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PWC issues updated guide to new IFRSs for 2010

Sunil Thukral — Tue, 30 Mar 2010 04:24:28 +0000

This PWC publication is a practical guide to the new IFRS standards and interpretations that come into effect in 2010. For three years there was little change to the body of IFRSs since European listed groups were required to apply the standards in 2005. The Board issued new standards that took effect in 2009; for 2010 there are a number of significant changes that will impact companies. These changes include new standards and interpretations, and amendments to existing requirements.

This is one of the problems with the IFRS - the IFRS standards in many ways are subject to interpretation, which means that each country and even each company has an ability to develop their own interpretations of the IFRS standards. Further, to add icing on the cake, the IFRS standards are not yet finalized, they are a moving target. So the companies might reach a consensus on a standard as it is written today, but these standards might change by the time the company actually adopts the accounting standards. Hence, for the implementation of the accounting standards suggest that all the companies operating in the same economic sector should brainstorm the issues together and reach a consensus as to the interpretation of the IFRS standards that they collectively intend to follow.

Click here to see this PWC publication:

A_practical_guide_to_new_IFRSs_for_2010 (PDF – 49 pages)

[Reference: PWC website and the above guide]

Guide for first time adopters of IFRS

Sunil Thukral — Sat, 20 Mar 2010 20:36:37 +0000

In 2003, IFRS 1, First-time Adoption of International Financial Reporting Standards (IFRS 1) was issued by International Accounting Standards Board (IASB). IFRS 1 has since been updated to make it more user friendly, with the most recent revision in July 2009 that introduced additional exemptions.

Why was IFRS 1 issued?

Let’s take an example of ABC Inc., which is currently reporting under local GAAP (e.g. U.S. GAAP) and wants to start reporting under International Financial Reporting Standards (IFRS) in the year 2011. So what GAAP do you think should be followed to produce the comparative information for 2010? Should it be the local GAAP that the company has always been following or should the comparative information should be produced using IFRSs. For comparability purposes, it would make logical sense to produce the comparative information using IFRS.

IFRS 1 was issued to assist and establish the rules for an entity’s first financial statements prepared in accordance with IFRSs, particularly regarding the transition from the accounting principles previously applied by the entity (previous GAAP).

Prior to the issuance of IFRS 1, first-time adopters were expected (in most cases) to retrospectively apply all IFRS requirements in their first IFRS-compliant financial statements. Recognising that this often resulted in costs that exceeded the benefits of the financial information generated, the IASB revised the approach to first-time adoption to include limited exemptions from the principle of retrospective application. As a result, IFRS 1 significantly eases the burden for first-time adopters.

How is IFRS 1 applied?

The general principle underlying IFRS 1 is that “IFRSs effective at the date of an entity’s first IFRS financial statements” should be applied retrospectively in the opening IFRS statement of financial position, the comparative period and the first IFRS reporting period.

In practical terms, this means that if an entity adopts IFRSs for the year ended 31 December, 2011, it must apply all IFRSs effective at that date (i.e. 31 December, 2011) retrospectively to the 2010 reporting period, and to the opening statement of financial position on 1 January 2010 (assuming only one year of comparative information is provided). Hence, in this case the entity’s date of transition to IFRSs is January 1, 2010 and its changeover date is January 1, 2011. Effectively, this general principle would result in full retrospective application of IFRSs as if they had been the framework for an entity’s accounting since its inception.

IFRS 1 adapts to the general principle of retrospective application by adding a limited number of very important “exceptions” and “exemptions”. The “exceptions” to retrospective application (of which there are four) are mandatory.

There are a total of 16 “exemptions” are optional – a first-time adopter may choose whether and which exemptions to apply. It is best to review these strategic choices for a company very carefully as it is required to fully understand the nature and impact of the strategic choices made by the company. Each company has to properly document all the strategic choices made by them and the reasons of making one choice over the other. Some of these strategic choices

A word of caution that an entity may only apply IFRS 1 in its “first” IFRS financial statements. IFRS 1 provides specific examples as to when would an entity would qualify to use IFRS 1.

