Consolidation of a foreign operation

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Last update 22/12/2019 Consolidation of a foreign operation – In the past all kinds of different methods of translating foreign currency financial statements existed, called current rate method and temporal rate method. IAS 21.39 defines the current (very practical) approach to translation of foreign currency financial statements for consolidation in the presentation currency as follows: … Read more

Fair value

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Last update 06/01/2020 IAS 32, IAS 36, IFRS 1, IFRS 9, IFRS 13 Definition Fair value:  Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. IFRS 16 Definition Fair value: For the purpose of applying the … Read more

Consolidation in summary

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Last update 23/12/2019 Consolidation in summary – Consolidated financial statements present the financial position and results of a group (a parent and its subsidiaries) as those of a single economic entity. The key steps to achieve this are: currency conversion: assets, liabilities, equity, income, expenses and cash flow need to be translated into the reporting … Read more

Factoring and reverse factoring

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Last update 10/12/2019 Factoring and reverse factoring – There is no specific guidance in IFRS on the classification of cash flows from traditional factoring or reverse factoring arrangements. Topics hide Introduction Cash flow presentation Factoring and reverse factoring Introduction Traditional factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party … Read more

Consolidation Assess control over an investment

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Last update 20/11/2019 IFRS 10 Consolidation Assess control over an investment is the key to consolidate a investee entity or not. Whether a subsidiary or a consolidated structured entity. Topics hide Voting rights in subsidiaries Contractual relations for consolidated structured entities Identifying relevant activities Evaluating power Assessing returns Link between power and returns Potential voting … Read more

Extraordinary items

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Last update 25/11/2019 Previous guidance allowed/required items to be classified as extraordinary when they were deemed both unusual and infrequent. Events or transactions meeting the criteria for classification as extraordinary were required to be segregated from the results of ordinary operations (Operational income or income from operations) and shown separately in the income statement, net … Read more

Consolidation and same reporting date

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Last update 23/12/2019 Consolidation and same reporting date – The basic requirement in IFRS 10 is that each group entity’s financial statements are drawn up to the same reporting date for consolidation purposes. Where reporting dates differ, additional financial information is prepared for consolidation purposes, unless impractical. [IFRS 10 B92]. The financial statements of the … Read more

Expected Credit Losses

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Last update 20/11/2019 Expected Credit Losses IFRS 13 definition: The weighted average of credit losses with the respective risks of a default occurring as the weights. Under the “expected credit loss” model, an entity calculates the allowance for credit losses by considering on a discounted basis the cash shortfalls it would incur in various default scenarios … Read more

Consolidated subsidiaries joint operations and other entities Investments in joint ventures associates and structured entities

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Last update 26/11/2019 Consolidated subsidiaries joint operations and other entities Investments in joint ventures associates and structured entities – want a quick understanding of all control nuances, read this!  IFRS 12 provides one comprehensive disclosure standard for equity instruments in Subsidiaries, Joint arrangements (Joint operations and Joint ventures), Associates and Structured entities. Hence, management needs … Read more

Expected cash flow

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Last update 05/01/2020 IFRS 13 Definition of expected cash flow: The probability-weighted average (ie mean of the distribution) of possible future cash flows. Context Topics hide Estimated cash flow and expected cash flow Expected cash flow Estimated cash flow and expected cash flow In the past, accounting pronouncements have used the terms estimated cash flow … Read more