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CHAPTER 3

FINANCIAL REPORTING STANDARDS

Presenter’s namePresenter’s titledd Month


2/36

O!"ECTI#E OF FINANCIAL REPORTING

$ O%&e'ti(e o) *eneral +,r+ose )inan'ial re+ortin*

- To +ro(ide )inan'ial in)ormation a%o,t the re+ortin* entit that is,se),l to existing and potential investors, lenders, and othercreditors in ma.in* de'isions a%o,t +ro(idin* reso,r'es to theentit/ Those de'isions in(ol(e %,in*0 sellin*0 or holdin* e1,it and

de%t instr,ments and +ro(idin* or settlin* loans and other )orms o)'redit/

$ In(estors

- !,0 sell0 or hold

$ Lenders and other 'reditors- Lend or not

- Amo,nt and terms

Co+ri*ht 2 453 CFA Instit,te


3/36

FINANCIAL REPORTING 6SE IN SEC6RIT7 ANAL7SIS AND #AL6ATION

$ De'isions % in(estors to %,0 sell0 or hold se',rities de+ends one8+e'tations a%o,t ret,rns 9di(idend ield and +ri'e a++re'iation:/

$ E8+e'tations a%o,t ret,rns de+end on +ros+e'ts )or an entit’s ),t,re'ash )lo;s0 and assessin* those +ros+e'ts re1,ires in)ormation a%o,tan entit’s

- reso,r'es0- 'laims on reso,r'es0 and

- ,se o) the reso,r'es % mana*ement and %oard/

$ Finan'ial re+orts are not desi*ned to sho; the (al,e o) a re+ortin*

entit< the +ro(ide in)ormation to hel+ ,sers estimate the (al,e o) there+ortin* entit/

$ Finan'ial re+orts do not and 'annot +ro(ide all the in)ormation needed% in(estors and 'reditors/ Other +ertinent in)ormation m,st %eo%tained )rom other so,r'es/

Co+ri*ht 2 453 CFA Instit,te 3


4/36

IMPORTANCE OF FINANCIAL REPORTING STANDARDSIN SEC6RIT7 ANAL7SIS AND #AL6ATION

$ Com+le8it in(ol(ed in settin* standards re)le'ts the 'om+le8it o) the,nderlin* e'onomi' realit/

$ Com+le8it and ,n'ertaint 'reate the need )or &,d*ment % +re+arers/

$",d*ment 'an (ar amon* +re+arers0 so standards are needed toa'hie(e 'onsisten'/

$ E(en tho,*h standards limit the ran*e o) a''e+ta%le a++roa'hes0+re+arers still m,st ma.e &,d*ments and ,se estimates/

$ ! ,nderstandin* ho; and ;hen standards re1,ire &,d*ments and

estimates that 'an a))e't re+orted n,m%ers0 an analst 'an ma.e%etter ,se o) the in)ormation/

Co+ri*ht 2 453 CFA Instit,te =


5/36

E>AMPLE

D,rin* an a''o,ntin* +eriod0 In'oo. In'/0 a h+otheti'al 'om+an that

im+orts *o,rmet 'oo.;are sets0 had the )ollo;in* transa'tions?

$ A'1,ired o))i'e e1,i+ment )or @0444 in 'ash

$ Paid rent and other mis'ellaneo,s %,siness e8+enses o) @540444

$ P,r'hased 544 sets o) 'oo.;are at a 'ost o) @B44 ea'h and +aid 544 on

deli(er

$ Sold 4 sets to ',stomers )or @5044 ea'h 9@B0444 total:/ In order to

ma.e the sales0 In'oo. had to o))er 'redit terms to man ',stomers/ At

ear-end0 ',stomers o;ed In'oo. @50444 )or 'oo.;are that had %een

deli(ered 9i/e/0 @B0444 'ash ;as 'olle'ted )rom ',stomers and0 there)ore0

@50444 remained o,tstandin* )rom ',stomers:/

In'oo.’s t;o o;ners +lan to s+lit the +ro)its 44/ I) no a''o,ntin*

standards e8isted0 ;hat alternati(es mi*ht %e +ro+osed as reasona%le ;as

to 'om+,te the +ro)its



6/36

E>AMPLE$ A''o,ntin* standards limit the ran*e o) allo;a%le a++roa'hes/

$ In'oo. ;o,ld re+ort sales re(en,es o) @B0444< ho;e(er0 that amo,nt;o,ld li.el %e red,'ed to re)le't an estimate )or ,n'olle'ti%le

