UNIT-3

ACCOUNTING FOR
ASSETS &
LIABILITIES
 I A S 1 6 - P R O P E RT Y, P L A N T A N D E Q U I P M E N T

Overview
IAS 16 is to prescribe the accounting treatment for
property, plant, and equipment. The principal issues are
the recognition of assets, the determination of their
carrying amounts, and the depreciation charges and
impairment losses to be recognized in relation to them.
 Recognition and measurement of PP&E

IAS 16 states that the cost of an item of

property, plant and equipment shall be recognized
as an asset only if, :
It is probable that future economic benefits
associated with the item will flow to the entity; and
The cost of the item can be measured reliably.
Subsequent Measurement

An entity may choose 2 accounting models for

its property plant and equipment:
1. Cost model: An entity shall carry an asset at its cost
less any accumulated depreciation and any
accumulated impairment losses.
2. Revaluation model :An entity shall carry an asset at
a revalued amount.
Depreciation

Depreciation is defined as the systematic allocation

of the depreciable amount of an asset over its useful life.

Basics of depreciation:

1. Depreciable amount

2. Depreciation period

3. Depreciation method
Disclosure
For each class of property, plant, and equipment, disclose:
[IAS 16.73]
Basis for measuring carrying amount
Depreciation method(s) used
Useful lives or depreciation rates
Gross carrying amount and accumulated depreciation and
impairment losses.
 I A S - 3 8 I N TA N G I B L E A S S E TS
Overview

The purpose of this Standard is to prescribe the

recognition and measurement criteria for in­tangible
assets that are not covered by other Standards.
Categories of IP
Intellectual property (“IP”) in general
3 broad categories:
• Research and development
• Patents, copyrights, brand names, trademarks,
franchises, concessions, operating right or right of
use
• Computer software (developed internally or acquired
from a third party)
 The Standard does not apply to those intangible
assets covered by other Standards, such as
Intangible assets held for sale in the ordinary course of business
(IAS 2)
Deferred tax assets (IAS 12)
Leases within the scope of IAS 17
Assets arising from employee benefit plans (IAS 19)
Financial assets covered by IAS 39, IAS 27, IAS 28, or IAS 31
Goodwill acquired in a business combination (IFRS 3)
Recognition
Intangible assets are recognised if it is probable that the future
economic benefits that are attributable to the asset will flow to the
entity.

There are specific recognition criteria for internally-generated

intangible assets.

Internally-generated goodwill, brands, mastheads,

publishing titles, customer lists, start-up costs, training costs,
advertising costs and relocation costs are never recognised as an
intangible assets.
Recognition of an Expenses

The Standard requires that all expenditure on

an intangible item be written off as an expense unless
it meets the recognition criteria or it is acquired as part
of a business combination and cannot be separately
identified, in which case it is subsumed as part of
goodwill and treated in accordance with IFRS 3.
Examples include:
Expenditure on start-up activities (start-up costs) or on
opening a new facility or business (preoperative expenses)
Expenditure on training.
Expenditure on advertising and promotional activities.
Expenditure on relocating or reorganizing part or all of an
entity.
ACCOUNTING TREATMENT:
Subsequently, IAS 38 allows a choice of cost or revaluation
model.
Cost model – carried at initial cost less accumulated amortization
and impairment losses.
Revaluation model – carried at revalued amount, based on fair
value, less subsequent amortization and impairment losses. The asset
value should be reviewed regularly so that the carrying value in the
statement of financial position should never be materially different
from its fair value.
 There are a number of events which give rise to potential
intangible assets.
1. A purchased intangible asset. This could include a Trade mark,
patent, license, copyrights. The price paid by an entity to acquire an
intangible asset, such as a patent, usually reflects the expectations of
future economic benefit to be generated by the asset. (for.ex.windows-
license)
This usually means that the cost of the intangible asset is
automatically reliably measured as what was paid for it and hence can
be recognized.
2. Internally generated. For example brands,
goodwill, publishing titles or customer lists. Such
internally generated items are not recognised as they
cannot be measured reliably and are usually not
capable of separation from the business.
For example, a brand is usually not sold unless the
whole business is sold.
DISCLOSURES
The Standard requires these disclosures for each class of intangible
asset, distinguishing between internally generated and other assets:
Whether useful lives are indefinite or finite and, if finite, the useful lives
or amortization rates used
The amortization methods used

