Illustrative condensed consolidated interim - PwC condensed consolidated interim ... how to prepare financial statements ... The 2016 version of the Illustrative HKFRS consolidated financial

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  • Hong Kong Financial Reporting Standards

    www.pwchk.com

    Illustrative condensed consolidated interim

    For the six months ended 30 June 2017

  • Manual of accounting IFRS 2017

    Global guide to IFRS providing comprehensive practical guidance on how to prepare financial statements in accordance with IFRS. Includes hundreds of worked examples and guidance on financial instruments. The Manual is a two-volume set comprising:

    Manual of accounting IFRS 2017 Vol. 1 and Vol. 2

    Language: English

    In depth New IFRSs for 2017

    This publication outlines the new IFRS standards and amendments plus those standards and amendments that are effective from 1 January 2017.

    Language: English and Simplified Chinese

    Illustrative HKFRS consolidated financial statements for the year ended 31 Dec 2016

    The 2016 version of the Illustrative HKFRS consolidated financial statements is for a fictitious listed manufacturing, wholesale and retail group. The illustrative example is prepared in accordance with the requirements as set out in:

    The Hong Kong Companies Ordinance (Cap.622);

    The Listing Rules issued by the Stock Exchange of Hong Kong Limited; and

    HKFRSs issued by the Hong Kong Institute of Certified Public Accountants.

    Language: English

    Practical guides to IFRS

    Practical guides to IFRS provide updates on the guidance in recently released discussion papers, exposure drafts and final standards from the IASB.

    Language: English and Simplified Chinese

    IFRS/HKFRS News

    Monthly newsletter highlighting the latest update in the International/Hong Kong Financial Reporting Standards.

    Language: English

    IFRS/HKFRS News (Chinese)

    Monthly newsletter highlighting the latest update in the International/Hong Kong Financial Reporting Standards.

    Language: Simplified Chinese

    Please visit http://www.pwccn.com/en/services/audit-and-assurance/publications.html for more publications.

    PwCs Accounting Technical Publications

  • 1

    Introduction to HKAS 34, 'Interim financial reporting'

    Objective and scope

    Although there is no requirement under HKFRS for entities to publish interim financial reports, a number of territories around the world either require or recommend their publication, often stipulating that they should be prepared in accordance with HKFRS. HKAS 34, 'Interim financial reporting', applies where an entity publishes an interim financial report in accordance with HKFRS. It encourages publicly traded entities to prepare interim reports at least as of the end of the first half of their financial year [HKAS 34 para 1(a)].

    The objective of HKAS 34 is to set out the minimum content that an interim financial report should contain and the principles that should be used in recognising and measuring the transactions and balances included in that report.

    HKAS 34 recommends that interim financial reports are published within 60 days of the period end, although local legislative requirements may mandate a different timescale1 [HKAS 34 para 1(b)].

    Content

    Entities may either prepare full HKFRS financial statements (as published in their annual report), or condensed financial statements under HKAS 34. Condensed reporting is the more common approach.

    HKAS 34 requires the interim financial report to contain, as a minimum:

    A statement of financial position (balance sheet) as at the end of the current interim period and as at the end of theimmediately preceding financial year.

    A statement or statements of profit or loss and other comprehensive income for the current interim period and cumulativelyfor the current financial year to date (for example, the second quarter and the half year to date), with comparativestatements for the comparable interim periods of the immediately preceding financial year.

    A statement of changes in equity for the year to date, with a comparative statement for the comparable year-to-date periodof the immediately preceding financial year.

    A statement of cash flows for the year to date, with a comparative statement for the comparable year-to-date period of theimmediately preceding financial year.

    Selected explanatory notes.

    Basic and diluted earnings per share for the interim period reported, presented in the statement that presents thecomponents of profit or loss for an interim period (only if the entity is required to present earnings per share in accordancewith HKAS 33).

    [ HKAS 34 paras 8, 11]

    The condensed primary statements should contain, as a minimum, the main headings and sub-totals that were included in the entity's most recent full financial statements. Additional line items or notes should be included if their omission would make the condensed interim financial report misleading [HKAS 34 para 10].