a''o,nts/

$ In'oo. ;o,ld re+ort 'ost o) *oods sold o) @=0444/

- It sold 4 ,nits0 ea'h o) ;hi'h 'ost @B44/- I) the +er-,nit 'osts ;ere di))erent0 'ost o) *oods sold ;o,ld re1,ire

the 'hoi'e o) in(entor 'ost method/

$ In'oo. ;o,ld re+ort some amo,nt o) e8+ense )or at least +art o) the

o))i'e e1,i+ment/ The amo,nt o) the e8+ense ;o,ld de+end on- Estimated ,se),l li)e o) the e1,i+ment0

- Estimated sal(a*e (al,e o) the e1,i+ment at the end o) its li)e0 and

- Choi'e o) de+re'iation method/



7/36

STANDARD-SETTING !ODIES ANDREG6LATOR7 A6THORITIES

$ Generall0

- Standard-settin* %odies set the standards and

- Re*,lator a,thorities re'o*nie and en)or'e thestandards/

$ Ho;e(er0 re*,lators o)ten retain the le*al a,thorit toesta%lish )inan'ial re+ortin* standards in their &,risdi'tionsand 'an o(err,le +ri(ate se'tor standard-settin* %odies/

Co+ri*ht 2 453 CFA Instit,te B


8/36

E>AMPLES OF STANDARD-SETTING !ODIES

$ The International A''o,ntin* Standards !oard 9IAS!: setsIFRS 9International Finan'ial Re+ortin* Standards:/

$ The 6/S/ Finan'ial A''o,ntin* Standards !oard 9FAS!:sets 6/S/ GAAP 9*enerall a''e+ted a''o,ntin*

+rin'i+les:/



9/36

E>AMPLES OF REG6LATOR7 A6THORITIES

Country Regulatory authority with primary responsibility forsecurities regulation in the country

A,stralia A,stralian Se',rities and In(estments Commission

!el*i,m Finan'ial Ser(i'es and Mar.ets A,thorit

!rail ComissJo de #alores Mo%iliKrios

China China Se',rities Re*,lator Commission

Fran'e A,torit des mar'hs )inan'iers

German !,ndesanstalt )r Finandienstleist,n*sa,)si'ht

India Se',rities and E8'han*e !oard o) India

"a+an Finan'ial Ser(i'es A*en'

Moro''o Conseil dontolo*i1,e des (ale,rs mo%ilires

Ni*eria Se',rities and E8'han*e Commission Ni*eria



10/36

E>AMPLES OF REG6LATOR7 A6THORITIES9CONTIN6ED:

Country Regulatory authority with primary responsibility forsecurities regulation in the country

Port,*al ComissJo do Mer'ado de #alores Mo%iliKrios

S+ain Comisin Na'ional del Mer'ado de #alores

So,th A)ri'a Finan'ial Ser(i'es !oard

T,r.e Ca+ital Mar.ets !oard o) T,r.e

6nited in*dom Finan'ial Ser(i'es A,thoritQ

6nited States Se',rities and E8'han*e Commission 9SEC:

6r,*,a !an'o Central del 6r,*,a


QFSA to %e s,''eeded % the Finan'ial Cond,'t A,thorit and the Pr,dential Re*,lation A,thorit in 453/


11/36

INTERNATIONAL ORGANIATION OFSEC6RITIES COMMISSIONS 9IOSCO:

$ Not a re*,lator a,thorit0 %,t an international asso'iation o)se',rities re*,lators )ormed in 53

$ O%&e'ti(es o) IOSCO mem%ers?- De(elo+ international standards o) mar.et re*,lation to +rote't

in(estors and address sstemi' ris.s/

- E8'han*e in)ormation and 'oo+erate in en)or'ement to enhan'ein(estor +rote'tion and +romote in(estor 'on)iden'e/

- E8'han*e in)ormation to assist in de(elo+ment o) mar.ets0in)rastr,'t,re0 and re*,lation/



12/36

IFRS 6SE ARO6ND THE ORLD


Country Status for Listed Companies as of December 20

Ar*entina Re1,ired )or )is'al ears %e*innin* on or a)ter 5 "an,ar 45

A,straliaRe1,ired )or all +ri(ate se'tor re+ortin* entities and as the%asis )or +,%li' se'tor re+ortin* sin'e 44

!railRe1,ired )or 'onsolidated )inan'ial statements o) %an.s andlisted 'om+anies )rom 35 De'em%er 454 and )or indi(id,al'om+an a''o,nts +ro*ressi(el sin'e "an,ar 44

CanadaRe1,ired )rom 5 "an,ar 455 )or all listed entities and+ermitted )or +ri(ate se'tor entities in'l,din* not-)or-+ro)itor*aniations

China S,%stantiall 'on(er*ed national standards

E,ro+ean 6nion

All mem%er states o) the E6 are re1,ired to ,se IFRS as

ado+ted % the E6 )or listed 'om+anies sin'e 44

India India is 'on(er*in* ;ith IFRS at a date to %e 'on)irmed

IndonesiaCon(er*en'e +ro'ess on*oin*< a de'ision a%o,t a tar*et date)or ),ll 'om+lian'e ;ith IFRS is e8+e'ted to %e made in 45


13/36

IFRS 6SE ARO6ND THE ORLD


Country Status for Listed Companies as of December 20

!apan Permitted )rom 454 )or a n,m%er o) international 'om+anies


14/36

CONTIN6ING DE#ELOPMENTS IN FINANCIALREPORTING STANDARDS

$ As ill,strated on the +re'edin* slides0 altho,*h man 'o,ntries ha(eado+ted IFRS0 not all 'o,ntries ha(e done so/

$ Finan'ial re+ortin* standards 9%oth IFRS and home-'o,ntr GAAP:'ontin,e to e(ol(e )or (ario,s reasons0 in'l,din*

-Chan*es in e'onomi' a'ti(it 9ne; t+es o) +rod,'ts andtransa'tions:0

- Im+ro(ements to e8istin* standards0 and

- Con(er*en'e %et;een international and home-'o,ntr standards/

$ An analst needs to ,nderstand ;hether and ho; di))eren'es in

)inan'ial re+ortin* standards a))e't 'om+ara%ilit in 'ross-se'tionalanalsis/

Co+ri*ht 2 453 CFA Instit,te 5=


15/36

GLO!AL CON#ERGENCE OF ACCO6NTINGSTANDARDS? DIFFERENCES REMAIN

$ Di))erent re+ortin* sstems are ,sed in di))erent 'o,ntries/$ For e8am+le0 des+ite 'on(er*en'e e))orts0 di))eren'es remain %et;een

6/S/ GAAP and IFRS/

(nventory

$ IFRS does not allo; )or the ,se o) the LIFO 9last in0 )irst o,t: 'ostin*methodolo* )or in(entor0 ;hi'h is +ermitted ,nder 6/S/ GAAP/

$ In the 6nited States0 the Internal Re(en,e Ser(i'e 9IRS: has'on)ormit +ro(isions s,'h that 'ertain methods o) a''o,ntin* areallo;ed )or in'ome ta8 +,r+oses onl i) the entit also ,ses that

method )or )inan'ial re+ortin* +,r+oses/ LIFO is one s,'h methods,%&e't to 'on)ormit +ro(isions/