The gross carrying amount and accumulated amortization and

impairment losses at the beginning and end of the period
The line items in the income statement in which amortization is included

Additions, separately showing those internally generated, those acquired

separately, and those acquired through business combinations.
 I A S 4 0 : I N V E S T M E N T P R O P E RT Y
Overview

Prescribes the accounting when property is held

to earn rentals or for capital appreciation rather than
being occupied by the owner for the production or
supply of goods or services or for administrative
purposes.
Investment property

An investment property is land or buildings (or part

thereof) or both held (whether by the owner or by a lessee under
a finance lease) to earn rentals or for capital appreciation or
both.

IAS 40 does not apply to owner-occupied property,

property that is being constructed or developed on behalf of
third parties, property held for sale in the ordinary course of
business or property that is leased to another entity under a
finance lease.
Initial measurement

An investment property is measured

initially at cost. Transaction costs are included in
the initial measurement.
SUBSEQUENT MEASUREMENT
An entity chooses either the fair value model or
the cost model after initial recognition. The
chosen measurement model is applied to all of the
entity’s investment property.
Change from one model to the other is
permitted if it will result in a more appropriate
presentation.
Fair value model

Investment property is measured at fair value and

changes in fair value are recognized in profit or loss.
Cost model

Investment property is measured at depreciated cost

less any accumulated impairment losses unless it is
classified as a non-current asset held for sale under IFRS 5.
The fair value of the investment property must be
disclosed.
Disclosures

IAS 40 Investment property prescribes a lot of

disclosures to be presented in the financial statements, including
1. The description of selected model,
2. How the fair value was derived,
3. What the classification criteria for investment property
are, and
4. Movements in investment property during the
reporting period.
 I A S - 3 6 - I M PA I R M E N T O F A S S E T S

Overview

Sets out requirements to ensure that assets

are carried at no more than their recoverable amount
and to prescribe how recoverable amount and an
impairment loss or its reversal is calculated.
Identifying impairments

At the end of each reporting period, assets are

reviewed to look for any indication that they may be

impaired.
Recognition
 An impairment loss is recognised when the carrying
amount of an asset exceeds its recoverable amount.
An impairment loss is recognised in profit or loss
for assets carried at cost and treated as a revaluation
decrease for assets carried at the revalued amount.
Reversal of prior years’ impairment losses is
required in some cases, but it is prohibited for goodwill.
 Recognize and measurement of an impairment loss
 If the asset’s recoverable amount is lower
than its carrying amount, then an entity must
recognize an impairment loss as a difference
between these 2 amounts.
An impairment loss shall be recognized to
profit or loss or as a revaluation decrease if the
asset is carried at revalued amount in line with other
IFRS.
Recoverable amount

Recoverable amount is the higher of an asset’s fair

value less costs of disposal and its value-in-use.
Value-in-use is the present value of estimated
future cash flows expected to arise from the continuing
use of an asset and from its disposal at the end of its useful
life.
Cash-generating units (CGUs)

If it is not possible to determine the

recoverable amount for an individual asset, then the
recoverable amount of the CGU to which the asset
belongs is determined.

Disclosure

Impairment losses recognized in profit or loss

Which line item(s) of the statement of comprehensive income

Impairment losses on revalued assets recognized in other

comprehensive income.

Disclosure by reportable segment: [IAS 36.129]

Impairment losses recognized.

