COMMISSION REGULATION (EU) 2023/1803
of 13 August 2023
adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council
(Text with EEA relevance)
Article 1
Article 2
Article 3
Article 4
Article 5
ANNEX
INTERNATIONAL ACCOUNTING STANDARDS
INTERNATIONAL ACCOUNTING STANDARD 1
Presentation of Financial Statements
OBJECTIVE
SCOPE
DEFINITIONS
FINANCIAL STATEMENTS
Purpose of financial statements
Complete set of financial statements
General features
Fair presentation and compliance with IFRSs
Going concern
Accrual basis of accounting
Materiality and aggregation
Offsetting
Frequency of reporting
Comparative information
Minimum comparative information
Additional comparative information
Change in accounting policy, retrospective restatement or reclassification
Consistency of presentation
STRUCTURE AND CONTENT
Introduction
Identification of the financial statements
Statement of financial position
Information to be presented in the statement of financial position
Current/non-current distinction
Current assets
Current liabilities
Information to be presented either in the statement of financial position or in the notes
Statement of profit or loss and other comprehensive income
Information to be presented in the profit or loss section or the statement of profit or loss
Information to be presented in the other comprehensive income section
Profit or loss for the period
Other comprehensive income for the period
Information to be presented in the statement(s) of profit or loss and other comprehensive income or in the notes
Revenue |
|
X |
Other income |
|
X |
Changes in inventories of finished goods and work in progress |
X |
|
Raw materials and consumables used |
X |
|
Employee benefits expense |
X |
|
Depreciation and amortisation expense |
X |
|
Other expenses |
X |
|
Total expenses |
|
(X) |
Profit before tax |
|
X |
Revenue |
X |
Cost of sales |
(X) |
Gross profit |
X |
Other income |
X |
Distribution costs |
(X) |
Administrative expenses |
(X) |
Other expenses |
(X) |
Profit before tax |
X |
Statement of changes in equity
Information to be presented in the statement of changes in equity
Information to be presented in the statement of changes in equity or in the notes
Statement of cash flows
Notes
Structure
Disclosure of accounting policies
Sources of estimation uncertainty
Capital
Puttable financial instruments classified as equity
Other disclosures
TRANSITION AND EFFECTIVE DATE
WITHDRAWAL OF IAS 1 (REVISED 2003)
INTERNATIONAL ACCOUNTING STANDARD 2
Inventories
OBJECTIVE
SCOPE
DEFINITIONS
MEASUREMENT OF INVENTORIES
Cost of inventories
Costs of purchase
Costs of conversion
Other costs
Cost of agricultural produce harvested from biological assets
Techniques for the measurement of cost
Cost formulas
Net realisable value
RECOGNITION AS AN EXPENSE
DISCLOSURE
EFFECTIVE DATE
WITHDRAWAL OF OTHER PRONOUNCEMENTS
INTERNATIONAL ACCOUNTING STANDARD 7
Statement of Cash Flows
(2)
OBJECTIVE
SCOPE
BENEFITS OF CASH FLOW INFORMATION
DEFINITIONS
Cash and cash equivalents
PRESENTATION OF A STATEMENT OF A CASH FLOWS
Operating activities
Investing activities
Financing activities
REPORTING CASH FLOWS FROM OPERATING ACTIVITIES
REPORTING CASH FLOWS FROM INVESTING AND FINANCING ACTIVITIES
REPORTING CASH FLOWS ON A NET BASIS
FOREIGN CURRENCY CASH FLOWS
INTEREST AND DIVIDENDS
TAXES ON INCOME
INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES
CHANGES IN OWNERSHIP INTERESTS IN SUBSIDIARIES AND OTHER BUSINESSES
NON-CASH TRANSACTIONS
CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
COMPONENTS OF CASH AND CASH EQUIVALENTS
OTHER DISCLOSURES
EFFECTIVE DATE
INTERNATIONAL ACCOUNTING STANDARD 8
Accounting Policies, Changes in Accounting Estimates and Errors
OBJECTIVE
SCOPE
DEFINITIONS
ACCOUNTING POLICIES
Selection and application of accounting policies
Consistency of accounting policies
Changes in accounting policies
Applying changes in accounting policies
Retrospective application
Limitations on retrospective application
Disclosure
ACCOUNTING ESTIMATES
Changes in accounting estimates
Applying changes in accounting estimates
Disclosure
ERRORS
Limitations on retrospective restatement
Disclosure of prior period errors
IMPRACTICABILITY IN RESPECT OF RETROSPECTIVE APPLICATION AND RETROSPECTIVE RESTATEMENT
EFFECTIVE DATE AND TRANSITION
WITHDRAWAL OF OTHER PRONOUNCEMENTS
INTERNATIONAL ACCOUNTING STANDARD 10
Events after the Reporting Period
OBJECTIVE
SCOPE
DEFINITIONS
RECOGNITION AND MEASUREMENT
Adjusting events after the reporting period
Non-adjusting events after the reporting period
Dividends
GOING CONCERN
DISCLOSURE
Date of authorisation for issue
Updating disclosure about conditions at the end of the reporting period
Non-adjusting events after the reporting period
EFFECTIVE DATE
WITHDRAWAL OF IAS 10 (REVISED 1999)
INTERNATIONAL ACCOUNTING STANDARD 12
Income Taxes
OBJECTIVE
SCOPE
DEFINITIONS
Tax base
RECOGNITION OF CURRENT TAX LIABILITIES AND CURRENT TAX ASSETS
RECOGNITION OF DEFERRED TAX LIABILITIES AND DEFERRED TAX ASSETS
TAXABLE TEMPORARY DIFFERENCES
Business combinations
Assets carried at fair value
Goodwill
Initial recognition of an asset or liability
Deductible temporary differences
Goodwill
Initial recognition of an asset or liability
Unused tax losses and unused tax credits
Reassessment of unrecognised deferred tax assets
Investments in subsidiaries, branches and associates and interests in joint arrangements
MEASUREMENT
|
Taxable Temporary Difference |
Tax Rate |
Deferred Tax Liability |
Cumulative tax depreciation |
30 |
30 % |
9 |
Proceeds in excess of cost |
50 |
nil |
— |
Total |
80 |
|
9 |
|
Taxable Temporary Difference |
Tax Rate |
Deferred Tax Liability |
Cumulative tax depreciation |
30 |
30 % |
9 |
Proceeds in excess of cost |
50 |
20 % |
10 |
Total |
80 |
|
19 |
RECOGNITION OF CURRENT AND DEFERRED TAX
Items recognised in profit or loss
Items recognised outside profit or loss
Deferred tax arising from a business combination
Current and deferred tax arising from share-based payment transactions
PRESENTATION
Tax assets and tax liabilities
Offset
Tax expense
Tax expense (income) related to profit or loss from ordinary activities
Exchange differences on deferred foreign tax liabilities or assets
DISCLOSURE
|
19X1 |
19X2 |
Accounting profit |
2500 |
3000 |
Tax at the domestic rate of 30 % |
750 |
900 |
Tax effect of expenses that are not deductible for tax purposes |
60 |
30 |
Effect of lower tax rates in country B |
(50) |
(150) |
Tax expense |
760 |
780 |
Accounting profit |
2500 |
3000 |
Tax at the domestic rates applicable to profits in the country concerned |
700 |
750 |
Tax effect of expenses that are not deductible for tax purposes |
60 |
30 |
Tax expense |
760 |
780 |
EFFECTIVE DATE
WITHDRAWAL OF SIC-21
INTERNATIONAL ACCOUNTING STANDARD 16
Property, Plant and Equipment
OBJECTIVE
SCOPE
DEFINITIONS
RECOGNITION
Initial costs
Subsequent costs
MEASUREMENT AT RECOGNITION
Elements of cost
Measurement of cost
MEASUREMENT AFTER RECOGNITION
Cost model
Revaluation model
Depreciation
Depreciable amount and depreciation period
Depreciation method
Impairment
Compensation for impairment
DERECOGNITION
DISCLOSURE
TRANSITIONAL PROVISIONS
EFFECTIVE DATE
WITHDRAWAL OF OTHER PRONOUNCEMENTS
INTERNATIONAL ACCOUNTING STANDARD 19
Employee Benefits
OBJECTIVE
SCOPE
DEFINITIONS
SHORT-TERM EMPLOYEE BENEFITS
Recognition and measurement
All short-term employee benefits
Short-term paid absences
Profit-sharing and bonus plans
Disclosure
POST-EMPLOYMENT BENEFITS: DISTINCTION BETWEEN DEFINED CONTRIBUTION PLANS AND DEFINED BENEFIT PLANS
Multi-employer plans
Defined benefit plans that share risks between entities under common control
State plans
Insured benefits
POST-EMPLOYMENT BENEFITS: DEFINED CONTRIBUTION PLANS
Recognition and measurement
Disclosure
POST-EMPLOYMENT BENEFITS: DEFINED BENEFIT PLANS
Recognition and measurement
Accounting for the constructive obligation
Statement of financial position
Recognition and measurement: present value of defined benefit obligations and current service cost
Actuarial valuation method
Year |
1 |
2 |
3 |
4 |
5 |
||
|
CU |
CU |
CU |
CU |
CU |
||
Benefit attributed to: |
|
|
|
|
|
||
|
0 |
131 |
262 |
393 |
524 |
||
|
131 |
131 |
131 |
131 |
131 |
||
|
131 |
262 |
393 |
524 |
655 |
||
Opening obligation |
— |
89 |
196 |
324 |
476 |
||
Interest at 10 % |
— |
9 |
20 |
33 |
48 |
||
Current service cost |
89 |
98 |
108 |
119 |
131 |
||
Closing obligation |
89 |
196 |
324 |
476 |
655 |
Attributing benefit to periods of service
Actuarial assumptions
Actuarial assumptions: mortality
Actuarial assumptions: discount rate
Actuarial assumptions: salaries, benefits and medical costs
Past service cost and gains and losses on settlement
