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Last update 11/12/2019 The fair value hedge is one of three hedges defined in IFRS 9, the others are the cash flow hedge and the hedge of a net investment. Hedge accounting can bring a number of advantages over traditional accounting methods. The core benefit is that by addressing the timings mismatch associated with standard … Read more
Last update 23/12/2019 Consolidation of foreign operations – The financial statements of foreign subsidiaries must be translated into the group’s presentation currency (which is often, but not always, the parent’s functional currency). The relevant requirements are included in IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’. Translation of financial statements Consolidation of foreign … Read more
Last update 13/12/2019 [IFRS 17 Insurance contracts – Fair value approach] An entity can elect to use the fair value approach if the full retrospective approach is impracticable, and it should use the fair value approach if the modified retrospective approach is impracticable. Applying the fair value approach: The contractual service margin is determined as … Read more
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
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
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
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
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
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
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