What is replicating portfolios?

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Last update 06/12/2019 So, what is replicating portfolios? Topic – IFRS 17 Insurance contracts. A replicating portfolio is a pool of assets designed to reproduce (replicate) the cash flows or market values of a pool of liabilities across a large number of stochastic scenarios used among other in the insurance industry. Once set up, a … Read more

How to work with APMs

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Last update 19/12/2019 How to work with APMs – Alternative performance measures (APM) have a twofold use; directors monitor the financial and economic performance through APMs, and reporting entities heavily rely on APMs to communicate results to their financial statement users. APMs should normally be consistent with the performance indicators used by directors. However, regulatory … Read more

WACC

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Last update 04/01/2020 Weighted Average Cost of Capital WACC Formula Here is the basic formula to calculate for weighted average cost of capital (WACC): WACC = (( E / V ) * Re) + [( ( D / V ) * Rd) * (1-T)] E = Market value of the business entity’s equity D = … Read more

How to account for revenue in a transfer of land

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Last update 01/11/2019 Here the questions raised is how to account for revenue in a transfer of land. Or to put it more formally how to account for revenue recognition in a real estate contract that includes the transfer of land (as per IFRS 15 Revenue from Contracts with Customers) as per the same 2018 IFRS … Read more

Verifiability

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Last update 04/08/2019 An enhancing qualitative characteristic that enables different knowledgeable and independent observers to reach consensus, although not necessarily complete agreement, that a particular depiction is a faithful representation. The Conceptual Framework provides the following guidance [Conceptual Framework 2.30 – 2.32]: Verifiability helps assure users that information faithfully represents the economic phenomena it purports to represent. Verifiability means … Read more

How is goodwill different from other intangible assets?

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Last update 26/11/2019 How is goodwill different from other intangible assets? An asset, which has no physical existence such as corporate intellectual properties (patents, trademarks, business methodologies and copyrights), trademarks, patents, software, goodwill and brand recognition are known to be an “Intangible asset”. So goodwill is and is not an intangible asset. Goodwill is a … Read more

Variable fee approach

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Last update 17/12/2019 [IFRS 17 Insurance Contracts] The Variable Fee Approach (‘VFA’) is a modification of the General Model. The General Model is applied to insurance contracts without participation features or to insurance contracts with participation features that fail the Variable fee scope test. Topics hide Variable fee scope test Overview Variable Fee Approach Differences … Read more

How are operating segments determined?

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Last update 16/09/2019 IFRS 8 8 states that the following factors should be considered when an entity is determining the set of components that constitutes its operating segments: The nature of business activities of each component. To the extent that the higher- level segment information is represented by components that contain dissimilar business activities, while … Read more

Value-at-risk

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Last update 06/12/2019 Value-at-risk – Over the past 20 years the value-at-risk (VAR) analysis has become established as the industry and regulatory standard in measuring market risk. The demands placed on VAR and other similar techniques have grown tremendously, driven by new products such as correlation trading, multi-asset options, power-reverse dual currency swaps, swaps whose … Read more

How and for what purpose is the asset used?

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Last update 17/12/2019 How and for what purpose is the asset used – A customer has the right to direct how and for what purpose the asset is used if, within the scope of its right of use defined in the contract, it can change how and for what purpose the asset is used throughout … Read more