Past service cost
Gains and losses on settlement
Recognition and measurement: plan assets
Fair value of plan assets
Reimbursements
Components of defined benefit cost
Current service cost
Net interest on the net defined benefit liability (asset)
Remeasurements of the net defined benefit liability (asset)
Presentation
Offset
Current/non-current distinction
Components of defined benefit cost
Disclosure
Characteristics of defined benefit plans and risks associated with them
Explanation of amounts in the financial statements
Amount, timing and uncertainty of future cash flows
Multi-employer plans
Defined benefit plans that share risks between entities under common control
Disclosure requirements in other IFRSs
OTHER LONG-TERM EMPLOYEE BENEFITS
Recognition and measurement
Disclosure
TERMINATION BENEFITS
Recognition
Measurement
Disclosure
TRANSITION AND EFFECTIVE DATE
Appendix A
Application Guidance
INTERNATIONAL ACCOUNTING STANDARD 20
Accounting for Government Grants and Disclosure of Government Assistance
(9)
SCOPE
DEFINITIONS
GOVERNMENT GRANTS
Non-monetary government grants
Presentation of grants related to assets
Presentation of grants related to income
Repayment of government grants
GOVERNMENT ASSISTANCE
DISCLOSURE
TRANSITIONAL PROVISIONS
EFFECTIVE DATE
INTERNATIONAL ACCOUNTING STANDARD 21
The Effects of Changes in Foreign Exchange Rates
OBJECTIVE
SCOPE
DEFINITIONS
Elaboration on the definitions
Functional currency
Net investment in a foreign operation
Monetary items
SUMMARY OF THE APPROACH REQUIRED BY THIS STANDARD
REPORTING FOREIGN CURRENCY TRANSACTIONS IN THE FUNCTIONAL CURRENCY
Initial recognition
Reporting at the ends of subsequent reporting periods
Recognition of exchange differences
Change in functional currency
USE OF A PRESENTATION CURRENCY OTHER THAN THE FUNCTIONAL CURRENCY
Translation to the presentation currency
Translation of a foreign operation
Disposal or partial disposal of a foreign operation
TAX EFFECTS OF ALL EXCHANGE DIFFERENCES
DISCLOSURE
EFFECTIVE DATE AND TRANSITION
WITHDRAWAL OF OTHER PRONOUNCEMENTS
INTERNATIONAL ACCOUNTING STANDARD 23
Borrowing Costs
CORE PRINCIPLE
SCOPE
DEFINITIONS
RECOGNITION
Borrowing costs eligible for capitalisation
Excess of the carrying amount of the qualifying asset over recoverable amount
Commencement of capitalisation
Suspension of capitalisation
Cessation of capitalisation
DISCLOSURE
TRANSITIONAL PROVISIONS
EFFECTIVE DATE
WITHDRAWAL OF IAS 23 (REVISED 1993)
INTERNATIONAL ACCOUNTING STANDARD 24
Related Party Disclosures
OBJECTIVE
SCOPE
PURPOSE OF RELATED PARTY DISCLOSURES
DEFINITIONS
DISCLOSURES
All entities
Government-related entities
EFFECTIVE DATE AND TRANSITION
WITHDRAWAL OF IAS 24 (2003)
INTERNATIONAL ACCOUNTING STANDARD 26
Accounting and Reporting by Retirement Benefit Plans
SCOPE
DEFINITIONS
DEFINED CONTRIBUTION PLANS
DEFINED BENEFIT PLANS
Actuarial present value of promised retirement benefits
Frequency of actuarial valuations
Financial statement content
ALL PLANS
Valuation of plan assets
Disclosure
EFFECTIVE DATE
INTERNATIONAL ACCOUNTING STANDARD 27
Separate Financial Statements
OBJECTIVE
SCOPE
DEFINITIONS
PREPARATION OF SEPARATE FINANCIAL STATEMENTS
DISCLOSURE
EFFECTIVE DATE AND TRANSITION
References to IFRS 9
WITHDRAWAL OF IAS 27 (2008)
INTERNATIONAL ACCOUNTING STANDARD 28
Investments in Associates and Joint Ventures
OBJECTIVE
SCOPE
DEFINITIONS
SIGNIFICANT INFLUENCE
EQUITY METHOD
APPLICATION OF THE EQUITY METHOD
Exemptions from applying the equity method
Classification as held for sale
Discontinuing the use of the equity method
Changes in ownership interest
Equity method procedures
Impairment losses
SEPARATE FINANCIAL STATEMENTS
EFFECTIVE DATE AND TRANSITION
References to IFRS 9
WITHDRAWAL OF IAS 28 (2003)
INTERNATIONAL ACCOUNTING STANDARD 29
Financial Reporting in Hyperinflationary Economies
(13)
SCOPE
THE RESTATEMENT OF FINANCIAL STATEMENTS
Historical cost financial statements
Statement of financial position
Statement of comprehensive income
Gain or loss on net monetary position
Current cost financial statements
Statement of financial position
Statement of comprehensive income
Gain or loss on net monetary position
Taxes
Statement of cash flows
Corresponding figures
Consolidated financial statements
Selection and use of the general price index
ECONOMIES CEASING TO BE HYPERINFLATIONARY
DISCLOSURES
EFFECTIVE DATE
INTERNATIONAL ACCOUNTING STANDARD 32
Financial Instruments: Presentation
OBJECTIVE
SCOPE
DEFINITIONS (SEE ALSO PARAGRAPHS AG3-AG23)
PRESENTATION
Liabilities and equity (see also paragraphs AG13-AG14J and AG25–AG29A)
Puttable instruments
Instruments, or components of instruments, that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation
Reclassification of puttable instruments and instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation
No contractual obligation to deliver cash or another financial asset (paragraph 16(a))
Settlement in the entity's own equity instruments (paragraph 16(b))
Contingent settlement provisions
Settlement options
Compound financial instruments (see also paragraphs AG30-AG35 and Illustrative Examples 9-12)
Treasury shares (see also paragraph AG36)
Interest, dividends, losses and gains (see also paragraph AG37)
Offsetting a financial asset and a financial liability (see also paragraphs AG38A–AG38F and AG39)
EFFECTIVE DATE AND TRANSITION
WITHDRAWAL OF OTHER PRONOUNCEMENTS
Appendix
APPLICATION GUIDANCE
IAS 32 Financial Instruments: Presentation
DEFINITIONS (PARAGRAPHS 11-14)
Financial assets and financial liabilities
Equity instruments
The class of instruments that is subordinate to all other classes (paragraphs 16A(b) and 16C(b))
Total expected cash flows attributable to the instrument over the life of the instrument (paragraph 16A(e))
Transactions entered into by an instrument holder other than as owner of the entity (paragraphs 16A and 16C)
No other financial instrument or contract with total cash flows that substantially fixes or restricts the residual return to the instrument holder (paragraphs 16B and 16D)
Derivative financial instruments
Contracts to buy or sell non-financial items (paragraphs 8-10)
PRESENTATION
Liabilities and equity (paragraphs 15-27)
No contractual obligation to deliver cash or another financial asset (paragraphs 17-20)
Settlement in the entity's own equity instruments (paragraphs 21-24)
Contingent settlement provisions (paragraph 25)
Treatment in consolidated financial statements
Compound financial instruments (paragraphs 28-32)
Treasury shares (paragraphs 33 and 34)
Interest, dividends, losses and gains (paragraphs 35-41)
Offsetting a financial asset and a financial liability (paragraphs 42-50)
Criterion that an entity ‘currently has a legally enforceable right to set off the recognised amounts’ (paragraph 42(a))
Criterion that an entity ‘intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously’ (paragraph 42(b))
INTERNATIONAL ACCOUNTING STANDARD 33
Earnings per Share
OBJECTIVE
SCOPE
DEFINITIONS
MEASUREMENT
Basic earnings per share
Earnings
Shares
Diluted earnings per share
Earnings
Shares
Dilutive potential ordinary shares
Options, warants and their equivalents
Convertible instruments
Contingently issuable shares
Contracts that may be settled in ordinary shares or cash
Purchased options
Written put options
RETROSPECTIVE ADJUSTMENTS
PRESENTATION
DISCLOSURE
EFFECTIVE DATE
WITHDRAWAL OF OTHER PRONOUNCEMENTS
Appendix A
APPLICATION GUIDANCE
Profit or loss attributable to the parent entity
Rights issues
Control number
Average market price of ordinary shares
Options, warrants and their equivalents
Written put options
Instruments of subsidiaries, joint ventures or associates
Participating equity instruments and two-class ordinary shares
Partly paid shares
INTERNATIONAL ACCOUNTING STANDARD 34
Interim Financial Reporting
OBJECTIVE
SCOPE
DEFINITIONS
CONTENT OF AN INTERIM FINANCIAL REPORT
Minimum components of an interim financial report
Form and content of interim financial statements
Significant events and transactions
Other disclosures
Disclosure of compliance with IFRSs
Periods for which interim financial statements are required to be presented
Materiality
DISCLOSURE IN ANNUAL FINANCIAL STATEMENTS
RECOGNITION AND MEASUREMENT
Same accounting policies as annual
Revenues received seasonally, cyclically, or occasionally
Costs incurred unevenly during the financial year
Applying the recognition and measurement principles
Use of estimates
RESTATEMENT OF PREVIOUSLY REPORTED INTERIM PERIODS
EFFECTIVE DATE
INTERNATIONAL ACCOUNTING STANDARD 36
Impairment of Assets
OBJECTIVE
SCOPE
For impairment of other financial assets, refer to IFRS 9.