    PwC observation:

    HKAS 34 does not require the presentation in the condensed primary statements of all the line items that are required by HKAS 1, Presentation of financial statements, to be included in the primary statements in the annual financial statements; however, it is common, and considered best practice, to include them. In some countries, the extent to which line items may be aggregated in condensed interim financial statements may also be governed by local regulators or market requirements.

    HKAS 34 requires additional line items or notes to be included if their omission would make the condensed interim financial report misleading [HKAS 34 para 10]. An entity may incur costs on an annual basis that are not significant enough in the context of the annual financial statements to require separate disclosure. However, such costs might be incurred unevenly during the year and require separate presentation in the condensed statement of profit or loss, thus leading to a difference in presentation between the interim financial report and the annual comparative financial statements.

    HKAS 34 requires comparative information to be given for all primary statements. A comparative statement of financial position should be given for the last full financial year. HKAS 34 does not require statement of financial position comparatives for the prior interim period. Statement of profit or loss and other comprehensive income comparatives should be given for the comparative

    1 According to MB Listing Rule 13.49(6) and 13.48(1), a MB issuer must publish its interim results announcement not later than two months after the end of that period

    of six months and must send out either (i) its interim report, or (ii) its summary interim report not later than three months after the end of that period of six months.

    According to GEM Listing Rule 18.53 and 18.78, a GEM issuer must publish its interim results announcement and send out either (i) its interim report, or (ii) its summary interim report not later than 45 days after the end of such period.

  • 2

    interim period, but comparatives for the last full financial year are not required. HKAS 34 requires in addition a cumulative current year-to-date statement of profit or loss and other comprehensive income with comparatives. This will be relevant to those choosing to report under HKAS 34 at quarterly dates. For example, at the third quarter, results would be given for the three months to the end of the third quarter, and also for the nine months to the end of the third quarter. Equity movement and cash flow comparative information is required for the equivalent year-to-date period in the previous year [ HKAS 34 para 20].

    Statements required for entities that report half-yearly at the end of the second quarter

    Statement Current Comparative

    Statement of financial position at 30 June 20X7 31 December 20X6

    Statement of profit or loss and other comprehensive income (and, where applicable, separate statement of profit or loss): six months ended

    30 June 20X7 30 June 20X6

    Statement of changes in equity: six months ended

    30 June 20X7 30 June 20X6

    Statement of cash flows: six months ended

    30 June 20X7 30 June 20X6

    Statements required for entities that report quarterly at the end of the third quarter

    Statement Current Comparative

    Statement of financial position at 30 September 20X7 31 December 20X6

    Statement of profit or loss and other comprehensive income (and, where applicable, separate statement of profit or loss) - nine months ended

    - three months ended

    30 September 20X7

    30 September 20X7

    30 September 20X6

    30 September 20X6

    Statement of changes in equity - nine months ended 30 September 20X7 30 September 20X6

    Statement of cash flows - nine months ended 30 September 20X7 30 September 20X6

    If an interim financial report is presented for a different interim reporting period, the heading of the financial information should specify the interim reporting period covered (for example, 'For the quarter ended 30 September 2017' or 'For the third quarter ended 31 March 2018'); the heading for the figures should indicate whether they are presented for a quarter, a half-year or the financial year to date, as appropriate.

    HKAS 34 has a year-to-date approach to interim reporting and does not replicate the requirements of HKAS 1 in terms of comparative information. As a consequence, it is not necessary to provide an additional balance sheet (statement of financial position) as at the beginning of the earliest comparative period presented where an entity has made a retrospective change in accounting policies and/or a retrospective reclassification.

    The entity's annual financial statements give a comprehensive picture of the entity's state of affairs at the most recent year end and, therefore, the interim financial report should be read in conjunction with them. It is not necessary to give relatively insignificant updates to information already reported. The selected explanatory notes to the interim report should explain significant events and transactions that have occurred during the interim period [HKAS 34 para 15 and 15A].