IFRS 1 consists of explanatory text as well as implementation guidance. While there is never a substitute for a complete reading of the Standard and discussing with your internal advisors, the summaries provided by the Big 4 accounting firms provides a reasonable starting point from which to build a more thorough understanding of the steps required in preparing an entity’s first IFRS financial statements.

What information does these strategic choices provide to the analysts?

The analysts should carefully review the various strategic choices made by the companies to understand the motivations of the companies of making one strategic choice over the other as these strategic choices would have a material impact of the future IFRS reported results.

Where do I find more detailed information about IFRS 1?

Click below to download the implementation guidance issued by the Big 4:

Download Deloitte’s Guide to IFRS 1

PWC: Mapping the change: IFRS implementation guide.

(References: IFRS 1, Deloitte and PWC implementation guides for IFRS 1 implementation).

KPMG – Disclosure Checklist (2008)

Sunil Thukral — Sun, 06 Jul 2008 02:37:03 +0000

The purpose of this Disclosure Checklist is to assist you in preparing financial statements in accordance with IFRS by identifying the disclosures required. The Disclosure Checklist reflects IFRSs in issue at 1 June 2008 that are required to be applied by an entity with an annual period beginning on or after 1 January 2008.

Sections 1 to 4 of the publication identify IFRS disclosure requirements that are effective for annual periods beginning on 1 January 2008 (“currently effective” requirements).

Section 5 of the publication identifies the additional IFRS disclosure requirements for a first-time adopter of IFRSs.

Section 6 of the publication identifies IFRS disclosure requirements that are effective for annual periods beginning after 1 January 2008 (“forthcoming” requirements).

Download PDF (registration is optional) (size 779K)

Source: kpmgifrg.com

Deloitte's – IFRS Model Financial Statements

Sunil Thukral — Wed, 07 May 2008 14:43:44 +0000

These are model financial statements for the year ended 31 December 2007 illustrate the application of the presentation and disclosure requirements of IFRSs by an entity that is not a first-time adopter of IFRSs. They also contain additional disclosures that are considered to be best practice, particularly where such disclosures are included in illustrative examples provided with a specific Standard.

IFRS Model Financial Statements for 2007 (PDF 700k, English).

Sourece: IASplus.com

PWC – Sample corporate consolidated financial statements 2007

Sunil Thukral — Sun, 06 Apr 2008 02:52:55 +0000

Sample corporate consolidated financial statements 2007 (PDF file, 6.1mb) provides a realistic set of financial statements for a corporate entity. Certain types of transaction (such as construction contracts and agriculture) have not been included as they are not relevant to the group’s operations. The example disclosures for some of these additional items have been included in the appendices. Other disclosure items and transactions are included in other publications in the ‘Illustrative’ series.

Source: PWC.com

Deloitte's IFRS Presentation and Disclosure Checklist for 2007

Sunil Thukral — Wed, 02 Apr 2008 14:50:11 +0000

Deloitte’s IFRS Presentation and Disclosure Checklist (Word version) (ZIP of a Microsoft Word file 423k). The checklist is formatted to allow the recording of a review of financial statements, with a place to indicate yes/no/not-applicable for each presentation and disclosure item. This is a Microsoft Word File Zipped.

Deloitte’s IFRS Presentation and Disclosure Checklist (PDF version) for the year ended 31 December 2007 (PDF 794k).

IAS 1 (Revised 2007) Compliance Checklist

IAS 1 (Revised 2007) Presentation of Financial Statements was issued on 6 September 2007 and is effective for annual periods beginning on or after 1 January 2009, with early application permitted. Click to download:

Deloitte’s – IAS 1 (Revised 2007) Compliance Checklist (PDF 223k)

2007 Interim Reporting Compliance Checklist

IAS 34 compliance checklist as of 31 May 2007. The checklist is formatted to allow the recording of a review of interim financial statements, with a place to indicate yes/no/not-applicable for each item.

Deloitte’s 2007 Interim Reporting Compliance Checklist (Word version) (ZIP of Microsoft Word file 42k)
DEloitte’s 2007 Interim Reporting Compliance Checklist (PDF version) (PDF 91k)

Source: IASplus.com