DEFINITIONS
IDENTIFYING AN ASSET THAT MAY BE IMPAIRED
MEASURING RECOVERABLE AMOUNT
Measuring the recoverable amount of an intangible asset with an indefinite useful life
Fair value less costs of disposal
Value in use
Basis for estimates of future cash flows
Composition of estimates of future cash flows
Foreign currency future cash flows
Discount rate
RECOGNISING AND MEASURING AN IMPAIRMENT LOSS
CASH-GENERATING UNITS AND GOODWILL
Identifying the cash-generating unit to which an asset belongs
Recoverable amount and carrying amount of a cash-generating unit
Goodwill
Allocating goodwill to cash - generating units
Testing cash - generating units with goodwill for impairmént
Timing of impairment tests
Corporate assets
Impairment loss for a cash-generating unit
REVERSING AN IMPAIRMENT LOSS
Reversing an impairment loss for an individual asset
Reversing an impairment loss for a cash-generating unit
Reversing an impairment loss for goodwill
DISCLOSURE
TRANSITIONAL PROVISIONS AND EFFECTIVE DATE
WITHDRAWAL OF IAS 36 (ISSUED 1998)
Appendix A
USING PRESENT VALUE TECHNIQUES TO MEASURE VALUE IN USE
The components of a present value measurement
General principles
Traditional and expected cash flow approaches to present value
Traditional approach
Expected cash flow approach
Present value of CU1000 in 1 year at 5 % |
CU952,38 |
|
Probability |
10,00 % |
CU95,24 |
Present value of CU1000 in 2 years at 5,25 % |
CU902,73 |
|
Probability |
60,00 % |
CU541,64 |
Present value of CU1000 in 3 years at 5,50 % |
CU851,61 |
|
Probability |
30,00 % |
CU255,48 |
Expected present value |
|
CU892,36 |
Discount rate
Appendix C
IMPAIRMENT TESTNG CASH-GENERATING UNITS WITH GOODWILL AND NON-CONTROLLING INTERESTS
Allocation of goodwill
Testing for impairment
Allocating an impairment loss
INTERNATIONAL ACCOUNTING STANDARD 37
Provisions, Contingent Liabilities and Contingent Assets
OBJECTIVE
SCOPE
DEFINITIONS
Provisions and other liabilities
Relationship between provisions and contingent liabilities
RECOGNITION
Provisions
Present obligation
Past event
Probable outflow of resources embodying economic benefits
Reliable estimate of the obligation
Contingent liabilities
Contingent assets
MEASUREMENT
Best estimate
Risks and uncertainties
Present value
Future events
Expected disposal of assets
REIMBURSEMENTS
CHANGES IN PROVISIONS
USE OF PROVISIONS
APPLICATION OF THE RECOGNITION AND MEASUREMENT RULES
Future operating losses
Onerous contracts
Restructuring
DISCLOSURE
Comparative information is not required.
TRANSITIONAL PROVISIONS
EFFECTIVE DATE
INTERNATIONAL ACCOUNTING STANDARD 38
Intangible Assets
OBJECTIVE
SCOPE
DEFINITIONS
Intangible assets
Identifiability
Control
Future economic benefits
RECOGNITION AND MEASUREMENT
Separate acquisition
Acquisition as part of a business combination
Intangible asset acquired in a business combination
Subsequent expenditure on an acquired in-process research and development project
Acquisition by way of a government grant
Exchanges of assets
Internally generated goodwill
Internally generated intangible assets
Research phase
Development phase
Cost of an internally generated intangible asset
RECOGNITION OF AN EXPENSE
Past expenses not to be recognised as an asset
MEASUREMENT AFTER RECOGNITION
Cost model
Revaluation model
USEFUL LIFE
INTANGIBLE ASSETS WITH FINITE USEFUL LIVES
Amortisation period and amortisation method
Residual value
Review of amortisation period and amortisation method
INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIVES
Review of useful life assessment
RECOVERABILITY OF THE CARRYING AMOUNT — IMPAIRMENT LOSSES
RETIREMENTS AND DISPOSALS
DISCLOSURE
General
Intangible assets measured after recognition using the revaluation model
Research and development expenditure
Other information
TRANSITIONAL PROVISIONS AND EFFECTIVE DATE
Exchanges of similar assets
Early application
WITHDRAWAL OF IAS 38 (ISSUED 1998)
INTERNATIONAL ACCOUNTING STANDARD 39
Financial Instruments: Recognition and Measurement
SCOPE
DEFINITIONS
HEDGING
Hedging instruments
Qualifying instruments
Designation of hedging instruments
Hedged items
Qualifying items
Designation of financial items as hedged items
Designation of non-financial items as hedged items
Designation of groups of items as hedged items
Hedge accounting
Fair value hedges
Cash flow hedges
Hedges of a net investment
Temporary exceptions from applying specific hedge accounting requirements
Highly probable requirement for cash flow hedges
Reclassifying the cumulative gain or loss recognised in other comprehensive income
Effectiveness assessment
Designating financial items as hedged items
End of application
Additional temporary exceptions arising from interest rate benchmark reform
Hedge accounting
Accounting for qualifying hedging relationships
Retrospective effectiveness assessment
Cash flow hedges
Groups of items
Designating financial items as hedged items
EFFECTIVE DATE AND TRANSITION
WITHDRAWAL OF OTHER PRONOUNCEMENTS
Appendix A
Application guidance
HEDGING (paragraphs 71-102)
Hedging instruments (paragraphs 72-77)
Qualifying instruments (paragraphs 72 and 73)
Hedged items (paragraphs 78-84)
Qualifying items (paragraphs 78-80)
Designation of financial items as hedged items (paragraphs 81 and 81A)
Designation of non-financial items as hedged items (paragraph 82)
Designation of groups of items as hedged items (paragraphs 83 and 84)
Hedge accounting (paragraphs 85-102)
Assessing hedge effectiveness
Fair value hedge accounting for a portfolio hedge of interest rate risk
TRANSITION (paragraphs 103–108C)
INTERNATIONAL ACCOUNTING STANDARD 40
Investment Property
OBJECTIVE
SCOPE
DEFINITIONS
CLASSIFICATION OF PROPERTY AS INVESTMENT PROPERTY OR OWNER-OCCUPIED PROPERTY
RECOGNITION
MEASUREMENT AT RECOGNITION
MEASUREMENT AFTER RECOGNITION
Accounting policy
Fair value model
Inability to measure fair value reliably
Cost model
TRANSFERS
DISPOSALS
DISCLOSURE
Fair value model and cost model
Fair value model
Cost model
TRANSITIONAL PROVISIONS
Fair value model
Cost model
Business Combinations
IFRS 16
Transfers of Investment property
EFFECTIVE DATE
WITHDRAWAL OF IAS 40 (2000)
INTERNATIONAL ACCOUNTING STANDARD 41
Agriculture
OBJECTIVE
SCOPE
Biological assets |
Agricultural produce |
Products that are the result of processing after harvest |
Sheep |
Wool |
Yarn, carpet |
Trees in a timber plantation |
Felled trees |
Logs, lumber |
Dairy cattle |
Milk |
Cheese |
Pigs |
Carcass |
Sausages, cured hams |
Cotton plants |
Harvested cotton |
Thread, clothing |
Sugarcane |
Harvested cane |
Sugar |
Tobacco plants |
Picked leaves |
Cured tobacco |
Tea bushes |
Picked leaves |
Tea |
Grape vines |
Picked grapes |
Wine |
Fruit trees |
Picked fruit |
Processed fruit |
Oil palms |
Picked fruit |
Palm oil |
Rubber trees |
Harvested latex |
Rubber products |
Some plants, for example, tea bushes, grape vines, oil palms and rubber trees, usually meet the definition of a bearer plant and are within the scope of IAS 16. However, the produce growing on bearer plants, for example, tea leaves, grapes, oil palm fruit and latex, is within the scope of IAS 41. |
DEFINITIONS
Agriculture-related definitions
General definitions
RECOGNITION AND MEASUREMENT
Gains and losses
Inability to measure fair value reliably
GOVERNMENT GRANTS
DISCLOSURE
General
Additional disclosures for biological assets where fair value cannot be measured reliably
Government grants
EFFECTIVE DATE AND TRANSITION
INTERNATIONAL FINANCIAL REPORTING STANDARD 1
First-time Adoption of International Financial Reporting Standards
OBJECTIVE
SCOPE
RECOGNITION AND MEASUREMENT
Opening IFRS statement of financial position
Accounting policies
Exceptions to the retrospective application of other IFRSs
Estimates
Exemptions from other IFRSs
PRESENTATION AND DISCLOSURE
Comparative information
Non-IFRS comparative information and historical summaries
Explanation of transition to IFRSs
Reconciliations
Designation of financial assets or financial liabilities
Use of fair value as deemed cost
Use of deemed cost for investments in subsidiaries, joint ventures and associates
Use of deemed cost for oil and gas assets
Use of deemed cost for operations subject to rate regulation
Use of deemed cost after severe hyperinflation
Interim financial reports
EFFECTIVE DATE
WITHDRAWAL OF IFRS 1 (ISSUED 2003)
Appendix A
Defined terms
Appendix B
Exceptions to the retrospective application of other IFRSs
Derecognition of financial assets and financial liabilities
Hedge accounting
Non-controlling interests
Classification and measurement of financial instruments
Impairment of financial assets
Embedded derivatives
Government loans
Insurance contracts
Deferred tax related to leases and decommissioning, restoration and similar liabilities
Appendix C
Exemptions for business combinations
Appendix D
Exemptions from other IFRSs
Share-based payment transactions
Deemed cost
Leases
Cumulative translation differences
Investments in subsidiaries, joint ventures and associates
Assets and liabilities of subsidiaries, associates and joint ventures
Compound financial instruments
Designation of previously recognised financial instruments
Fair value measurement of financial assets or financial liabilities at initial recognition
Decommissioning liabilities included in the cost of property, plant and equipment
Financial assets or intangible assets accounted for in accordance with IFRIC 12
Borrowing costs
Extinguishing financial liabilities with equity instruments
Severe hyperinflation
Joint arrangements
Stripping costs in the production phase of a surface mine
Designation of contracts to buy or sell a non-financial item
Revenue
Foreign Currency Transactions and Advance Consideration
Appendix E
Short-term exemptions from IFRSs
Exemption from the requirement to restate comparative information for IFRS 9
Uncertainty over income tax treatments
INTERNATIONAL FINANCIAL REPORTING STANDARD 2
Share-based Payment
OBJECTIVE
SCOPE
RECOGNITION
EQUITY-SETTLED SHARE-BASED PAYMENT TRANSACTIONS
Overview
Transactions in which services are received
Transactions measured by reference to the fair value of the equity instruments granted
Determining the fair value of equity instruments granted
Treatment of vesting conditions
Treatment of non-vesting conditions
Treatment of a reload feature
After vesting date
