Examples collecting cash and selling assets

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Last update 16/12/2019 Examples collecting cash and selling assets – The following are examples of when the objective of the entity’s business model may be achieved by both collecting contractual cash flows and selling financial assets. This list of examples is not exhaustive. Furthermore, the examples are not intended to describe all the factors that … Read more

Probability of default

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Last update 13/12/2019 The probability of default (PD) represents the likelihood of a borrower defaulting on its financial obligation, either over the next 12 months (12M PD) or over the remaining lifetime (Lifetime PD) of the obligation. See also ‘Definition of Default‘. PD is defined as the probability of whether borrowers will default on their obligations … Read more

Example Variable fee approach for measurement

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Last update 18/12/2019 Example Variable fee approach for measurement – The variable fee approach (VFA) is applied to insurance contracts with direct participation features that contain the following conditions (‘eligibility criteria’) at initial recognition: the contractual terms specify that the policyholder participates in a share of a clearly identified pool of underlying items; the entity … Read more

Prior period errors

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Last update 23/08/2019 Omissions from, and misstatements in, the entity’s financial statements for one or more prior periods arising from a failure to use, or a misuse of, faithfully representative information that: Was available when financial statements for those periods were authorised for issue; and Could reasonably be expected to have been obtained and taken … Read more

Example Understanding related party disclosures

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Last update 26/11/2019 Example Understanding related party disclosures shows two disclosures of related-party transactions. Here is a real life disclosure from Petrobas in Brasil followed by an example from IAS 24: Exemption from disclosure (IAS 24 25) Government G directly or indirectly controls Entities 1 and 2 and Entities A, B, C and D. Person … Read more

Primary users of general purpose financial reports

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Last update 07/01/2020 Primary users of general purpose financial reports – IAS 1 9 defines the purpose of financial statements as follows: ‘……The objective of financial statements is to provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic … Read more

Example of hyperinflation accounting

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Last update 21/12/2019 Example of hyperinflation accounting – Here is an example of hyperinflation accounting (change from functional currency (ARS) to presentation currency (USD)) and a limited disclosure on hedge accounting for a net investment in a foreign operation (Third-party financing of EUR operations in EUR-denominated notes). Hyperinflation accounting (Source: www.ft.com, ‘American companies count cost … Read more

Presentation and disclosure

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Last update 07/01/2020 Presentation and disclosure are the meta terms used to describe how information about assets, liabilities, equity, income and expenses is provided in financial statements. Presentation and disclosure have received a prominent combined place in the Conceptual Framework for Financial Reporting 2018.  After Recognition and Derecognition and Measurement it provides the end process … Read more

Example impairment and revaluation of a building

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Last update 01/12/2019 Example impairment and revaluation of a building – On January 1, 2005 OwnPlus Inc. purchased a building for €2 million. Its estimated useful life at that date was 20 years and the company uses the straight-line depreciation method. On December 31, 2009 the government embarked on a plan to construct a fly-over adjacent … Read more

Power

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Last update 11/08/2019 Existing rights that give the current ability to direct the relevant activities. “Power” is defined as the investor having such rights that (s)he can direct the activities that affect the investee’s returns. In the simplest cases, such power arises from the voting rights granted by shares. A parent company exerts power when it … Read more