INTERNATIONAL FINANCIAL REPORTING

STANDARDS (CHUẨN MỰC BÁO CÁO TÀI

CHÍNH QUỐC TẾ)

Copyright: Faculty of Accounting- Academy of Finance 1

INTERNATIONAL FINANCIAL REPORTING
STANDARDS (CHUẨN MỰC BÁO CÁO TÀI
CHÍNH QUỐC TẾ)

Copyright: Faculty of Accounting- Academy of Finance 2

 INTRODUCTION

1. Objectives:

üProvide the learner know how to understand IFRSs

üApplying IFRSs in preparing FS.

Copyright: Faculty of Accounting- Academy of Finance 3

 INTRODUCTION
2. Learning materials:

IFRS.ORG
IASPLUS.COM
ACCA F7 STUDY TEXT, F7 REVISION KIT
BIG 4 WEBSITES…
https://www.cpdbox.com/ifrs/
https://tuonthi.com
https://opentuition.com

Copyright: Faculty of Accounting- Academy of Finance 4

CONCEPTUAL FRAMEWORK
 STANDARDS IN ISSUE

IFRS 1 First-time Adoption of International Financial Reporting Standar

IFRS 2 Share-based Payment
IFRS 3 Business Combinations
IFRS 4 Insurance Contracts**
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
IFRS 6 Exploration for and Evaluation of Mineral Resources
IFRS 7 Financial Instruments: Disclosures
IFRS 8 Operating Segments
IFRS 9 Financial Instruments
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IFRS 14 Regulatory Deferral Accounts
IFRS 15 Revenue from Contracts with Customers
 STANDARDS IN ISSUE

IFRS 16 Leases
IFRS 17 Insurance Contracts
IFRS for SMEs
IAS 1 Presentation of Financial Statements
IAS 2 Inventories
IAS 7 Statement of Cash Flows
IAS 8 Accounting Policies, Changes in Accounting Estimates
IAS 10 and Errors Events After the Reporting Period
IAS 12 Income Taxes
IAS 16 Property, Plant and
IAS 19 Equipment Employee
IAS 20 Benefits
IAS 21 Accounting for Government Grants and Disclosure of Governme
IAS 23 The Effects of Changes in Foreign Exchange Rates
Borrowing Costs
 STANDARDS IN ISSUE

IAS 24 Related Party Disclosures

IAS 26 Accounting and Reporting by Retirement
IAS 27 Benefit Plans Separate Financial Statements
IAS 28 (revised 2011)
IAS 29 Investments in Associates and Joint Ventures
IAS 32 (revised 2011) Financial Reporting in
IAS 33 Hyperinflationary Economies Financial
IAS 34 Instruments: Presentation
IAS 36 Earnings Per Share
IAS 37 Interim Financial Reporting
IAS 38 Impairment of Assets
IAS 40 Provisions, Contingent Liabilities and Contingent
IAS 41 Assets Intangible Assets
Investment Property
Agriculture
Conceptual framework

Purpose

Development of future IFRSs

Promoting harmonization
Assist national standard-setting bodies
Preparers of financial statements
Assist auditors
Assist in interpreting the information in F/s
Why did we revise the Conceptual
Framework?

Previous version of Conceptual Framework

useful but some improvements needed

incomplete out of date unclear

Main improvements

Filled in the gaps, for

example, concepts on Updated, for Clarified, for example,
measurement and example, the the roles of
presentation and definitions of an asset stewardship and
disclosure, including and a liability and prudence in financial
guidance on the use recognition criteria reporting
of profit or loss and
OCI
 Conceptual framework

Framework deals with: The objective of financial statements

The Conceptual

The qualitative characteristics that determine

the usefulness of information in financial
statements.
The definition, recognition and measurement
of the elements from which financial
statements are constructed

Concepts of capital and capital maintenance

 Objective of financial reporting
Provide financial information useful to users in making
decisions

Users’ decisions involve decisions about

buying, holding or providing or settling voting and influencing
selling loans management

To make these decisions, users assess

prospects for future net cash management’s stewardship of the
inflows to the entity entity’s economic resources

To make both these assessments, users need information

about both
economic resources, claims and how efficiently and effectively
changes in those resources and management has discharged its
claims responsibilities
 Qualitative characteristics
Fundamental qualitative characteristics

Relevance Faithful representation

• Information is relevant if it is
• Information must faithfully
capable of making a difference represent the substance of
to the decisions made by
what it purports to represent
users
Enhancing characteristics

Comparability Verifiability Timeliness Understandability

Cost constraint
 Elements of financial statements—
assets, liabilities and equity
• Relate to financial position
A present economic resource controlled by the entity as
a result of past events
Asset • An economic resource is a right that has the
potential to produce economic benefits

A present obligation of the entity to transfer an

economic resource as a result of past events
Liability • An obligation is a duty or responsibility that the
entity has no practical ability to avoid

The residual interest in the assets of the entity after

deducting all its liabilities
Equity • Financial Instruments with Characteristics of Equity
research project further explores how to distinguish
liabilities from equity
 Elements of financial statements—
income and expenses
• Relate to financial performance
Increases in assets, or decreases in liabilities,
Income that result in increases in equity, other than
those relating to contributions from holders of
equity claims

