Intr Introductor oductory Pr Prog ogramme on mme on IFRS f IFRS for Y r Young oung Members Member Organised by Institute of Chartered Accountants of India Presented by CA Manish C. Iyer & CA Shilpi Hisaria Technical Directorate, Institute of Chartered Accountants of India CA Manish C. Iyer & CA Shilpi Hisaria 38 38 manish.iyer@icai.in & shilpi.hisaria@icai.in
Documents in this module Documents in this module • IAS 1 • IAS 7 • IAS 8 IAS 8 CA Manish C. Iyer & CA Shilpi Hisaria 39 manish.iyer@icai.in & shilpi.hisaria@icai.in
IAS 1 – Presentation of Financial Statements • Fair Presentation and Compliance with IFRS p • Going Concern • Complete set of Financial Statements • Comparative Information • Consistency of Presentation • SFP Presentation • SPLOCI Presentation • SOCIE Presentation SOCIE P i • Notes Presentation CA Manish C. Iyer & CA Shilpi Hisaria 40 manish.iyer@icai.in & shilpi.hisaria@icai.in
Fair Presentation Fair Presentation • Application of International Financial Reporting pp p g Standards presumed to result in Fair Presentation • Management to make explicit and unreserved statement of compliance with IFRSs in the notes statement of compliance with IFRSs in the notes – Requirement of all IFRSs to be complied with • Departure from IFRSs possible Departure from IFRSs possible – Rarely – Other entities in similar circumstances also depart – Departure to be disclosed in the notes • Disclosure cannot rectify incorrect accounting policies policies CA Manish C. Iyer & CA Shilpi Hisaria 41 manish.iyer@icai.in & shilpi.hisaria@icai.in
Going Concern Going Concern • Mgmt. to assess going concern at each BS Date • Not a Going Concern only on – Intention to liquidate – Intention to cease trading Intention to cease trading – Mgmt. has no realistic alternative but to close • Uncertainties that may affect going concern assumption to be disclosed b d l d • Basis of FS to be changed when not a going concern – Fact of not being a going concern to be disclosed Fact of not being a going concern to be disclosed – Basis to be disclosed – Reasons for not being a going concern to be disclosed CA Manish C. Iyer & CA Shilpi Hisaria 42 manish.iyer@icai.in & shilpi.hisaria@icai.in
Complete set of Financial Statements Complete set of Financial Statements • Statement of Financial Position (SFP) State e t o a c a os t o (S ) • Statement of Profit or Loss and Other Comprehensive Income p • Statement of Cash Flows • Statement of Changes in Equity g q y • Notes • SFP at the beginning of the comparative period g g p p – On change in accounting policy, correction of error and reclassification CA Manish C. Iyer & CA Shilpi Hisaria 43 manish.iyer@icai.in & shilpi.hisaria@icai.in
Comparative Information Comparative Information • Comparative information to be disclosed for Comparative information to be disclosed for all amounts reported • Comparative information for previous period • Comparative information for previous period only is to be disclosed • Comparative information to be given also in C i i f i b i l i notes CA Manish C. Iyer & CA Shilpi Hisaria 44 manish.iyer@icai.in & shilpi.hisaria@icai.in
Consistency of Presentation y • Presentation and classification of items in FS to be retained be retained • Conditions for change • Each material class of similar items to be presented separately • Assets and liabilities and income and expenses to be offset only if required or permitted by a be offset only if required or permitted by a Standard or an Interpretation • Reclassify comparative amount on change in Reclassify comparative amount on change in presentation • Reclassification not necessary, if impracticable CA Manish C. Iyer & CA Shilpi Hisaria 45 manish.iyer@icai.in & shilpi.hisaria@icai.in
Statement of Financial Position Statement of Financial Position • Assets and Liabilities to be classified Assets and Liabilities to be classified – Current / Non ‐ Current – Liquidity Liquidity • Further sub ‐ classifications may be in notes CA Manish C. Iyer & CA Shilpi Hisaria 46 manish.iyer@icai.in & shilpi.hisaria@icai.in