Impairment losses reversed
 IAS 23 BORROWING COSTS

Overview

Prescribes the accounting when

borrowings are made to acquire or construct an
qualifying asset.
Recognition of borrowing costs as a cost of
construction:
Borrowing costs directly attributable to the
acquisition or construction of a qualifying asset are
included in the cost of that asset.
 A qualifying asset measured at fair value, for example a
biological asset.
A qualifying asset is an asset that necessarily takes a substantial
period of time to get ready for its intended use or sale.
Examples may include:
(a) Inventories

(b) Manufacturing plants

(c) Power generation facilities

(d) intangible assets

(e) investment property

(f) bearer plants

Disclosure

In the Notes to the financial statement

(i) the amount of borrowing costs capitalized during
the period.
 IAS 20 Accounting for Government Grants and
Disclosure of Government Assistance
Overview

Prescribes the accounting for, and disclosure of,

Government grants and other forms of Government
assistance.
Recognition of Government Grants and
Assistance
The Government grants- these are the actual resources,
whether monetary benefit transferred to an entity by a
government.
The Government assistance – these are other actions of
the government designed to provide some monitory or
non-monetary, benefit to an entity, for example free
marketing or business advices, and registration etc.,
 IAS 20 deals with almost all types of government
grants, with the following exclusions:
Government assistance in the form of tax reliefs (tax
breaks, tax holidays, etc.),
Grants related to agriculture under IAS 41;

Grants in the financial statements that reflect the effect

of changing prices and
Government acting as a part-owner of the entity.
Accounting treatment

Specific accounting treatment depends on

the purpose of the grant received. An entity can
receive a grant either for:
Acquisition of an asset, or
Reimbursement of costs.
Grant related to assets

If an entity receives the grant for acquisition of

some assets, there are 2 options to present such grant in
the financial statements:
To present it as deferred income; or
To deduct the grant from the carrying amount of an
asset acquired.
Grant related to expenses (reimbursement of
expenditures).
If the grant is provided to reimburse costs incurred in the
past, then it is recognized immediately in profit or loss.
If the grant is provided to reimburse costs incurred or to
be incurred at the present time or in the future, then the grant
is recognized in profit or loss in the periods when the costs
are incurred.
Disclosure of government grants

The following must be disclosed: [IAS 20.39]

Accounting policy adopted for grants, including method
of balance sheet presentation.
Nature and extent of grants recognized in the financial
statements.
Unfulfilled conditions and contingencies attaching to
recognized grants.
 IAS 2 INVENTORIES

Objectives :
The objective of IAS 2 is to prescribe the accounting
treatment for inventories.
It provides guidance for determining the cost of
inventories and for subsequently recognising an expense,
including any write-down to net realisable value (NRV).
It also provides guidance on the cost formulas that are
used to assign costs to inventories.
Scope
Materials and supplies that are consumed in production
(raw materials),
Assets in the production process for sale in the ordinary
course of business (work in process), and
Inventories include assets held for sale in the ordinary
course of business (finished goods).
However, IAS 2 excludes certain inventories from its
scope: [IAS 2.2]
Work in process arising under construction contracts
IAS 11
Financial instruments IAS 39

Biological assets related to agricultural activity and

agricultural produce at the point of harvest IAS 41
Fundamental principle of IAS 2

Inventories are required to be stated at the

lower of cost and net realizable value (NRV).

Initial measurement of inventory:
Costs of purchase
Costs of conversion of Inventory
“Other costs / Specific Costs” incurred in bringing
the inventories to their present location and
condition.
Costs of purchase

The costs of purchase constitute of all

The purchase price
Import duties
Transportation costs
Handling costs directly pertaining to the
acquisition of the goods
Costs of Conversion of Inventory:

Cost of conversion of inventory includes costs

directly attributable to the units of production for
example, direct labor.
Other costs / Specific Costs”:

Specific costs are attributed to the specific

individual items of inventory. Cost is determined on
either a First in First out (FIFO) or weighted average
basis. Last In First out (LIFO) is not permitted.
DISCLOSURE

The financial statements should disclose

Accounting policies adopted for measuring inventories and the cost
flow assumption (i.e., cost formula) used.
Total carrying amount as well as amounts classified as appropriate to
the entity.
Carrying amount of any inventories carried at fair value less costs to
sell.
Amount of inventory recognized as expense during the period.

Amount of any write-down of inventories recognized as an expense in

the period.
 IAS 17 LEASES
Overview:
Sets out the recognition, measurement,
presentation and disclosure requirements for
leases.
Concept of Lease
A lease is an agreement whereby lessor

conveys to the lessee in return for a payment or

series of payments (minimum lease payments)

right to use an asset for the agreed period of

time (lease term).

