number of changesrequired in the detailof the definition ofrelated party.

ED was issued inFebruary 2007.

Final IFRS planned forsecond quarter of2008.

Revenuerecognition*

The objective of theproject is to developgeneral principles fordetermining whenrevenue should berecognised in thefinancial statements.

DP planned for secondquarter of 2008.

(IFRS for) Smalland Medium-sized Entities

The objective of theproject is to developan InternationalFinancial ReportingStandard for entitiesthat do not havepublic accountability.

ED was issued inFebruary 2007.

Final IFRS planned forsecond half of 2008.


IASB active research topics

102

IASB active research topics* Convergence project with FASB

Topic Status

Derecognition* • Staff research paper being developed.

Reducing • To develop standards for the reporting ofComplexity in financial instruments that are principle-basedReporting Financial and less complex.Instruments * • DP issued March 2008.

Intangible assets* • To develop a consistent approach to recognition and measurement of intangibleassets, (including purchased and internally-generated intangible assets) not related to a business combination.

• Staff research paper being developed.• Decision in December 2007 not to add this

project to the agenda but to continue as a research project.

Extractive activities • To focus on the factors influencing the estimation of reserves and resources and the major reserve reporting codes and classification systems used in the extractive industries.

• A group of national standard setters is developing a discussion paper.

Liabilities and • To provide a more relevant and comparable equity* depiction of financial instruments with

characteristics of equity, liabilities or both.• DP issued February 2008.


Interpretations

103

InterpretationsInterpretations of IASs and IFRSs are developed by the InternationalFinancial Reporting Interpretations Committee (IFRIC), which replacedthe Standing Interpretations Committee (SIC) in 2002. Interpretationsare part of IASB’s authoritative literature. Therefore, financialstatements may not be described as complying with InternationalFinancial Reporting Standards unless they comply with all therequirements of each applicable Standard and each applicableInterpretation.

IFRIC Interpretations

The following Interpretations have been issued by the InternationalFinancial Reporting Interpretations Committee (IFRIC) starting in 2004through 31 March 2008:

• IFRIC 1 Changes in Existing Decommissioning, Restoration andSimilar Liabilities

• IFRIC 2 Members’ Shares in Co-operative Entities and SimilarInstruments

• IFRIC 3 – withdrawn

• IFRIC 4 Determining whether an Arrangement contains a Lease

• IFRIC 5 Rights to Interests Arising from Decommissioning,Restoration and Environmental Rehabilitation Funds

• IFRIC 6 Liabilities arising from Participating in a Specific Market –Waste Electrical and Electronic Equipment

• IFRIC 7 Applying the Restatement Approach under IAS 29, FinancialReporting in Hyperinflationary Economies

• IFRIC 8 Scope of IFRS 2

• IFRIC 9 Reassessment of Embedded Derivatives

• IFRIC 10 Interim Financial Reporting and Impairment

• IFRIC 11 IFRS 2 – Group and Treasury Share Transactions

• IFRIC 12 Service Concession Arrangements

• IFRIC 13 Customer Loyalty Programmes

• IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, MinimumFunding Requirements and their Interaction


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104

SIC Interpretations

The following Interpretations, issued by the Standing InterpretationsCommittee (SIC) from 1997-2001, remain in effect. All other SICInterpretations have been superseded by amendments to IASs or new IFRSsissued by the IASB:

• SIC-7 Introduction of the Euro

• SIC-10 Government Assistance – No Specific Relation to OperatingActivities

• SIC-12 Consolidation – Special Purpose Entities

• SIC-13 Jointly Controlled Entities – Non-Monetary Contributions byVenturers

• SIC-15 Operating Leases – Incentives

• SIC-21 Income Taxes – Recovery of Revalued Non-Depreciable Assets

• SIC-25 Income Taxes – Changes in the Tax Status of an Entity or itsShareholders

• SIC-27 Evaluating the Substance of Transactions in the Legal Form ofa Lease

• SIC-29 Service Concession Arrangements: Disclosures

• SIC-31 Revenue – Barter Transactions Involving Advertising Services

• SIC-32 Intangible Assets – Web Site Costs

Items not added to IFRIC agenda

We maintain on www.iasplus.com a list of over 130 issues that the IFRICconsidered adding to its agenda but decided not to do so. In each case,the IFRIC announces its reason for not taking the issue onto its agenda.By their nature, those announcements provide helpful guidance in applyingIFRSs. You will find the list at www.iasplus.com/ifric/notadded.htm

IFRIC due process

In February 2007, the Trustees of the IASC Foundation published the DueProcess Handbook for the International Financial Reporting InterpretationsCommittee (IFRIC). A copy may be downloaded from the IASB’s websitewww.iasb.org

The IFRIC approves draft and final Interpretations if not more than four ofthe fourteen IFRIC members vote against. Final Interpretations must thenbe approved by the IASB (at least nine votes in favour).


IFRIC current agenda issues

105

IFRIC current agenda issuesStandard Topic Status

IAS 18 Revenue Real Estate Sales Draft Interpretation D21 issued

Customer Contributions Draft Interpretation D24 issued

IAS 21 The Hedges of a Net Draft InterpretationEffects of Changes Investment in a D22 issuedin Foreign Foreign OperationExchange Rates

IAS 27 Distributions of Draft InterpretationConsolidated Non-cash Assets D23 issuedand Separate to OwnersFinancial Statements

IAS 39 Financial Derecognition of ActiveInstruments: financial assetsRecognition and Measurement


IFRS e-learning

106

Deloitte IFRS e-learningDeloitte is pleased to make available, in the publicinterest and without charge, our e-learningtraining materials for IFRSs. Modules are availablefor virtually all IASs/IFRSs.

