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Natural disasters Asset impairments

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Natural disasters Asset impairments contains an explanation of the accounting considerations a reporting entity faces when operations are affected by a natural disaster. A combination of impairments of assets and insurance coverage for property damage and business interruption.

Impairment of assets

If an entity determines that the events resulting from a natural disaster have triggered impairment indicators, an impairment test must be performed in accordance with IAS 36 Impairment of Assets for the respective asset(s) and/or cash-generating unit(s). Indicators of impairment as a result of a natural disaster could include: Natural disasters – Asset impairments

  • Observable indications that the asset’s value has declined during the period significantly more than what would be expected as a result of
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Natural disasters Insurance recoveries and reimbursements

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Natural disasters Insurance recoveries and reimbursements discusses the IFRS accounting between several standards and the reporting for a natural disaster and the insurances involved.

An entity may experience a loss related to a natural disaster either through the impairment of an asset or the incurrence of a liability. For example, as a result of damage from a natural disaster, an entity may determine that an item of property, plant and equipment is impaired in accordance with IAS 36 Impairment of assets or that a receivable from a customer is impaired in accordance with IFRS 9 Financial instruments (or IAS 39, if still applicable).

Alternatively, an entity may incur costs to repair a damaged facility or determine that … Read more

Natural disasters Hedge accounting

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Natural disasters Hedge accounting, how to deal with this combinations, contract go on but the business dies….. Here is how to report such issues under IFRS.

The natural disaster and potential subsequent events can disrupt many business transactions that may be postponed or cancelled. For example, entities may have been forecasting purchases of local goods or sales of their goods to local entities. Natural disasters Hedge accounting

Prior to the disaster, many such transactions may have constituted ‘highly probable’ hedged transactions in cash flow hedges under IFRS 9 Financial instruments (or IAS 39, if still applicable). However, purchases and sales that were considered highly probable a few weeks prior to the natural disaster, may no longer be … Read more

Natural disasters Restructuring

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When your business is just surviving, Natural disasters Restructuring does not help, but the accounting and financial reporting is somewhat explained here. As a result of a natural disaster, an entity may decide to sell or abandon certain assets or execute a restructuring plan. A restructuring is a programme that is planned and controlled by management, and materially changes either the scope of a business undertaken by an entity or the manner in which business is conducted. IAS 37 Provisions, Contingent Liabilities and Contingent Assets addresses the accounting for costs associated with exit or disposal activities. Exit activities may include: Natural disasters RestructuringNatural disasters Restructuring

  • Sale or termination of a line of business Natural disasters Restructuring
  • Closure of a
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Natural disasters Decommissioning obligations

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Natural disasters Decommissioning obligations arise when an entity is required to dismantle or remove an asset at the end of its useful life and to restore the site on which it has been located, for example, when an oil rig or nuclear power station reaches the end of its economic life. Natural disasters Decommissioning obligations

Natural disasters Decommissioning obligations

Rather than allowing an entity to build up a provision for the required costs over the life of the facility, IAS 37 Provisions, Contingent Liabilities and Contingent Assets requires that the liability is recognised as soon as the obligation arises, which will normally be at commencement of operations. Similarly, IAS 16 Property, plant and equipment requires the initial cost of an item … Read more

Natural disasters Miscellaneous considerations

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Natural disasters Miscellaneous considerations deals with several special IFRS accounting issues after a natural disaster.

Future operating losses Natural disasters Miscellaneous considerations

Entities may incur other losses directly or indirectly related to a natural disaster. An entity may anticipate having future operating losses for a period of time after a natural disaster. For example, an entity may have repair costs, lost revenue due to plant closures or losses due to an overall decline in the economy. Additional costs might be incurred in renting alternative production facilities, providing transport or accommodation for employees or outsourcing business functions.

Future operating losses and costs do not meet the definition of a liability (because they do not arise from a present Read more

Natural disasters Classification of income and expense

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Natural disasters Classification of income and expense deals with how important these (insurance) income and (impairment) expense items are in the financial statement after such disaster.

IAS 1 Presentation of Financial Statements requires that when items of income or expense (a term covering both profit or loss and other comprehensive income) are material, their nature and amount are disclosed separately. The standard provides examples of circumstances that would give rise to the separate disclosure of items of income and expense, which include:

  1. Write-downs of inventories to net realisable value, or of property, plant and equipment to recoverable amount, as well as reversals of such write-downsNatural disasters Classification of income and expense
  2. Restructuring of the activities of an entity and reversals of any provisions
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Natural disasters Financial impact overview

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Natural disasters Financial impact overview comprises a discussion of items to quantify in table in combination with qualifications to provide a clear as possible picture (without photoshopping the disaster off course). As communities begin the process of recovering from the tragedy of a natural disaster, entities operating in those locations, or providing goods and services in them, raise questions about the related financial reporting effects. This narrative provides a reminder of the existing accounting requirements that should be considered when addressing the financial effects of natural disasters, including:

  • Asset impairments– If an entity determines that the events resulting from a natural disaster have triggered impairment indicators, an impairment test must be performed in accordance with IAS
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