$ Th,s0 ;itho,t a 'han*e in IRS r,les0 eliminatin* LIFO )rom 6/S/ GAAP;o,ld0 in e))e't0 eliminate its ,se )or ta8 +,r+oses as ;ell/



16/36


$ Des+ite 'on(er*en'e e))orts0 di))eren'es remain %et;een 6/S/ GAAPand IFRS/

"easurement of Certain $sset Classes 9o+tionalit +ermitted ,nderIFRS:

$ 6nder IFRS0 'ertain assets 9e/*/0 'a+italied a'1,ired intan*i%les and+ro+ert0 +lant0 and e1,i+ment: are initiall re'o*nied at 'ost/ Fors,%se1,ent meas,rement0 entities ha(e a 'hoi'e?

- to 'ontin,e ;ith a 'ost model or

- To re(al,e the assets ;ithin ea'h 'lass to )air mar.et (al,e 9less ans,%se1,ent a'',m,lated amortiation or de+re'iation:/

$ 6/S/ GAAP does not +ermit ,se o) a re(al,ation model/



17/36


$ Des+ite 'on(er*en'e e))orts0 di))eren'es remain %et;een 6/S/ GAAPand IFRS/

(mpairment 9+ro+ert0 +lant0 and e1,i+ment< in(entor< and intan*i%leassets:

$ The IFRS models allo; )or re(ersals o) im+airments ,+ to a 'ertainamo,nt i) there is an indi'ation that an im+airment loss has de'reased

$ 6/S/ GAAP does not allo; re(ersals o) im+airments/

$ The SEC sta)) %elie(es that the distin'tion 'o,ld res,lt in di))eren'es in

the timin* and e8tent o) re'o*nied im+airment losses/$ There)ore0 6/S/ iss,ers 'o,ld e8+erien'e *reater in'ome statement

(olatilit i) the IFRS models ;ere in'or+orated 9)lo;in* )rom re'o(erieso) (al,es +re(io,sl ;ritten do;n:/

Co+ri*ht 2 453 CFA Instit,te 5B


18/36


$ Des+ite 'on(er*en'e e))orts0 di))eren'es remain %et;een 6/S/ GAAP andIFRS/

Certain )onfinancial Liabilities

$ The re'o*nition o) 'ertain non)inan'ial lia%ilities 9e/*/0 'ontin*en'ies anden(ironmental lia%ilities: is *o(erned % the +ro%a%ilit that a lia%ilit has %een

in',rred ,nder %oth 6/S/ GAAP and IFRS/ Ho;e(er0 6/S/ GAAP and IFRSdi))er in their de)initions o) ;hat is +ro%a%le/U

$ For e8am+le0 the de)inition o) probable )or 'ontin*en'ies is

- For IFRS0 more li.el than not to o'',r/U

- For 6/S/ GAAP0 the ),t,re e(ent or e(ents are li.el to o'',r/U

$ Li.elU is 'onsidered to %e a hi*her threshold than more li.el than not0Umeanin* 6/S/ GAAP has a hi*her re'o*nition threshold than does IFRS/

$ There)ore0 a lia%ilit ;ill o)ten %e re'o*nied earlier ,nder IFRS than ,nder6/S/ GAAP/



19/36

IFRS CONCEPTUAL FRAMEWORK



20/36

IFRS CONCEPTUAL FRAMEWORK ?O!"ECTI#E OF FINANCIAL REPORTING

$ At the 'ore o) the ConceptualFramework is the o%&e'ti(e to+ro(ide )inan'ial in)ormation that

is ,se),l to ',rrent and +otential+ro(iders o) reso,r'es in ma.in*de'isions/

$ All other as+e'ts o) the)rame;or. )lo; )rom that 'entral

o%&e'ti(e/



21/36

IFRS CONCEPTUAL FRAMEWORK ?F6NDAMENTAL V6ALITATI#E CHARACTERISTICS

$ T;o fundamental 1,alitati(e'hara'teristi's that ma.e)inan'ial in)ormation ,se),l?- Relevance? In)ormation that

'o,ld +otentiall ma.e a

di))eren'e in ,sers’ de'isions/- Fait!ul Representation?