Types of Leases

There are 2 types of leases defined in

IAS 17:
A finance lease
An operating lease
A finance lease
It is a lease that transfers substantially all the
risks and rewards incidental to ownership of an asset.
Legal title may or may not eventually be transferred.
An operating lease
- It is a lease other than a finance lease.
- The classification of leases has to be performed
at the inception of the lease, before recognizing any
amounts related to the lease in the financial statements.
- The land will not appear on the balance sheet
and the operating lease rentals will be charged to the
in­come statement.
DISCLOSURES

The following disclosures for finance leases are

required in addition to those required by the finan­cial
instruments standards:
For each class of asset, the net carrying value at the
balance sheet date
A reconciliation between the total of the minimum lease
payments and their present value
 IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations
Overview

Sets out the accounting for non-current assets

held for sale and the presentation and disclosure of
discontinued operations.
Non-current assets held for sale
Non-current assets are ‘held for sale’ either
individually or as part of a disposal group when the entity
has the intention to sell them, they are available for
immediate sale and disposal within 12 months is highly
probable.
A disposal group is a group of assets to be disposed
of in a single transaction, including any related liabilities
that will also be transferred.
Discontinued operations

A discontinued operation is a component of an

entity that has either been disposed of or is classified
as held for sale. It must represent a separate major
line of business or major geographical area of
operations, be part of a single co-ordinated plan to
dispose of a separate major line of business or
geographical area of operations.
Measurement

Non-current assets ‘held for sale’ are

measured at the lower of the carrying amount
and fair value less costs to sell (or costs to
distribute). The non-current assets are no longer
depreciated.
Statement of comprehensive income

When there are discontinued operations, the

statement of comprehensive income is divided into
continuing and discontinued operations.
Statement of financial position

Non-current assets, and the assets and

liabilities in a disposal group, are presented
separately in the statement of financial position.
DISCLOSURE
Non-current assets held for sale and assets of disposal
groups must be disclosed separately from other assets in the
balance sheet. The liabilities must also be disclosed
separately in the balance sheet.
Several other disclosures are required, including a
description of the non-current assets of a disposal group, a
description of the facts and circumstances of the sale, and
the expected manner and timing of that disposal.
 IFRS 13 Fair Value Measurement
Why IFRS 13?
The objectives of IFRS 13 are:
To define fair value;
To set out in a single IFRS a framework for
measuring fair value; and
To require disclosures about fair value
measurements.
What is 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.
FAIR VALUE MEASUREMENT –IFRS 13
When an entity performs the fair value measurement, it must
determine all of the following:
The particular asset or liability that is the subject of the
measurement (consistently with its unit of account)
For a non-financial asset, the valuation premises that is
appropriate for the measurement (consistently with its highest and best
use)
The principal (or most advantageous) market for the asset or
liability
The valuation techniques appropriate for the measurement.
Key definitions: [IFRS 13:Appendix A]

Fair value: 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.
Active Market: A market in which transactions for the asset
or liability take place with sufficient frequency and volume to
provide pricing information on an ongoing basis
Exit Price: The price that would be received to sell an asset or
paid to transfer a liability
Highest and best use: The use of a non-financial asset by market
participants that would maximize the value of the asset or the group
of assets and liabilities (e.g. a business) within which the asset would
be used.
Most advantageous Market: The market that maximizes the
amount that would be received to sell the asset or minimizes the
amount that would be paid to transfer the liability, after taking into
account transaction costs and transport costs.
Principal Market: The market with the greatest volume and level
of activity for the asset or liability.
Valuation techniques

When determining fair value, an entity shall use

valuation techniques:
Market approach
Cost approach
Income approach
Market approach:

Uses prices and other relevant information generated by market

transactions involving identical or comparable (similar) assets, liabilities, or a
group of assets and liabilities (e.g. a business) .
 cost approach :

