Promises to transfer distinct goods or non-insurance services

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Last update 20/12/2019 Promises to transfer distinct goods or non-insurance services – In a final step, after separating non-closely related embedded derivatives and distinct investment components (see ‘Separation of Insurance Contracts‘, an entity should separate from the host insurance contract any promise to transfer distinct goods or non-insurance services to a policyholder. A good or … Read more

Examples hold assets and collect cash

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

Probability-weighted mean

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Last update 18/12/2019 What is a weighted mean? Probability-weighted mean A weighted mean is a kind of average. Instead of each data point contributing equally to the final mean, some data points contribute more “weight” than others. If all the weights are equal, then the weighted mean equals the arithmetic mean (the regular “average” you’re … Read more

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