In)ormation that )aith),llre+resents an e'onomi'+henomenon that it +,r+orts

to re+resent/ It is ideall- 'om+lete0- ne,tral0 and- )ree )rom error/



22/36

IFRS CONCEPTUAL FRAMEWORK ? ENHANCING V6ALITATI#E CHARACTERISTICS

$ Fo,r enhancing 1,alitati(e

'hara'teristi's that ma.e )inan'ialin)ormation ,se),l?

- Compara"ilit# ? Com+anies re'ord

and re+ort in)ormation in a similar

manner/

- $eri!ia"ilit# ? Inde+endent +eo+le

,sin* the same methods arri(e at

similar 'on'l,sions/

- Timeliness? In)ormation is a(aila%le

%e)ore it loses its rele(an'e/- Un%erstan%a"ilit#& Reasona%l

in)ormed ,sers sho,ld %e a%le to

'om+rehend the in)ormation/



23/36

IFRS CONCEPTUAL FRAMEWORK ? REPORTING ELEMENTS

$ Elements dire'tl related to themeas,rement o) )inan'ial +osition?

- Assets? Reso,r'es 'ontrolled %the enter+rise as a res,lt o) +aste(ents and )rom ;hi'h ),t,ree'onomi' %ene)its are e8+e'ted to)lo; to the enter+rise/

- Lia"ilities? Present o%li*ations o)an enter+rise arisin* )rom +aste(ents0 the settlement o) ;hi'h ise8+e'ted to res,lt in an o,t)lo; o)

reso,r'es em%odin* e'onomi'%ene)its/

- E'uit# ? Resid,al interest in theassets a)ter s,%tra'tin* thelia%ilities/



24/36

IFRS CONCEPTUAL FRAMEWORK ?REPORTING ELEMENTS

$ Elements dire'tl related to themeas,rement o) +er)orman'e?

- (ncome? In'reases in e'onomi'%ene)its in the )orm o) in)lo;s orenhan'ements o) assets or

de'reases o) lia%ilities that res,ltin an in'rease in e1,it 9other thanin'reases res,ltin* )rom'ontri%,tions % o;ners:/

- E)penses? De'reases in e'onomi'%ene)its in the )orm o) o,t)lo;s or

de+letions o) assets or in'reasesin lia%ilities that res,lt in de'reasesin e1,it 9other than de'reases%e'a,se o) distri%,tions too;ners:/

Co+ri*ht 2 453 CFA Instit,te =


25/36

IFRS CONCEPTUAL FRAMEWORK ?CONSTRAINTS AND ASS6MPTIONS

$ Constraint? The %ene)its o)in)ormation sho,ld e8'eed the'osts o) +ro(idin* it/

$ 6nderlin* Ass,m+tions?

- Accrual *asis? Finan'ialstatements sho,ld re)le'ttransa'tions in the +eriod ;henthe a't,all o'',r0 notne'essaril ;hen 'ashmo(ements o'',r/

- +oin, Concern? Ass,m+tionthat the 'om+an ;ill 'ontin,ein %,siness )or the )oreseea%le),t,re/



26/36

FINANCIAL STATEMENTS


A 'om+lete set o) )inan'ial statements in'l,des$ Statement o) )inan'ial +osition

$ Statement o) 'om+rehensi(e in'ome

$Statement o) 'han*es in e1,it

$ Statement o) 'ash )lo;s

$ Notes


27/36

GENERAL FEAT6RES OF FINANCIALSTATEMENTS

Co+ri*ht 2 453 CFA Instit,te B

$ Fair +resentation

$ Goin* 'on'ern

$ A''r,al %asis

$ Materialit and a**re*ation

$ No o))settin*

$ Fre1,en' o) re+ortin*

$ Com+arati(e in)ormation

$ Consisten'