  • 3

    The following is a list of events and transactions for which disclosures would be required if they are significant: the list is not exhaustive.

    (a) the write-down of inventories to net realisable value and the reversal of such a write-down; (b) recognition of a loss from the impairment of financial assets, property, plant and equipment, intangible assets, or other

    assets, and the reversal of such an impairment loss; (c) the reversal of any provisions for the costs of restructuring; (d) acquisitions and disposals of items of property, plant and equipment; (e) commitments for the purchase of property, plant and equipment; (f) litigation settlements; (g) corrections of prior period errors; (h) changes in the business or economic circumstances that affect the fair value of the entitys financial assets and financial

    liabilities, whether those assets or liabilities are recognised at fair value or amortised cost; (i) any loan default or breach of a loan agreement that has not been remedied on or before the end of the reporting period; (j) related party transactions; (k) transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments; (l) changes in the classification of financial assets as a result of a change in the purpose or use of those assets; and (m) changes in contingent liabilities or contingent assets.

    [HKAS 34 para 15B]

    In addition to the above disclosures, the following should also be disclosed and normally be reported on a financial year-to-date basis [HKAS 34 para 16A]:

    A statement that the accounting policies and methods of computation used in the interim financial statements are the same as those used in the most recent annual financial statements or, if this is not the case, a description of the nature and effect of the change.

    Explanatory comments about seasonality or cyclicality of interim operations.

    The nature and amount of any items affecting assets, liabilities, equity, net income or cash flows that are unusual because of their size, nature or incidence.

    The nature and amount of changes in estimates of amounts reported in prior periods, either interim periods within the current financial year or in prior financial years.

    Issues, repurchases and repayments of debt and equity securities.

    Dividends paid (aggregate or per share) separately for ordinary shares and other shares.

    Segment information for companies that are required by HKFRS 8, Operating segments, to disclose segment information in their annual reports. The information required to be disclosed includes:

    Revenues from external customers and inter-segment revenues if these are included in the measure of segment profit or loss reviewed by the chief operating decision-maker or otherwise regularly provided to the chief operating decision-maker.

    Intersegment revenues, if included in the measure of segment profit or loss reviewed by the chief operating decision maker or otherwise regularly provided to the chief operating decision maker.

    A measure of segment profit or loss.

    A measure of total assets and liabilities for a particular reportable segment if such amounts are regularly provided to the chief operating decision maker and if there has been a material change from the amount disclosed in the last annual financial statements.

    A description of differences from the last annual financial statements in the basis of segmentation or in the basis of measurement of segment profit or loss.

    A reconciliation of the total of the reportable segments measures of profit or loss to the entitys profit or loss before tax expense and discontinued operations (this can be done on an after-tax basis if tax is allocated to reportable segments). Material reconciling items shall be separately identified and described in that reconciliation.

    Events after the interim period that have not been reflected in the financial statements of interim period.

    The effect of changes in the reporting entity's composition during the interim period, including business combinations, obtaining or losing control of subsidiaries and long-term investments, restructurings and discontinued operations. For business combinations the detailed information required to be disclosed by HKFRS 3 paragraphs 59-62 and B64-B67. If the goodwill relating to the acquisition is material, the disclosure should also include a reconciliation of goodwill as per paragraph B67(d) of HKFRS 3.

    For financial instruments, the disclosures about fair value required by paragraphs 91-93(h), 94-96, 98 and 99 of HKFRS 13 Fair Value Measurement and paragraphs 25, 26 and 28-30 of HKFRS 7 Financial Instruments: Disclosures.

    For entities becoming, or ceasing to be, investment entities, as defined in HKFRS 10 Consolidated Financial Statements, the disclosures in HKFRS 12 Disclosure of Interests in Other Entities paragraph 9B.

  • 4

    The entity may consider the impact since the previous period end on the entity's cash flows, funding and liquidity, valuations and impairments, pensions and going concern assumption and give appropriate and sufficient disclos...

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