Decreases in assets, or increases in liabilities,

Expenses that result in decreases in equity, other than
those relating to distributions to holders of
equity claims

Information about income and expenses is just as important

as information about assets and liabilities
Recognition

Recognition criteria

Refer to the qualitative

Meet the definition of an
characteristics of useful
element
information
Recognition

Recognition criteria

Relevance Faithful representation

Whether recognition of an item Whether recognition of an item
results in relevant information may results in a faithful representation
be affected by, for example: may be affected by, for example:
• low probability of a flow of • measurement uncertainty
economic benefits • recognition inconsistency
• existence uncertainty • presentation and disclosure of
resulting income, expenses and
changes in equity

Cost constraint
 Conceptual framework (OLD)
Item Recognised in When
Asset The statement of It is probable that the future economic benefits
financial position will flow to the entity and the asset has a cost or
value that can be measured reliably
Liability The statement of It is probable that an outflow of resources
financial position embodying economic benefits will result from the
settlement of a present obligation and the
amount at which the settlement will take place
can be measured reliably
Income The statement of An increase in future economic benefits related
profit or loss and to an increase in an asset or a decrease of a
other comprehensive liability has arisen that can be measured reliably
income
Expenses The statement of A decrease in future economic benefits related to
profit or loss and a decrease in an asset or an increase of a
other comprehensive liability has arisen that can be measured reliably
income
Assets? Liabilities??
• Saman Co has purchased a patent for $ 50,000. This
patent gives the Saman Co the sole authority to use the
particular process which in turn will save $ 5,000 per
year for the next five years.

• Ratnayake Automobile (Pvt) Limited paid Mr. Dump $

10,000 to set up a car repair shop, on condition that
priority treatment is given to cars from the Company’s
fleet.

• ABC Electrics provides a warranty with every eclectic

equipment's sold.
Assets? Liabilities??

Saman Co : Past Event – Yes

Right to produce Economic Benefits – Yes
Ø Asset – Yes
Ratnayake: Past Event – Yes
Right to produce Economic Benefits – No. as no control
over the car repair shop and difficult to argue
Ø Asset – No
ABC Electrics: Present Obligation – Yes
Practical ability to avoid – No
Ø Liability -Yes
Which of the following would be classified
as a liability?
• A. Dexter's business manufactures a product under
licence. In 12 months' time the licence expires and
Dexter will have to pay $50,000 for it to be renewed.
• B. Reckless purchased an investment 9 months ago for
$120,000. The market for these investments has now
fallen and Reckless's investment is valued at $90,000.
• C. Carter has estimated the tax charge on its profits for
the year just ended as $165,000.
• D. Expansion is planning to invest in new machinery
and has been quoted a price of $570,000.
 Measurement
Historical cost Current value
measurement bases measurement bases
• include amortised cost • include fair value, value in use
(A), fulfilment value (L) and
current cost
Selecting a measurement basis

Relevance Faithful representation

• characteristics of the asset or liability • measurement inconsistency
• contribution to future cash flows • measurement uncertainty

Information in both the statement of financial position and the

statement(s) of financial performance

Enhancing qualitative characteristics and cost constraint

 Measurement
Fair value continues to be defined as the price in an orderly
transaction between market participants.

Value in use (or fulfilment value) is defined as the present

value of the cash flows that an entity expects to derive from
the continuing use of an asset and its ultimate disposal.

Current cost is different from fair value and value in use, as

current cost is an entry value. the value in which the entity
would acquire the asset (or incur the liability) at current
market prices, whereas fair value and value in use are exit
values, focusing on the values which will be gained from the
item
Example: A machine was purchased on 1 Jan X8 for $3m.
Historical cost is: $__________
It has useful life of 10 years and under the historical cost
convention, it will be carried at original cost less
accumulated depreciation. So in the FSs at 31 Dec X9, it
will be carried at: $___________
The two-year-old machine like this one may currently be
changing hands for $2.5m. This is called ________ is
$_______

If the machine will be expected to generate $500,000 per

annum for the remaining 8 years of its life and if the
company’s cost of capital is 10%. The present value is
$___________ (cumulative present of $1 per annum for 8
years discounted at 10%)
 Profit or loss and OCI

Statement of • Primary source of information about

profit or loss performance
• Default location for income and expenses

Other • Exceptional circumstances

• Only changes in current values of assets
comprehensive and liabilities
income • In principle, OCI items are recycled

Classification into profit or loss and OCI and recycling

Relevance Faithful representation

Only the Board can take decisions on OCI and recycling

 Conceptual framework
Capital maintenance

Capital maintenance is a theoretical concept which tries to

ensure that excessive dividends are not paid in times of
changing prices.

• Physical capital maintenance (PCM),

• Financial capital maintenance (FCM).
 Conceptual framework
Capital maintenance
• Financial capital maintenance (FCM).

Profit is earned only if the financial amount of net assets

at the end of the period exceeds the financial amount of
net assets at the beginning of the period, after excluding
any distributions to, and contributions from owners,
during the period.

• Physical capital maintenance (PCM)

Profit is earned only if the physical productive capacity of

the entity at the end of the period exceeds the physical
productive capacity at the beginning of the period