It reflects the amount that would be required currently to replace the

service capacity of an asset (current replacement cost).
Income approach

It converts future amounts (cash flows or income and expenses) to a

single current (discounted) amount, reflecting current market expectations
about those future amounts.
Disclosure
The disclosures depend on the nature of the fair
value measurement (e.g. whether it is recognized in
the financial statements or merely disclosed) and the
level in which it is classified.
 IAS 32- Financial Instruments
Presentation
Overview

Prescribes the accounting requirements for the

presentation of financial instruments particularly as
to the classification of such instruments into financial
assets, financial liability, equity instruments.
Scope
IAS 32 applies in presenting and disclosing information
about all types of financial instruments with the following
exceptions: [IAS 32.4]
Interests in subsidiaries, associates and joint ventures that
are accounted for under IAS 27
Consolidated Financial Statements, IAS 10
 insurance contracts IFRS 4
Key definitions [IAS 32.11]
Financial instrument:
A contract that gives rise to a financial asset
of one entity and a financial liability or equity
instrument of another entity.
Financial asset: any asset that is:
 cash
 an equity instrument of another entity
 a contractual right
• to receive cash or another financial asset from
another entity; or
• to exchange financial assets or financial
liabilities with another entity under conditions
that are potentially favorable to the entity;
 Financial liability: any liability that is:
 a contractual obligation:
• to deliver cash or another financial asset
to another entity; or
• to exchange financial assets or financial
liabilities with another entity under
conditions that are potentially unfavorable
to the entity;
Equity instrument:

Any contract that evidences a residual

interest in the assets of an entity after
deducting all of its liabilities.
Fair value:

The amount for which an asset could be

exchanged, or a liability settled.
Classification as liability or equity

The fundamental principle of IAS 32 is

that a financial instrument should be classified
as either a financial liability or an equity
instrument according to the substance of the
contract.
Preference shares

If an entity issues preference (preferred)

shares that pay a fixed rate of dividend and that
have a mandatory redemption feature at a
future date, the substance is that they are a
contractual obligation to deliver cash and,
therefore, should be recognized as a liability.
Compound financial instruments
Some financial instruments – sometimes called
compound instruments – have both a liability and an equity
component from the issuer's perspective.
In that case, IAS 32 requires that the component
parts be accounted for and presented separately according to
their substance based on the definitions of liability and
equity. For example: a Convertible bond contains two
components.
 IFRS 9 Financial Instruments

Overview

Sets out requirements for recognition and

measurement of financial instruments,
including impairment, derecognition and
general hedge accounting.
Initial measurement

All financial instruments are initially

measured at fair value plus or minus, in the case of a
financial asset or financial liability not at fair value
through profit or loss, transaction costs.
Equity investments
Equity investments held are measured at fair value.
Changes in the fair value are recognised in profit or loss
(FVTPL).
However, if an equity investment is not held for
trading, an entity can make an irrevocable election at initial
recognition to recognise the fair value changes in OCI
(FVTOCI) with only dividend income recognized in profit
or loss.
 Derivatives

All derivatives in the scope of IFRS 9,

including those linked to unquoted equity
investments, are measured at fair value.
Hedge accounting

The hedge accounting requirements in IFRS 9

are optional. If the eligibility and qualification
criteria are met, hedge accounting allows an entity to
reflect risk management activities in the financial
statements by matching gains or losses on hedging
instruments with losses or gains on the risk exposures
they hedge.
 IFRS 7 Financial Instruments: Disclosures
 Overview

Prescribes disclosures to help the primary users

of the financial statements evaluate the significance of
financial instruments to the entity, the nature and extent
of their risks and how the entity manages those risks.
 Significance of financial instruments

Requires disclosure of information about the

significance of financial instruments to an entity’s
financial position and performance, including its
accounting policies and application of hedge
accounting.
Financial position

Entities must disclose information about

financial assets and financial liabilities by category;
special disclosures when the fair value option is used;
Financial performance

Information must be disclosed about financial

instruments-related recognized income, expenses,
gains and losses; interest income and expense; fee
income; and impairment losses.
Other disclosures

