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Change in accounting estimate

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Change in accounting estimate – An adjustment of the carrying amount of an asset or a liability, or the amount of the periodic consumption of an asset, that results from the assessment of the present status of, and expected future benefits and obligations associated with, assets and liabilities. Changes in accounting estimates result from new information or new developments and, accordingly, are not correction of errors.

Therefore no retrospective restatement of financial statements is needed. The adjustment is recorded in profit or loss in the period it was re-estimated/re-calculated/re-validated.

 

Changes in accounting policies | Correction of errorsChanges in estimates

 

Change in accounting estimate (IAS 8 32 – 39) is an accounting rule which is Read more

The way to IFRS 9 Financial Instruments

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This is the way to IFRS 9 Financial Instruments, introducing the why? for this new IFRS standard. In July 2014 the International Accounting Standards Board (IASB) published the 4th and final version of IFRS 9 Financial Instruments.

The way to IFRS 9 Financial Instruments

This was the conclusion of a major project started in 2002 as part of the Norwalk Agreement (WIKI) between the IASB and US Financial Accounting Standards Board (FASB) as a long term reform of financial instrument accounting.

The project had been divided into three phases in order to allow a step by step approach. Once a phase was completed, the corresponding chapters were created in IFRS 9 and withdrawn from IAS … Read more

Refinancing of bank debt

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Refinancing of bank debt is a case of different intercompany financing arrangements at arm’s length investment terms and at (more of) intercompany investment terms or at (third party) bank finance terms. As a result it includes quite a lot of special explanations of issues faced in such less standard financing terms.

Assume Parent A advances a €200k unsecured loan to Subsidiary B on 1 January 2018. The loan is interest-free and is repayable in 5 years. At the same time, Bank X advances a €800k secured loan to Subsidiary B. The loan carries market rate of interest of 5% and is repayable in 5 years.

At initial recognition Parent A concluded that the loan to Subsidiary B Read more

Accounting treatment acquisition of a business or assets

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Accounting treatment acquisition of a business or asset(s)Accounting treatment acquisition of a business or assets – An entity has to determine whether a transaction or other event is a business combination, which requires that the assets acquired and liabilities assumed constitute a business. If the assets acquired are not a business, the reporting entity shall account for the transaction or other event as an asset acquisition.

Whether the simplified (optional) concentration tests is applied or a detailed assessment applying the normal requirements in IFRS 3 is applied, in IFRS 3 (simplified in May 2019) the result of the assessment of what was acquired is the acquirer obtained control over a business (business combination or business acquisition) or a (group of similar) identifiable asset(s) (asset Read more

IAS 34 Interim financial statements

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IAS 34 Interim financial statements provide all there is to know for producing Interim financial statements, what, where, when and what is in them.

Objective

IAS 34 prescribes the guidelines for an entity regarding the preparation of interim financial statements by providing information about the minimum contents of interim financial reports along with the recognition and measurement principles for such financial reports. These interim financial reports will provide the most recent activities, circumstances and financial affairs of the reporting entity

Scope

IAS 34 does not define, which entity is required to publish the interim financial reports, the time period after the end of interim period within which these financial reports should be published and how frequently these Read more

Government grants and assistance

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The receipt of government grants and assistance by an entity may be significant for the preparation of the financial statements for two reasons. Firstly, if resources Government grants and assistancehave been transferred, an appropriate method of accounting for the transfer must be found. Secondly, it is desirable to give an indication of the extent to which the entity has benefited from such assistance during the reporting period. This facilitates comparison of an entity’s financial statements with those of prior periods and with those of other entities.

Scope/Objective

IAS 20 is applied in accounting for, and in the disclosure of, government grants and in the disclosure of other forms of government assistance.

Government grants are sometimes called by other names such … Read more

Accounting Policies to First IFRS Financial statements

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Accounting Policies to First IFRS Financial statements – An entity must use the same accounting policies in its opening IFRS statement of financial position and throughout all periods presented in its first IFRS financial statements. Those accounting policies must comply with each IFRSs effective at the end of its first IFRS reporting period, unless there is a mandatory exception to retrospective application or an optional exemption from the requirements of IFRSs.

[IFRS 1, paras 7 – 9]Accounting Policies to First IFRS Financial statements

Note that:

  • An entity may apply a new IFRS that is not yet mandatory if that IFRSs permits early application.
  • The transitional provisions in IFRSs do not apply to a first-time adopter’s transition to IFRSs.

Mandatory Exceptions to Retrospective Application Read more

Obligation

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Obligations may be legally enforceable as a consequence of a binding contract or statutory requirement. This is normally the case, for example, with amounts payable for goods and services received. However, obligations do not have to be legally binding.

If, for example, an entity decides as a matter of policy to rectify faults in its products even when these become apparent after the warranty period has expired, the costs that are expected to be incurred in respect of goods already sold are liabilities.

Obligations do not include future commitments.

Some liabilities can be measured only by using a substantial degree of estimation. Some entities describe these liabilities as provisions. In some countries, such provisions are not regarded … Read more

Revenue from maintenance services

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Revenue from maintenance services – Entities may provide maintenance services such as telephone support, bug fixes and unspecified upgrades or enhancements on software-enabled products.

Under earlier IFRS, these maintenance services were often treated as a single component (combined with other goods or services). These services are commonly referred to as post-contract support (PCS), and are not unique services contemplated or defined in IFRS 15. Revenue from maintenance services

As a result, entities must evaluate whether the individual services that comprise what is considered PCS under US GAAP are a separate performance obligations. For example, a technology entity may conclude that the promise to provide unspecified future upgrades and enhancements is a promised good or service in the … Read more