If the fair value of the equity instruments cannot be estimated reliably
Modifications to the terms and conditions on which equity instruments were granted, including cancellations and settlements
CASH-SETTLED SHARE-BASED PAYMENT TRANSACTIONS
Treatment of vesting and non-vesting conditions
SHARE-BASED PAYMENT TRANSACTIONS WITH A NET SETTLEMENT FEATURE FOR WITHHOLDING TAX OBLIGATIONS
SHARE-BASED PAYMENT TRANSACTIONS WITH CASH ALTERNATIVES
Share-based payment transactions in which the terms of the arrangement provide the counterparty with a choice of settlement
Share-based payment transactions in which the terms of the arrangement provide the entity with a choice of settlement
SHARE-BASED PAYMENT TRANSACTIONS AMONG GROUP ENTITIES (2009 AMENDMENTS)
DISCLOSURES
TRANSITIONAL PROVISIONS
EFFECTIVE DATE
WITHDRAWAL OF INTERPRETATIONS
Appendix A
Defined terms
Appendix B
Application Guidance
Estimating the fair value of equity instruments granted
Shares
Share options
Inputs to option pricing models
Expected early exercise
Expected volatility
Newly listed entities
Unlisted entities
Expected dividends
Risk-free interest rate
Capital structure effects
Modifications to equity-settled share-based payment arrangements
Accounting for a modification of a share-based payment transaction that changes its classification from cash-settled to equity-settled
Share-based payment transactions among group entities (2009 amendments)
Share-based payment arrangements involving an entity’s own equity instruments
Share-based payment arrangements involving equity instruments of the parent
Aparent grantsrights to its equity instruments to the employees of its subsidiary (paragraph B52 (a))
A subsidiary grants rights to equity instruments of its parent to its employees (paragraph B52 (b))
Share-based payment arrangements involving cash-settled payments to employees
Transfer of employees between group entities
INTERNATIONAL FINANCIAL REPORTING STANDARD 3
Business Combinations
OBJECTIVE
SCOPE
IDENTIFYING A BUSINESS COMBINATION
THE ACQUISITION METHOD
Identifying the acquirer
Determining the acquisition date
Recognising and measuring the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree
Recognition principle
Recognition conditions
Classifying or designating identifiable assets acquired and liabilities assumed in a business combination
Measurement principle
Exceptions to the recognition or measurement principles
Exceptions to the recognition principle
Liabilities and contingent
liabilities within the scope of IAS 37 or IFRIC 21
Contingent liabilities and contingent assets
Exceptions to both the recognition and measurement principles
Income taxes
Employee benefits
Indemnification assets
Leases in which the acquiree is the lessee
Exceptions to the measurement principle
Reacquired rights
Share–based payment transactions
Assets held for sale
Insurance contracts
Recognising and measuring goodwill or a gain from a bargain purchase
Bargain purchases
Consideration transferred
Contingent consideration
Additional guidance for applying the acquisition method to particular types of business combinations
A business combination achieved in stages
A business combination achieved without the transfer of consideration
Measurement period
Determining what is part of the business combination transaction
Acquisition-related costs
SUBSEQUENT MEASUREMENT AND ACCOUNTING
Reacquired rights
Contingent liabilities
Indemnification assets
Contingent consideration
DISCLOSURES
EFFECTIVE DATE AND TRANSITION
Effective date
Transition
Income taxes
REFERENCE TO IFRS 9
WITHDRAWAL OF IFRS 3 (2004)
Appendix A
Defined terms
Appendix B
Application guidance
BUSINESS COMBINATIONS OF ENTITIES UNDER COMMON CONTROL (APPLICATION OF PARAGRAPH 2(c))
IDENTIFYING A BUSINESS COMBINATION (APPLICATION OF PARAGRAPH 3)
DEFINITION OF A BUSINESS (APPLICATION OF PARAGRAPH 3)
Optional test to identify concentration of fair value
Elements of a business
Assessing whether an acquired process is substantive
IDENTIFYING THE ACQUIRER (APPLICATION OF PARAGRAPHS 6 AND 7)
REVERSE ACQUISITIONS
Measuring the consideration transferred
Preparation and presentation of consolidated financial statements
Non-controlling interest
Earnings per share
RECOGNISING PARTICULAR ASSETS ACQUIRED AND LIABILITIES ASSUMED (APPLICATION OF PARAGRAPHS 10–13)
Intangible assets
Reacquired rights
Assembled workforce and other items that are not identifiable
MEASURING THE FAIR VALUE OF PARTICULAR IDENTIFIABLE ASSETS AND A NON-CONTROLLING INTEREST IN AN ACQUIREE (APPLICATION OF PARAGRAPHS 18 AND 19)
Assets with uncertain cash flows (valuation allowances)
Assets subject to operating leases in which the acquiree is the lessor
Assets that the acquirer intends not to use or to use in a way that is different from the way other market participants would use them
Non-controlling interest in an acquiree
MEASURING GOODWILL OR A GAIN FROM A BARGAIN PURCHASE
Measuring the acquisition-date fair value of the acquirer’s interest in the acquiree using valuation techniques (application of paragraph 33)
Special considerations in applying the acquisition method to combinations of mutual entities (application of paragraph 33)
DETERMINING WHAT IS PART OF THE BUSINESS COMBINATION TRANSACTION (APPLICATION OF PARAGRAPHS 51 AND 52)
Effective settlement of a pre-existing relationship between the acquirer and acquiree in a business combination (application of paragraph 52(a))
Arrangements for contingent payments to employees or selling shareholders (application of paragraph 52(b))
Acquirer share-based payment awards exchanged for awards held by the acquiree’s employees (application of paragraph 52(b))
Equity-settled share-based payment transactions of the acquiree
OTHER IFRSS THAT PROVIDE GUIDANCE ON SUBSEQUENT MEASUREMENT AND ACCOUNTING (APPLICATION OF PARAGRAPH 54)
DISCLOSURES (APPLICATION OF PARAGRAPHS 59 AND 61)
TRANSITIONAL PROVISIONS FOR BUSINESS COMBINATIONS INVOLVING ONLY MUTUAL ENTITIES OR BY CONTRACT ALONE (APPLICATION OF PARAGRAPH 66)
INTERNATIONAL FINANCIAL REPORTING STANDARD 5
Non-current Assets Held for Sale and Discontinued Operations
OBJECTIVE
SCOPE
CLASSIFICATION OF NON-CURRENT ASSETS (OR DISPOSAL GROUPS) AS HELD FOR SALE OR AS HELD FOR DISTRIBUTION TO OWNERS
Non-current assets that are to be abandoned
MEASUREMENT OF NON-CURRENT ASSETS (OR DISPOSAL GROUPS) CLASSIFIED AS HELD FOR SALE
Measurement of a non-current asset (or disposal group)
Recognition of impairment losses and reversals
Changes to a plan of sale or to a plan of distribution to owners
PRESENTATION AND DISCLOSURE
Presenting discontinued operations
Gains or losses relating to continuing operations
Presentation of a non-current asset or disposal group classified as held for sale
Additional disclosures
TRANSITIONAL PROVISIONS
EFFECTIVE DATE
WITHDRAWAL OF IAS 35
Appendix A
Defined terms
Appendix B
Application supplement
EXTENSION OF THE PERIOD REQUIRED TO COMPLETE A SALE
INTERNATIONAL FINANCIAL REPORTING STANDARD 6
Exploration for and Evaluation of Mineral Resources
OBJECTIVE
SCOPE
RECOGNITION OF EXPLORATION AND EVALUATION ASSETS
Temporary exemption from IAS 8 paragraphs 11 and 12
MEASUREMENT OF EXPLORATION AND EVALUATION ASSETS
Measurement at recognition
Elements of cost of exploration and evaluation assets
Measurement after recognition
Changes in accounting policies
PRESENTATION
Classification of exploration and evaluation assets
Reclassification of exploration and evaluation assets
IMPAIRMENT
Recognition and measurement
Specifying the level at which exploration and evaluation assets are assessed for impairment
DISCLOSURE
EFFECTIVE DATE
TRANSITIONAL PROVISIONS
Appendix A
Defined terms
INTERNATIONAL FINANCIAL REPORTING STANDARD 7
Financial Instruments: Disclosures
OBJECTIVE
SCOPE
CLASSES OF FINANCIAL INSTRUMENTS AND LEVEL OF DISCLOSURE
SIGNIFICANCE OF FINANCIAL INSTRUMENTS FOR FINANCIAL POSITION AND PERFORMANCE
Statement of financial position
Categories of financial assets and financial liabilities
Financial assets or financial liabilities at fair value through profit or loss
Investments in equity instruments designated at fair value through other comprehensive income
Reclassification
Offsetting financial assets and financial liabilities
Collateral
Allowance account for credit losses
Compound financial instruments with multiple embedded derivatives
Defaults and breaches
Statement of comprehensive income
Items of income, expense, gains or losses
Other disclosures
Accounting policies
Hedge accounting
The risk management strategy
The amount, timing and uncertainty of future cash flows
The effects of hedge accounting on financial position and performance
Option to designate a credit exposure as measured at fair value through profit or loss
Uncertainty arising from interest rate benchark reform
Additional disclosures related to interest rate benchmark reform
Fair value
NATURE AND EXTENT OF RISKS ARISING FROM FINANCIAL INSTRUMENTS
Qualitative disclosures
Quantitative disclosures
Credit risk
Scope and objectives
The credit risk management practices
Quantitative and qualitative Information about amounts arising from expected credit losses
Credit risk exposure
Collateral and other credit enhancements obtained
Liquidity risk
Market risk
Sensitivity analysis
Other market risk disciosures
TRANSFERS OF FINANCIAL ASSETS
Transferred financial assets that are not derecognised in their entirety
Transferred financial assets that are derecognised in their entirety
Supplementary information
INITIAL APPLICATION OF IFRS 9
EFFECTIVE DATE AND TRANSITION
WITHDRAWAL OF IAS 30
Appendix A
Defined terms
Appendix B
Application Guidance
CLASSES OF FINANCIAL INSTRUMENTS AND LEVEL OF DISCLOSURE (PARAGRAPH 6)
Other disclosure — accounting policies (paragraph 21)
NATURE AND EXTENT OF RISKS ARISING FROM FINANCIAL INSTRUMENTS (PARAGRAPHS 31-42)
Quantitative disclosures (paragraph 34)
Credit risk management practices (paragraphs 35F–35G)
Changes in the loss allowance (paragraph 35H)
Collateral (paragraph 35K)
Credit risk exposure (paragraphs 35M–35N)
Maximum credit risk exposure (paragraph 36(a))
Quantitative liquidity risk disclosures (paragraphs 34(a) and 39(a) and (b))
Market risk — sensitivity analysis (paragraphs 40 and 41)
Interest rate risk
Currency risk
Other price risk