Each module involves downloading a 4mb to 6mbzip file and extracting the enclosed files and directory structure into adirectory on your computer.

Before downloading, you will be asked to read and accept a disclaimernotice. The e-learning modules may be used and distributed freely bythose registering with the site, without alteration from the original formand subject to the terms of the Deloitte copyright over the material.

To download, go to www.iasplus.com and click on the light bulb icon onthe home page.


Website addresses

107

Website addressesDeloitte Touche Tohmatsu

www.deloitte.com

www.iasplus.com

IASB

www.iasb.org

Some national standard-setting bodies

Australian Accounting Standards Board www.aasb.com.au

Canadian Accounting Standards Board www.acsbcanada.org

China Accounting Standards Committee www.casc.gov.cn/internet/internet/en.html

Conseil National de la Comptabilité www.minefi.gouv.fr/(France) directions_services/CNCompta/

German Accounting Standards Board www.drsc.de

Japan Accounting Standards Board www.asb.or.jp/index_e.php

Korea Accounting Standards Board http://.eng.kasb.or.kr

New Zealand Financial Reporting www.nzica.comStandards Board and New Zealand www.asrb.co.nzAccounting Standards Review Board

Accounting Standards Board www.frc.org.uk/asb(United Kingdom)

Financial Accounting Standards www.fasb.orgBoard (USA)

International Auditing and Assurance Standards Board

www.ifac.org/iaasb

International Federation of Accountants

www.ifac.org

International Organization of Securities Commissions

www.iosco.org

Our IAS Plus website has a page with links to nearly 200 accounting-related websites: www.iasplus.com/links/links.htm


Subscribe to our IAS Plus newsletter

108

Subscribe to our IAS PlusnewsletterDeloitte publishes an IAS Plus quarterly newsletter (roughly 30 pages) ondevelopments in international financial reporting. We also publish specialeditions of this newsletter (usually 3 to 6 pages) to address importantpronouncements and proposals and other major news events in detail.In addition, e-mail alerts are occasionally provided for important newsarising between issues of the newsletter.

If you would like to receive alerts to these newsletters, with downloadlinks, via e-mail, you can subscribe by visiting the IAS Plus website:www.iasplus.com/subscribe.htm

Electronic editions of the IAS Plus newsletter are also available atwww.iasplus.com/iasplus/iasplus.htm

We also offer alerts via our RSS feed – subscribe on the IAS Pluswebsite home page.


Deloitte IFRS resourcesIn addition to this publication, Deloitte Touche Tohmatsu has a range oftools and publications to assist in implementing and reporting under IFRSs.These include:

www.iasplus.com Updated daily, iasplus.com is your one-stop shopfor information related to IFRSs.

Deloitte’s IFRS e-Learning IFRS training materials, one modulee-Learning modules for each IAS and IFRS and the Framework, with

self-tests, available without charge atwww.iasplus.com

IAS Plus newsletter Quarterly newsletter on recent developments inIFRSs and accounting updates for individualcountries. Special editions for importantdevelopments. To subscribe, visitwww.iasplus.com

Presentation and Checklist incorporating all of the presentation disclosure checklist and disclosure requirements of Standards.

Model financial Model financial statements illustrating the statements presentation and disclosure requirements of

IFRSs.

iGAAP 2007 3rd edition (March 2007). Guidance on how to Financial instruments: apply these complex Standards, including IAS 32, IAS 39 and illustrative examples and interpretations.IFRS7 explained

First-time adoption: Application guidance for the “stable platform” A guide to IFRS 1 standards effective in 2005.

Share-based payments: Guidance on applying IFRS 2 to many common A guide to IFRS 2 share-based payment transactions.

Business combinations: Supplements the IASB’s own guidance for A guide to IFRS 3 applying this Standard.

Assets held for sale Detailed summaries and explanations of theand discontinued requirements of the Standard, including operations: examples of application and discussion ofA guide to IFRS 5 evolving literature.

Interim financial Guidance on applying the interim reporting reporting: standard, including a model interim financialA guide to IAS 34 report and an IAS 34 compliance checklist.


For more information on Deloitte Touche Tohmatsu, pleaseaccess our website at www.deloitte.com

Deloitte provides audit, tax, consulting, and financialadvisory services to public and private clients spanningmultiple industries. With a globally connected network ofmember firms in 140 countries, Deloitte brings world-classcapabilities and deep local expertise to help clients succeedwherever they operate. Deloitte’s 150,000 professionals arecommitted to becoming the standard of excellence.

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This publication contains general information only and isnot intended to be comprehensive nor to provide specificaccounting, business, financial, investment, legal, tax orother professional advice or services. This publication is nota substitute for such professional advice or services, and itshould not be acted on or relied upon or used as a basis forany decision or action that may affect you or your business.Before making any decision or taking any action that mayaffect you or your business, you should consult a qualifiedprofessional advisor.

Whilst every effort has been made to ensure the accuracy ofthe information contained in this publication, this cannot beguaranteed, and neither Deloitte Touche Tohmatsu nor anyrelated entity shall have any liability to any person or entitythat relies on the information contained in this publication.Any such reliance is solely at the user’s risk.

© Deloitte Touche Tohmatsu 2008. All rights reserved.

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