Current Asset Current Asset • It is expected to be realised in or is intended for p sale or consumption in the entity’s normal operating cycle • It is held primarily for the purpose of being • It is held primarily for the purpose of being traded • It is expected to be realised within twelve months It is expected to be realised within twelve months after the Balance Sheet Date • It is a cash or a cash equivalent unless it is restricted from being exchanged or used to settle i d f b i h d d l a liability for at least twelve months after the balance sheet date CA Manish C. Iyer & CA Shilpi Hisaria 47 manish.iyer@icai.in & shilpi.hisaria@icai.in
Current Liability Current Liability • It is expected to be settled in the entity’s normal It is expected to be settled in the entity s normal operating cycle • It is held primarily for the purpose of being It is held primarily for the purpose of being traded • It is due to be settled within twelve months after • It is due to be settled within twelve months after the balance sheet date • The entity does not have an unconditional right • The entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date twelve months after the balance sheet date CA Manish C. Iyer & CA Shilpi Hisaria 48 manish.iyer@icai.in & shilpi.hisaria@icai.in
Issues Issues • The duration of Jhingli Ltd.’s normal operating cycle is 3 g p g y months. It has agreed with some customer to accept payment in installments in 15 months. Jhingli Ltd. has classified such receivable as Other Non Current Assets classified such receivable as Other Non ‐ Current Assets. Whether the classification is proper? • The duration of Jhingli Ltd.’s normal operating cycle is g p g y 24 months. It has given loans to employees. Some of them are realisable after 13 months. Jhingli Ltd. classified the loans to employees as current assets classified the loans to employees as current assets. Whether the classification is proper? CA Manish C. Iyer & CA Shilpi Hisaria 49 manish.iyer@icai.in & shilpi.hisaria@icai.in
Issues Issues • A company has excess finished goods inventory p y g y that it does not expect to realize within the company’s operating cycle of fifteen months. How will such finished goods be classified? How will such finished goods be classified? • A company has sold 10,000 tonnes of steel to its customer. The sale contract provides for a normal credit period of three months. The company’s operating cycle is six months. However, the company does not expect to receive the payment company does not expect to receive the payment within 12 months from the reporting date. How should the company classify such receivable? CA Manish C. Iyer & CA Shilpi Hisaria 50 manish.iyer@icai.in & shilpi.hisaria@icai.in
Issues Issues • Company X has taken five year loan. The loan contains debt covenants, e.g., filing of quarterly contains debt covenants, e.g., filing of quarterly information, failing which the bank can recall the loan and demand repayment thereof. The company has not filed such information in the company has not filed such information in the last quarter; as a result of which the bank has the right to recall the loan. However, based on past experience and / or based on the discussions / b h with the bank, the management believes the default is minor and the bank will not demand default is minor and the bank will not demand repayment of loan. The management of Company X has classified the loan as non ‐ current. Whether the classification is proper? the classification is proper? CA Manish C. Iyer & CA Shilpi Hisaria 51 manish.iyer@icai.in & shilpi.hisaria@icai.in
ABC Group ‐ Statement of Financial Position (in thousands of currency units) 31 December 2014 31 December 2014 31 December 2013 31 December 2013 ASSETS Non ‐ Currenct Assets Property Plant and Equipment Property, Plant and Equipment 3,50,700 3 50 700 3,60,020 3 60 020 Goodwill 80,800 91,200 Other Intangible Assets 2,27,470 2,27,470 Investments in Associates 1,00,150 1,10,770 Investments in equity instruments 1,42,500 1,56,000 Total Non ‐ Current Assets 9,01,620 9,45,460 Current Assets Inventories 1,35,230 1,32,500 Trade Receivables 91,600 1,10,800 Other Current Assets 25,650 12,540 Cash and cash equivalents 3,12,400 3,22,900 Total Current Assets Total Current Assets 5 64 880 5,64,880 5 78 740 5,78,740 Total Assets 14,66,500 15,24,200 CA Manish C. Iyer & CA Shilpi Hisaria 52 manish.iyer@icai.in & shilpi.hisaria@icai.in
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