DERECOGNITION (PARAGRAPHS 42C–42H)
Continuing involvement (paragraph 42C)
Transferred financial assets that are not derecognised in their entirety (paragraph 42D)
Types of continuing involvement (paragraphs 42E–42H)
Maturity analysis for undiscounted cash outflows to repurchase transferred assets (paragraph 42E(e))
Qualitative information (paragraph 42E(f))
Gain or loss on derecognition (paragraph 42G(a))
Supplementary information (paragraph 42H)
Offsetting financial assets and financial liabilities (paragraphs 13A–13F)
Scope (paragraph 13A)
Disclosure of quantitative information for recognised financial assets and recognised financial liabilities within the scope of paragraph 13A (paragraph 13C)
Disclosure of the gross amounts of recognised financial assets and recognised financial liabilities within the scope of paragraph 13A (paragraph 13C(a))
Disclosure of the amounts that are set off in accordance with the criteria in paragraph 42 of IAS 32 (paragraph 13C(b))
Disclosure of the net amounts presented in the statement of financial position (paragraph 13C(c))
Disclosure of the amounts subject to an enforceable master netting arrangement or similar agreement that are not otherwise included in paragraph 13C(b) (paragraph 13C(d))
Limits on the amounts disclosed in paragraph 13C(d) (paragraph 13D)
Description of the rights of set-off subject to enforceable master netting arrangements and similar agreements (paragraph 13E)
Disclosure by type of financial instrument or by counterparty
Other
INTERNATIONAL FINANCIAL REPORTING STANDARD 8
Operating Segments
CORE PRINCIPLE
SCOPE
OPERATING SEGMENTS
REPORTABLE SEGMENTS
Aggregation criteria
Quantitative thresholds
DISCLOSURE
General information
Information about profit or loss, assets and liabilities
MEASUREMENT
Reconciliations
Restatement of previously reported information
ENTITY-WIDE DISCLOSURES
Information about products and services
Information about geographical areas
Information about major customers
TRANSITION AND EFFECTIVE DATE
WITHDRAWAL OF IAS 14
Appendix A
Defined term
INTERNATIONAL FINANCIAL REPORTING STANDARD 9
Financial Instruments
CHAPTER 1
Objective
CHAPTER 2
Scope
CHAPTER 3
Recognition and derecognition
3.1 INITIAL RECOGNITION
Regular way purchase or sale of financial assets
3.2 DERECOGNITION OF FINANCIAL ASSETS
Transfers that qualify for derecognition
Transfers that do not qualify for derecognition
Continuing involvement in transferred assets
All transfers
3.3 DERECOGNITION OF FINANCIAL LIABILITIES
CHAPTER 4
Classification
4.1 CLASSIFICATION OF FINANCIAL ASSETS
Option to designate a financial asset at fair value through profit or loss
4.2 CLASSIFICATION OF FINANCIAL LIABILITIES
Option to designate a financial liability at fair value through profit or loss
4.3 EMBEDDED DERIVATIVES
Hybrid contracts with financial asset hosts
Other hybrid contracts
4.4 RECLASSIFICATION
CHAPTER 5
Measurement
5.1 INITIAL MEASUREMENT
5.2 SUBSEQUENT MEASUREMENT OF FINANCIAL ASSETS
5.3 SUBSEQUENT MEASUREMENT OF FINANCIAL LIABILITIES
5.4 AMORTISED COST MEASUREMENT
Financial assets
Effective interest method
Modification of contractual cash flows
Write-off
5.5 IMPAIRMENT
Recognition of expected credit losses
General approach
Determining significant increases in credit risk
Modified financial assets
Purchased or originated credit-impaired financial assets
Simplified approach for trade receivables, contract assets and lease receivables
Measurement of expected credit losses
5.6 RECLASSIFICATION OF FINANCIAL ASSETS
5.7 GAINS AND LOSSES
Investments in equity instruments
Liabilities designated as at fair value through profit or loss
Assets measured at fair value through other comprehensive income
CHAPTER 6
Hedge accounting
6.1 OBJECTIVE AND SCOPE OF HEDGE ACCOUNTING
6.2 HEDGING INSTRUMENTS
Qualifying instruments
Designation of hedging instruments
6.3 HEDGED ITEMS
Qualifying items
Designation of hedged items
6.4 QUALIFYING CRITERIA FOR HEDGE ACCOUNTING
6.5 ACCOUNTING FOR QUALIFYING HEDGING RELATIONSHIPS
Fair value hedges
Cash flow hedges
Hedges of a net investment in a foreign operation
Accounting for the time value of options
Accounting for the forward element of forward contracts and foreign currency basis spreads of financial instruments
6.6 HEDGES OF A GROUP OF ITEMS
Eligibility of a group of items as the hedged item
Designation of a component of a nominal amount
Presentation
Nil net positions
6.7 OPTION TO DESIGNATE A CREDIT EXPOSURE AS MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS
Eligibility of credit exposures for designation at fair value through profit or loss
Accounting for credit exposures designated at fair value through profit or loss
6.8 TEMPORARY EXCEPTIONS FROM APPLYING SPECIFIC HEDGE ACCOUNTING REQUIREMENTS
Highly probable requirement for cash flow hedges
Reclassifying the amount accumulated in the cash flow hedge reserve
Assessing the economic relationship between the hedged item and the hedging instrument
Designating a component of an item as a hedged item
End of application
6.9 ADDITIONAL TEMPORARY EXCEPTIONS ARISING FROM INTEREST RATE BENCHMARK REFORM
Accounting for qualifying hedging relationships
Cash flow hedges
Groups of items
Designation of risk components
CHAPTER 7
Effective date and transition
7.1 EFFECTIVE DATE
7.2 TRANSITION
Transition for classification and measurement (Chapters 4 and 5)
Impairment (Section 5.5)
Transition for hedge accounting (Chapter 6)
Entities that have applied IFRS 9 (2009), IFRS 9 (2010) or IFRS 9 (2013) early
Transition for Prepayment Features with Negative Compensation
Transition for Annual Improvements to IFRS Standards
Transition for IFRS 17 as amended in June 2020
Transition for Interest Rate Benchmark Reform – Phase 2
7.3 WITHDRAWAL OF IFRIC 9, IFRS 9 (2009), IFRS 9 (2010) AND IFRS 9 (2013)
Appendix A
Defined terms
Appendix B
Application guidance
SCOPE (CHAPTER 2)
RECOGNITION AND DERECOGNITION (CHAPTER 3)
Initial recognition (Section 3.1)
Regular way purchase or sale of financial assets
Derecognition of financial assets (Section 3.2)
Arrangements under which an entity retains the contractual rights to receive the cash flows of a financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients (paragraph 3.2.4(b))
Evaluation of the transfer of risks and rewards of ownership (paragraph 3.2.6)
Evaluation of the transfer of control
Transfers that qualify for derecognition
Transfers that do not qualify for derecognition
Continuing involvement in transferred assets
All assets
Assets measured at amortised cost
Assets measured at fair value
All transfers
Examples
|
Fair value |
Percentage |
Allocated carrying amount |
Portion transferred |
9,090 |
90 % |
9,000 |
Portion retained |
1,010 |
10 % |
1,000 |
Total |
10,100 |
|
10,000 |
|
Debit |
Credit |
Original asset |
— |
9,000 |
Asset recognised for subordination or the residual interest |
1,000 |
— |
Asset for the consideration received in the form of excess spread |
40 |
— |
Profit or loss (gain on transfer) |
— |
90 |
Liability |
— |
1,065 |
Cash received |
9,115 |
— |
Total |
10,155 |
10,155 |
Derecognition of financial liabilities (Section 3.3)
CLASSIFICATION (CHAPTER 4)
Classification of financial assets (Section 4.1)
The entity's business model for managing financial assets
Abusiness model whose objective is to hold assets in order to collect contractual cash flows
Example |
Analysis |
Example 1 An entity holds investments to collect their contractual cash flows. The funding needs of the entity are predictable and the maturity of its financial assets is matched to the entity's estimated funding needs. The entity performs credit risk management activities with the objective of minimising credit losses. In the past, sales have typically occurred when the financial assets' credit risk has increased such that the assets no longer meet the credit criteria specified in the entity's documented investment policy. In addition, infrequent sales have occurred as a result of unanticipated funding needs. Reports to key management personnel focus on the credit quality of the financial assets and the contractual return. The entity also monitors fair values of the financial assets, among other information. |
Although the entity considers, among other information, the financial assets' fair values from a liquidity perspective (ie the cash amount that would be realised if the entity needs to sell assets), the entity's objective is to hold the financial assets in order to collect the contractual cash flows. Sales would not contradict that objective if they were in response to an increase in the assets' credit risk, for example if the assets no longer meet the credit criteria specified in the entity's documented investment policy. Infrequent sales resulting from unanticipated funding needs (eg in a stress case scenario) also would not contradict that objective, even if such sales are significant in value. |
Example 2 An entity's business model is to purchase portfolios of financial assets, such as loans. Those portfolios may or may not include financial assets that are credit impaired. If payment on the loans is not made on a timely basis, the entity attempts to realise the contractual cash flows through various means—for example, by contacting the debtor by mail, telephone or other methods. The entity's objective is to collect the contractual cash flows and the entity does not manage any of the loans in this portfolio with an objective of realising cash flows by selling them. In some cases, the entity enters into interest rate swaps to change the interest rate on particular financial assets in a portfolio from a floating interest rate to a fixed interest rate. |
The objective of the entity's business model is to hold the financial assets in order to collect the contractual cash flows. The same analysis would apply even if the entity does not expect to receive all of the contractual cash flows (eg some of the financial assets are credit impaired at initial recognition). Moreover, the fact that the entity enters into derivatives to modify the cash flows of the portfolio does not in itself change the entity's business model. |