28/36

STR6CT6RE AND CONTENT REV6IREMENTSFOR FINANCIAL STATEMENTS 9IAS NO/ 5:


$ Classi!ie% statement o! !inancial position? !alan'e sheet re1,ired todistin*,ish %et;een ',rrent and non',rrent assets and %et;een',rrent and non',rrent lia%ilities ,nless a +resentation %ased onli1,idit +ro(ides more rele(ant and relia%le in)ormation 9e/*/0 in the'ase o) a %an. or similar )inan'ial instit,tion:/

$ Minimum in!ormation on te !ace o! te !inancial statements? Minim,mline item dis'los,res on the )a'e o)0 or in the notes to0 the )inan'ialstatements are s+e'i)ied/

$ Minimum in!ormation in te notes 9or on the )a'e o) )inan'ialstatements:? Dis'los,res a%o,t in)ormation to %e +resented in the

)inan'ial statements are s+e'i)ied/

$ Comparative in!ormation? For all amo,nts re+orted in a )inan'ialstatement0 'om+arati(e in)ormation )or the +re(io,s +eriod is re1,ired/


29/36

COHERENT FINANCIAL REPORTINGFRAMEOR

Chara'teristi's o) a 'oherent)inan'ial re+ortin*)rame;or.

$ Transparent

$ Compreensive

$ Consistent

!arriers to 'reatin* s,'h a)rame;or.

$ $aluation? alternati(emeas,rement a++roa'hes

$ -tan%ar%.-ettin, Approac? %alan'e%et;een +rin'i+les andr,les/

$ Measurement ? alternati(eem+hasis on %alan'esheet (ers,s in'omestatement/



30/36

DISCLOS6RES OF SIGNIFICANT ACCO6NTINGPOLICIES

$ Com+anies are re1,ired to dis'lose their a''o,ntin*+oli'ies and estimates in the notes to the )inan'ialstatements/

$ Com+anies also dis',ss in the mana*ement 'ommentar

9MDWA: those +oli'ies that mana*ement deems mostim+ortant/$ Man o) the +oli'ies are dis',ssed in %oth the

mana*ement 'ommentar and the notes to the )inan'ialstatement/

$ Com+anies also dis'lose in)ormation a%o,t 'han*es/



31/36

MDWA DISCLOS6RES OF SIGNIFICANT ACCO6NTING POLICIES? E>AMPLE 5

“In certain instances, accounting principles generally accepted in the United States ofAmerica allow for the selection of alternative accounting methods. The Company’s

significant policies that involve the selection of alternative methods are accounting for

shipping and handling costs and inventories.

“Shipping and handling costs may e reported as either a component of cost of sales or

selling, general and administrative e!penses. The Company reports such costs, primarily

related to warehousing and outound freight, in the Consolidated Statements of Income

as a component of Selling, general and administrative e!penses. Accordingly, the

Company’s gross profit margin is not comparale with the gross profit margin of those

companies that include shipping and handling charges in cost of sales. If such costs had

een included in cost of sales, gross profit margin as a percent of sales would have

decreased y "#$ ps, from #".%& to '(.)& in *$++ and decreased y "%$ ps in *$+$

and *$$(, with no impact on reported earnings.

E8'er+t )rom MDWA in Col*ate Palmoli(e Com+an’s 455 Ann,al Re+ort



32/36

FOOTNOTE DISCLOS6RE OF SIGNIFICANT ACCO6NTING POLICIES? E>AMPLE 5 9CONTIN6ED:

Shipping and Handling Costs“Shipping and handling costs are classified as Selling, general and

administrative e!penses and were -+,*#$, -+,+'* and -+,++ for

the years ended /ecemer %+, *$++, *$+$ and *$$(, respectively.