Example 3 An entity has a business model with the objective of originating loans to customers and subsequently selling those loans to a securitisation vehicle. The securitisation vehicle issues instruments to investors. The originating entity controls the securitisation vehicle and thus consolidates it. The securitisation vehicle collects the contractual cash flows from the loans and passes them on to its investors. It is assumed for the purposes of this example that the loans continue to be recognised in the consolidated statement of financial position because they are not derecognised by the securitisation vehicle. |
The consolidated group originated the loans with the objective of holding them to collect the contractual cash flows. However, the originating entity has an objective of realising cash flows on the loan portfolio by selling the loans to the securitisation vehicle, so for the purposes of its separate financial statements it would not be considered to be managing this portfolio in order to collect the contractual cash flows. |
Example 4 A financial institution holds financial assets to meet liquidity needs in a ‘stress case’ scenario (eg, a run on the bank's deposits). The entity does not anticipate selling these assets except in such scenarios. The entity monitors the credit quality of the financial assets and its objective in managing the financial assets is to collect the contractual cash flows. The entity evaluates the performance of the assets on the basis of interest revenue earned and credit losses realised. However, the entity also monitors the fair value of the financial assets from a liquidity perspective to ensure that the cash amount that would be realised if the entity needed to sell the assets in a stress case scenario would be sufficient to meet the entity's liquidity needs. Periodically, the entity makes sales that are insignificant in value to demonstrate liquidity. |
The objective of the entity's business model is to hold the financial assets to collect contractual cash flows. The analysis would not change even if during a previous stress case scenario the entity had sales that were significant in value in order to meet its liquidity needs. Similarly, recurring sales activity that is insignificant in value is not inconsistent with holding financial assets to collect contractual cash flows. In contrast, if an entity holds financial assets to meet its everyday liquidity needs and meeting that objective involves frequent sales that are significant in value, the objective of the entity's business model is not to hold the financial assets to collect contractual cash flows. Similarly, if the entity is required by its regulator to routinely sell financial assets to demonstrate that the assets are liquid, and the value of the assets sold is significant, the entity's business model is not to hold financial assets to collect contractual cash flows. Whether a third party imposes the requirement to sell the financial assets, or that activity is at the entity's discretion, is not relevant to the analysis. |
Abusiness model whose objective is achieved by both collecting contractual cash flows and selling financial assets
Example |
Analysis |
Example 5 An entity anticipates capital expenditure in a few years. The entity invests its excess cash in short and long-term financial assets so that it can fund the expenditure when the need arises. Many of the financial assets have contractual lives that exceed the entity's anticipated investment period. The entity will hold financial assets to collect the contractual cash flows and, when an opportunity arises, it will sell financial assets to re-invest the cash in financial assets with a higher return. The managers responsible for the portfolio are remunerated based on the overall return generated by the portfolio. |
The objective of the business model is achieved by both collecting contractual cash flows and selling financial assets. The entity will make decisions on an ongoing basis about whether collecting contractual cash flows or selling financial assets will maximise the return on the portfolio until the need arises for the invested cash. In contrast, consider an entity that anticipates a cash outflow in five years to fund capital expenditure and invests excess cash in short-term financial assets. When the investments mature, the entity reinvests the cash in new short-term financial assets. The entity maintains this strategy until the funds are needed, at which time the entity uses the proceeds from the maturing financial assets to fund the capital expenditure. Only sales that are insignificant in value occur before maturity (unless there is an increase in credit risk). The objective of this contrasting business model is to hold financial assets to collect contractual cash flows. |
Example 6 A financial institution holds financial assets to meet its everyday liquidity needs. The entity seeks to minimise the costs of managing those liquidity needs and therefore actively manages the return on the portfolio. That return consists of collecting contractual payments as well as gains and losses from the sale of financial assets. As a result, the entity holds financial assets to collect contractual cash flows and sells financial assets to reinvest in higher yielding financial assets or to better match the duration of its liabilities. In the past, this strategy has resulted in frequent sales activity and such sales have been significant in value. This activity is expected to continue in the future. |
The objective of the business model is to maximise the return on the portfolio to meet everyday liquidity needs and the entity achieves that objective by both collecting contractual cash flows and selling financial assets. In other words, both collecting contractual cash flows and selling financial assets are integral to achieving the business model's objective. |
Example 7 An insurer holds financial assets in order to fund insurance contract liabilities. The insurer uses the proceeds from the contractual cash flows on the financial assets to settle insurance contract liabilities as they come due. To ensure that the contractual cash flows from the financial assets are sufficient to settle those liabilities, the insurer undertakes significant buying and selling activity on a regular basis to rebalance its portfolio of assets and to meet cash flow needs as they arise. |
The objective of the business model is to fund the insurance contract liabilities. To achieve this objective, the entity collects contractual cash flows as they come due and sells financial assets to maintain the desired profile of the asset portfolio. Thus both collecting contractual cash flows and selling financial assets are integral to achieving the business model's objective. |
Other business models
Contractual cash flows that are solely payments of principal and interest on the principal amount outstanding
Consideration for the time value of money
Contractual terms that change the timing or amount of contractual cash flows
Instrument |
Analysis |
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Instrument A Instrument A is a bond with a stated maturity date. Payments of principal and interest on the principal amount outstanding are linked to an inflation index of the currency in which the instrument is issued. The inflation link is not leveraged and the principal is protected. |
The contractual cash flows are solely payments of principal and interest on the principal amount outstanding. Linking payments of principal and interest on the principal amount outstanding to an unleveraged inflation index resets the time value of money to a current level. In other words, the interest rate on the instrument reflects ‘real’ interest. Thus, the interest amounts are consideration for the time value of money on the principal amount outstanding. However, if the interest payments were indexed to another variable such as the debtor's performance (eg the debtor's net income) or an equity index, the contractual cash flows are not payments of principal and interest on the principal amount outstanding (unless the indexing to the debtor's performance results in an adjustment that only compensates the holder for changes in the credit risk of the instrument, such that contractual cash flows are solely payments of principal and interest). That is because the contractual cash flows reflect a return that is inconsistent with a basic lending arrangement (see paragraph B4.1.7A). |
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Instrument B Instrument B is a variable interest rate instrument with a stated maturity date that permits the borrower to choose the market interest rate on an ongoing basis. For example, at each interest rate reset date, the borrower can choose to pay three-month LIBOR for a three-month term or one-month LIBOR for a one-month term. |
The contractual cash flows are solely payments of principal and interest on the principal amount outstanding as long as the interest paid over the life of the instrument reflects consideration for the time value of money, for the credit risk associated with the instrument and for other basic lending risks and costs, as well as a profit margin (see paragraph B4.1.7A). The fact that the LIBOR interest rate is reset during the life of the instrument does not in itself disqualify the instrument. However, if the borrower is able to choose to pay a one-month interest rate that is reset every three months, the interest rate is reset with a frequency that does not match the tenor of the interest rate. Consequently, the time value of money element is modified. Similarly, if an instrument has a contractual interest rate that is based on a term that can exceed the instrument's remaining life (for example, if an instrument with a five-year maturity pays a variable rate that is reset periodically but always reflects a five-year maturity), the time value of money element is modified. That is because the interest payable in each period is disconnected from the interest period. In such cases, the entity must qualitatively or quantitatively assess the contractual cash flows against those on an instrument that is identical in all respects except the tenor of the interest rate matches the interest period to determine if the cash flows are solely payments of principal and interest on the principal amount outstanding. (But see paragraph B4.1.9E for guidance on regulated interest rates.) For example, in assessing a bond with a five-year term that pays a variable rate that is reset every six months but always reflects a five-year maturity, an entity considers the contractual cash flows on an instrument that resets every six months to a six-month interest rate but is otherwise identical. The same analysis would apply if the borrower is able to choose between the lender's various published interest rates (eg the borrower can choose between the lender's published one-month variable interest rate and the lender's published three-month variable interest rate). |
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Instrument C Instrument C is a bond with a stated maturity date and pays a variable market interest rate. That variable interest rate is capped. |
The contractual cash flows of both:
are payments of principal and interest on the principal amount outstanding as long as the interest reflects consideration for the time value of money, for the credit risk associated with the instrument during the term of the instrument and for other basic lending risks and costs, as well as a profit margin. (See paragraph B4.1.7A) Consequently, an instrument that is a combination of (a) and (b) (eg a bond with an interest rate cap) can have cash flows that are solely payments of principal and interest on the principal amount outstanding. Such a contractual term may reduce cash flow variability by setting a limit on a variable interest rate (eg an interest rate cap or floor) or increase the cash flow variability because a fixed rate becomes variable. |
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Instrument D Instrument D is a full recourse loan and is secured by collateral. |
The fact that a full recourse loan is collateralised does not in itself affect the analysis of whether the contractual cash flows are solely payments of principal and interest on the principal amount outstanding. |
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Instrument E Instrument E is issued by a regulated bank and has a stated maturity date. The instrument pays a fixed interest rate and all contractual cash flows are non-discretionary. However, the issuer is subject to legislation that permits or requires a national resolving authority to impose losses on holders of particular instruments, including Instrument E, in particular circumstances. For example, the national resolving authority has the power to write down the par amount of Instrument E or to convert it into a fixed number of the issuer's ordinary shares if the national resolving authority determines that the issuer is having severe financial difficulties, needs additional regulatory capital or is ‘failing’. |
The holder would analyse the contractual terms of the financial instrument to determine whether they give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding and thus are consistent with a basic lending arrangement. That analysis would not consider the payments that arise only as a result of the national resolving authority's power to impose losses on the holders of Instrument E. That is because that power, and the resulting payments, are not contractual terms of the financial instrument. In contrast, the contractual cash flows would not be solely payments of principal and interest on the principal amount outstanding if the contractual terms of the financial instrument permit or require the issuer or another entity to impose losses on the holder (eg by writing down the par amount or by converting the instrument into a fixed number of the issuer's ordinary shares) as long as those contractual terms are genuine, even if the probability is remote that such a loss will be imposed. |
Instrument |
Analysis |
Instrument F Instrument F is a bond that is convertible into a fixed number of equity instruments of the issuer. |
The holder would analyse the convertible bond in its entirety. The contractual cash flows are not payments of principal and interest on the principal amount outstanding because they reflect a return that is inconsistent with a basic lending arrangement (see paragraph B4.1.7A); ie the return is linked to the value of the equity of the issuer. |
Instrument G Instrument G is a loan that pays an inverse floating interest rate (ie the interest rate has an inverse relationship to market interest rates). |
The contractual cash flows are not solely payments of principal and interest on the principal amount outstanding. The interest amounts are not consideration for the time value of money on the principal amount outstanding. |
Instrument H Instrument H is a perpetual instrument but the issuer may call the instrument at any point and pay the holder the par amount plus accrued interest due. Instrument H pays a market interest rate but payment of interest cannot be made unless the issuer is able to remain solvent immediately afterwards. Deferred interest does not accrue additional interest. |
The contractual cash flows are not payments of principal and interest on the principal amount outstanding. That is because the issuer may be required to defer interest payments and additional interest does not accrue on those deferred interest amounts. As a result, interest amounts are not consideration for the time value of money on the principal amount outstanding. If interest accrued on the deferred amounts, the contractual cash flows could be payments of principal and interest on the principal amount outstanding. The fact that Instrument H is perpetual does not in itself mean that the contractual cash flows are not payments of principal and interest on the principal amount outstanding. In effect, a perpetual instrument has continuous (multiple) extension options. Such options may result in contractual cash flows that are payments of principal and interest on the principal amount outstanding if interest payments are mandatory and must be paid in perpetuity. Also, the fact that Instrument H is callable does not mean that the contractual cash flows are not payments of principal and interest on the principal amount outstanding unless it is callable at an amount that does not substantially reflect payment of outstanding principal and interest on that principal amount outstanding. Even if the callable amount includes an amount that reasonably compensates the holder for the early termination of the instrument, the contractual cash flows could be payments of principal and interest on the principal amount outstanding. (See also paragraph B4.1.12.) |
Contractually linked instruments
Option to designate a financial asset or financial liability as at fair value through profit or loss (Sections 4.1 and 4.2)
Designation eliminates or significantly reduces an accounting mismatch
A group of financial liabilities or financial assets and financial liabilities is managed and its performance is evaluated on a fair value basis
Embedded derivatives (Section 4.3)
Instruments containing embedded derivatives
Reassessment of embedded derivatives
Reclassification of financial assets (Section 4.4)
Reclassification of financial assets
MEASUREMENT (CHAPTER 5)
Initial measurement (Section 5.1)
Subsequent measurement (Sections 5.2 and 5.3)
Investments in equity instruments and contracts on those investments
Amortised cost measurement (Section 5.4)
Effective interest method
Transaction costs
Write-off
Impairment (Section 5.5)
Collective and individual assessment basis
Timing of recognising lifetime expected credit losses
Determining whether credit risk has increased significantly since initial recognition
More than 30 days past due rebuttable presumption
Financial instruments that have low credit risk at the reporting date
Modifications
Measurement of expected credit losses
Expected credit losses
Definition of default
Period over which to estimate expected credit losses
Probability-weighted outcome
Time value of money
Reasonable and supportable information
Collateral
Reclassification of financial assets (Section 5.6)
Gains and losses (Section 5.7)
Liabilities designated as at fair value through profit or loss
The meaning of ‘credit risk’ (paragraphs 5.7.7 and 5.7.8)
Determining the effects of changes in credit risk
HEDGE ACCOUNTING (CHAPTER 6)
Hedging instruments (Section 6.2)
Qualifying instruments
Written options
Designation of hedging instruments
Hedged items (Section 6.3)
Qualifying items
Designation of hedged items
Risk components
Components of a nominal amount
Relationship between components and the total cash flows of an item
Qualifying criteria for hedge accounting (Section 6.4)
Hedge effectiveness
Economic relationship between the hedged item and the hedging instrument
The effect of credit risk
Hedge ratio
Frequency of assessing whether the hedge effectiveness requirements are met
Methods for assessing whether the hedge effectiveness requirements are met
Accounting for qualifying hedging relationships (Section 6.5)
Measurement of hedge ineffectiveness
Rebalancing the hedging relationship and changes to the hedge ratio
Discontinuation of hedge accounting
Accounting for the time value of options
Accounting for the forward element of forward contracts and foreign currency basis spreads of financial instruments
Hedge of a group of items (Section 6.6)
Hedge of a net position
Eligibility for hedge accounting and designation of a net position
Application of the hedge effectiveness requirements to a hedge of a net p o s i t i on
Cash flow hedges that constitute a net position
Layers of groups of items designated as the hedged item
Presentation of hedging instrument gains or losses
EFFECTIVE DATE AND TRANSITION (CHAPTER 7)
Transition (Section 7.2)
Financial assets held for trading
Impairment
DEFINITIONS (APPENDIX A)
Derivatives
Financial assets and liabilities held for trading
INTERNATIONAL FINANCIAL REPORTING STANDARD 10
Consolidated Financial Statements
OBJECTIVE
Meeting the objective
SCOPE
CONTROL
Power
Returns
Link between power and returns
ACCOUNTING REQUIREMENTS
Non-controlling interests
Loss of control
DETERMINING WHETHER AN ENTITY IS AN INVESTMENT ENTITY
Paragraphs B85A–B85M provide related application guidance.