E8'er+t )rom )ootnotes in Col*ate Palmoli(e Com+an’s 455 Ann,al Re+ort



33/36

FOOTNOTE DISCLOS6RE OF SIGNIFICANT ACCO6NTING POLICIES? E>AMPLE 5 9CONTIN6ED:

Use of Estimates“The preparation of financial statements in accordance with accounting

principles generally accepted in the United States of America re0uires

management to use 1udgment and ma2e estimates that affect the reported

amounts of assets and liailities and disclosure of contingent gains and losses at

the date of the financial statements and the reported amounts of revenues ande!penses during the reporting period. The level of uncertainty in estimates and

assumptions increases with the length of time until the underlying transactions

are completed. As such, the most significant uncertainty in the Company’s

assumptions and estimates involved in preparing the financial statements

includes pension and other retiree enefit cost assumptions, stoc23ased

compensation, asset impairment, uncertain ta! positions, ta! valuation

allowances and legal and other contingency reserves. 4Actual results could

ultimately differ from those estimates.


E8'er+t )rom )ootnotes in Col*ate Palmoli(e Com+an’s 455 Ann,al Re+ort


34/36

FOOTNOTE DISCLOS6RES OF ACCO6NTINGPRINCIPLES AND METHODS? E>AMPLE

“General Information. The consolidated financial statements of 5en2el A6 7Co. 86aA as of /ecemer %+, *$++ have een prepared in accordance with

International 9inancial :eporting Standards ;I9:S< as adopted y the =uropean

Union and in compliance with Section %+#a of the 6erman Commercial Code

>56?@4.

“Scope of consolidation. In addition to 5en2el A6 7 Co. 86aA as theultimate parent company, the consolidated financial statements at /ecemer %+,

*$++ include seven 6erman and +"$ non36erman companies in which 5en2el

A6 7 Co. 86aA has a dominating influence over financial and operating

policy, ased on the concept of control..... Compared to /ecemer %+, *$+$,

four new companies have een included in the scope of consolidation and

eleven companies have left the scope of consolidation. Seven mergers also too2

place. The changes in the scope of consolidation have not had any material

effect on the main items of the consolidated financial statements. E8'er+t )rom )ootnotes o) Hen.el 455 Ann,al Re+ort

Co+ri*ht 2 453 CFA Instit,te 3=


35/36

FOOTNOTE DISCLOS6RES OF ACCO6NTINGPRINCIPLES AND METHODS? E>AMPLE

Accounting estimates, assumptions and discretionary judgmentsreparation of the consolidated financial statements is ased on a

numer of accounting estimates and assumptions. These have an impact

on the reported amounts of assets, liailities and contingent liailities at

the reporting date and the disclosure of income and e!penses for the

reporting period. The actual amounts may differ from these estimates.“The accounting estimates and their underlying assumptions are

continually reviewed....The 1udgments of the Banagement ?oard

regarding the application of those I9:Ss which have a significant impact

on the consolidated financial statements are presented in the e!planatory

notes on ta!es on income4 intangile assets..., pension oligations4, financial instruments and

share3ased payment plans...E8'er+t )rom )ootnotes o) Hen.el 455 Ann,al Re+ort



36/36

S6MMAR7

$ O%&e'ti(e o) )inan'ial re+ortin* is to +ro(ide )inan'ial in)ormation a%o,t there+ortin* entit that is ,se),l to existing and potential investors, lenders,

and other creditors in ma.in* de'isions a%o,t +ro(idin* reso,r'es to the

entit/

$ *undamental 1,alitati(e 'hara'teristi's that ma.e )inan'ial in)ormation

,se),l in'l,deX Rele(an'e and

X Faith),l re+resentation 9'om+lete0 ne,tral0 )ree )rom error:

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in'l,de Compara"ilit# 0 $eri!ia"ilit# 0 Timeliness0 and Un%erstan%a"ilit#

$ Constraint? %ene)its o) in)o sho,ld e8'eed 'osts$ 6nderlin* Ass,m+tions

X A''r,al a''o,ntin*

X Goin* 'on'ern

ifsa_chapter3

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