INVESTMENT ENTITIES: EXCEPTION TO CONSOLIDATION
Appendix A
Defined terms
Appendix B
Application guidance
ASSESSING CONTROL
Purpose and design of an investee
Power
Relevant activities and direction of relevant activities
Rights that give an investor power over an investee
Substantive rights
Protective rights
Franchises
Voting rights
Power with a majority of the voting rights
Majority of the voting rights but no power
Power without a majority of the voting rights
Contractual arrangement with other vote holders
Rights from other contractual arrangements
The investor’s voting rights
Potential voting rights
Power when voting or similar rights do not have a significant effect on the investee’s returns
Exposure, or rights, to variable returns from an investee
Link between power and returns
Delegated power
The scope of the decision-making authority
Rights held by other parties
Remuneration
Exposure to variability of returns from other interests
Relationship with other parties
Control of specified assets
Continuous assessment
DETERMINING WHETHER AN ENTITY IS AN INVESTMENT ENTITY
Business purpose
Exit strategies
Earnings from investments
Fair value measurement
Typical characteristics of an investment entity
More than one investment
More than one investor
Unrelated investors
Ownership interests
ACCOUNTING REQUIREMENTS
Consolidation procedures
Uniform accounting policies
Measurement
Potential voting rights
Reporting date
Non-controlling interests
Changes in the proportion held by non-controlling interests
Loss of control
ACCOUNTING FOR A CHANGE IN INVESTMENT ENTITY STATUS
Appendix C
Effective date and transition
EFFECTIVE DATE
TRANSITION
References to the ‘immediately preceding period’
References to IFRS 9
WITHDRAWAL OF OTHER IFRSs
INTERNATIONAL FINANCIAL REPORTING STANDARD 11
Joint Arrangements
OBJECTIVE
Meeting the objective
SCOPE
JOINT ARRANGEMENTS
Joint control
Types of joint arrangement
FINANCIAL STATEMENTS OF PARTIES TO A JOINT ARRANGEMENT
Joint operations
Joint ventures
SEPARATE FINANCIAL STATEMENTS
Appendix A
Defined terms
Appendix B
Application guidance
JOINT ARRANGEMENTS
Contractual arrangement (paragraph 5)
Joint control (paragraphs 7–13)
Assessing joint control
TYPES OF JOINT ARRANGEMENT (PARAGRAPHS 14–19)
Classification of a joint arrangement
Structure of the joint arrangement
Joint arrangements not structured through a separate vehicle
Joint arrangements structured through a separate vehicle
Classification of a joint arrangement: assessment of the parties’ rights and obligations arising from the arrangement
The legal form of the separate vehicle
Assessing the terms of the contractual arrangement
|
Joint operation |
Joint venture |
The terms of the contractual arrangement |
The contractual arrangement provides the parties to the joint arrangement with rights to the assets, and obligations for the liabilities, relating to the arrangement. |
The contractual arrangement provides the parties to the joint arrangement with rights to the net assets of the arrangement (ie it is the separate vehicle, not the parties, that has rights to the assets, and obligations for the liabilities, relating to the arrangement). |
Rights to assets |
The contractual arrangement establishes that the parties to the joint arrangement share all interests (eg rights, title or ownership) in the assets relating to the arrangement in a specified proportion (eg in proportion to the parties’ ownership interest in the arrangement or in proportion to the activity carried out through the arrangement that is directly attributed to them). |
The contractual arrangement establishes that the assets brought into the arrangement or subsequently acquired by the joint arrangement are the arrangement’s assets. The parties have no interests (ie no rights, title or ownership) in the assets of the arrangement. |
Obligations for liabilities |
The contractual arrangement establishes that the parties to the joint arrangement share all liabilities, obligations, costs and expenses in a specified proportion (eg in proportion to the parties’ ownership interest in the arrangement or in proportion to the activity carried out through the arrangement that is directly attributed to them). |
The contractual arrangement establishes that the joint arrangement is liable for the debts and obligations of the arrangement. |
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|
The contractual arrangement establishes that the parties to the joint arrangement are liable to the arrangement only to the extent of their respective investments in the arrangement or to their respective obligations to contribute any unpaid or additional capital to the arrangement, or both. |
The contractual arrangement establishes that the parties to the joint arrangement are liable for claims raised by third parties. |
The contractual arrangement states that creditors of the joint arrangement do not have rights of recourse against any party with respect to debts or obligations of the arrangement. |
|
Revenues, expenses, profit or loss |
The contractual arrangement establishes the allocation of revenues and expenses on the basis of the relative performance of each party to the joint arrangement. For example, the contractual arrangement might establish that revenues and expenses are allocated on the basis of the capacity that each party uses in a plant operated jointly, which could differ from their ownership interest in the joint arrangement. In other instances, the parties might have agreed to share the profit or loss relating to the arrangement on the basis of a specified proportion such as the parties’ ownership interest in the arrangement. This would not prevent the arrangement from being a joint operation if the parties have rights to the assets, and obligations for the liabilities, relating to the arrangement. |
The contractual arrangement establishes each party’s share in the profit or loss relating to the activities of the arrangement. |
Guarantees |
The parties to joint arrangements are often required to provide guarantees to third parties that, for example, receive a service from, or provide financing to, the joint arrangement. The provision of such guarantees, or the commitment by the parties to provide them, does not, by itself, determine that the joint arrangement is a joint operation. The feature that determines whether the joint arrangement is a joint operation or a joint venture is whether the parties have obligations for the liabilities relating to the arrangement (for some of which the parties might or might not have provided a guarantee). |
Assessing other facts and circumstances
Classification of a joint arrangement structured through a separate vehicle
FINANCIAL STATEMENTS OF PARTIES TO A JOINT ARRANGEMENT (PARAGRAPHS 21A–22)
Accounting for acquisitions of interests in joint operations
Accounting for sales or contributions of assets to a joint operation
Accounting for purchases of assets from a joint operation
Appendix C
Effective date, transition and withdrawal of other IFRSs
EFFECTIVE DATE
Transition
Joint ventures—transition from proportionate consolidation to the equity method
Joint operations—transition from the equity method to accounting for assets and liabilities
Transition provisions in an entity’s separate financial statements
References to the ‘immediately preceding period’
References to IFRS 9
Accounting for acquisitions of interests in joint operations
WITHDRAWAL OF OTHER IFRSS
INTERNATIONAL FINANCIAL REPORTING STANDARD 12
Disclosure of Interests in Other Entities
OBJECTIVE
Meeting the objective
SCOPE
SIGNIFICANT JUDGEMENTS AND ASSUMPTIONS
Investment entity status
INTERESTS IN SUBSIDIARIES
The interest that non-controlling interests have in the group’s activities and cash flows
The nature and extent of significant restrictions
Nature of the risks associated with an entity’s interests in consolidated structured entities
Consequences of changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control
Consequences of losing control of a subsidiary during the reporting period
INTERESTS IN UNCONSOLIDATED SUBSIDIARIES (INVESTMENT ENTITIES)
INTERESTS IN JOINT ARRANGEMENTS AND ASSOCIATES
Nature, extent and financial effects of an entity’s interests in joint arrangements and associates
Risks associated with an entity’s interests in joint ventures and associates
INTERESTS IN UNCONSOLIDATED STRUCTURED ENTITIES
Nature of interests
Nature of risks
Appendix A
Defined terms
Appendix B
Application guidance
AGGREGATION (PARAGRAPH 4)
INTERESTS IN OTHER ENTITIES
SUMMARISED FINANCIAL INFORMATION FOR SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES (PARAGRAPHS 12 AND 21)
COMMITMENTS FOR JOINT VENTURES (PARAGRAPH 23(a))
INTERESTS IN UNCONSOLIDATED STRUCTURED ENTITIES (PARAGRAPHS 24–31)
Structured entities
Nature of risks from interests in unconsolidated structured entities (paragraphs 29–31)
Appendix C
Effective date and transition
EFFECTIVE DATE AND TRANSITION
REFERENCES TO IFRS 9
INTERNATIONAL FINANCIAL REPORTING STANDARD 13
Fair Value Measurement
OBJECTIVE
SCOPE
MEASUREMENT
Definition of fair value
The asset or liability
The transaction
Market participants
The price
Application to non-financial assets
Highest and best use for non-financial assets
Valuation premise for non-financial assets
Application to liabilities and an entity’s own equity instruments
General principles
Liabilities and equity instruments held by other parties as assets
Liabilities and equity instruments not held by other parties as assets
Non-performance risk
Restriction preventing the transfer of a liability or an entity’s own equity instrument
Financial liability with a demand feature
Application to financial assets and financial liabilities with offsetting positions in market risks or counterparty credit risk
Exposure to market risks
Exposure to the credit risk of a particular counterparty
Fair value at initial recognition
Valuation techniques
Inputs to valuation techniques
General principles
Inputs based on bid and ask prices
Fair value hierarchy
Level 1 inputs
Level 2 inputs
Level 3 inputs
DISCLOSURE
Appendix A
Defined terms
Appendix B
Application guidance
THE FAIR VALUE MEASUREMENT APPROACH
VALUATION PREMISE FOR NON-FINANCIAL ASSETS (PARAGRAPHS 31–33)
FAIR VALUE AT INITIAL RECOGNITION (PARAGRAPHS 57–60)
VALUATION TECHNIQUES (PARAGRAPHS 61–66)
Market approach
Cost approach
Income approach
Present value techniques
The components of a present value measurement
General principles
Risk and uncertainty
Discount rate adjustment technique
Expected present value technique
Possible cash flows |
Probability |
Probability-weighted cash flows |
CU500 |
15 % |
CU75 |
CU800 |
60 % |
CU480 |
CU900 |
25 % |
CU225 |
Expected cash flows |
|
CU780 |