The significant accounting policies on financial

instruments must be disclosed. When hedge
accounting is applied, extensive information about the
risk management strategy, the amount, timing and
uncertainty of future cash flows and the effects of
hedge accounting on financial position and
performance must be disclosed.
 IFRS 2 Share-based Payment
Overview

Sets out the accounting for transactions in which an

entity receives or acquires goods or services either as
consideration for its equity instruments or by incurring
liabilities for amounts based on the price of its shares
or other equity instruments.
Share-based payments

All share-based payment transactions are

recognised in the financial statements, using a
fair value measurement basis.
Measurement guidance
Depending on the type of share-based payment, fair
value may be determined by the value of the shares or rights to
shares given up, or by the value of the goods or services
received:
General fair value measurement principle
Measuring employee share options
When to measure fair value - options.
When to measure fair value - goods and services.
General fair value measurement principle.

In principle, transactions in which goods or services are

received as consideration for equity instruments of the entity
should be measured at the fair value of the goods or services
received.
Measuring employee share- options.

Transactions with employees and others providing

similar services, the entity is required to measure the fair value
of the equity instruments granted.
When to measure fair value - options.

For transactions measured at the fair value of the

equity instruments granted (such as transactions with
employees), fair value should be estimated at grant date.
When to measure fair value - goods and services.

For transactions measured at the fair value of the

goods or services received, fair value should be estimated
at the date of receipt of those goods or services.
Equity-settled share based payments

Equity-settled share-based payment

transactions are recorded by recognising an
increase in equity and the corresponding goods
or services received at the measurement date.
Cash-settled share based payments

A cash-settled share-based payment transaction is a

share-based payment transaction in which the entity
acquires goods or services by incurring a liability to
transfer cash or other assets to the supplier of those goods
or services for amounts that are based on the price (or
value) of equity instruments (including shares or share
options) of the entity or another group entity.
Disclosure
The nature and extent of share-based payment arrangements that
existed during the period.
How the fair value of the goods or services received, or the fair
value of the equity instruments granted, during the period was
determined.
The effect of share-based payment transactions on the entity's
profit or loss for the period and on its financial position.
IAS 37- Provisions, Contingent Assets and
Contingent Liabilities
Overview

Sets out recognition criteria and

measurement bases for provisions, contingent
liabilities and assets and the related disclosure
requirement.
Key definitions

Provision:
A provision is an amount set aside from a
company’s profits to cover an expected liability
or a decrease in the value of an asset, even
though the specific amount might be unknown.
Contingent liability:
a possible obligation depending on whether
some uncertain future event occurs, or
a present obligation but payment is not
probable or the amount cannot be measured
reliably.
Contingent asset:
a possible asset that arises from past events,
and
whose existence will be confirmed only by the
occurrence or non-occurrence of one or more
uncertain future events not wholly within the
control of the entity.
Recognition of a provision

An entity must recognize a provision if, and only if:

a present obligation (legal or constructive) has arisen as a
result of a past event (the obligating event),
payment is probable ('more likely than not'), and
the amount can be estimated reliably.
Disclosures
opening balance

additions

used (amounts charged against the provision)

closing balance

For each class of provision, a brief description :

nature

timing

uncertainties

assumptions
IAS 10- EVENTS AFTER THE
R E P O RT I N G P E R I O D
IAS 10- Events After the Reporting Period

Overview
Prescribes when financial statements
must be adjusted for events after the end of the
reporting period and what information must be
disclosed.
Key definitions
Event after the reporting period: An event,
which could be favourable or unfavourable, that
occurs between the end of the reporting period
and the date that the financial statements are
authorised for issue.
Adjusting event: An event after the reporting period
that provides further evidence of conditions that existed
at the end of the reporting period, including an event that
indicates that the going concern assumption in relation to
the whole or part of the enterprise is not appropriate.
 Non-adjusting event: An event after the reporting
period that is indicative of a condition that arose after the
end of the reporting period.
Accounting Treatment:
Adjust financial statements for adjusting events - events after the
balance sheet date that provide further evidence of conditions that
existed at the end of the reporting period
Do not adjust for non-adjusting events - events or conditions that
arose after the end of the reporting period.
If an entity declares dividends after the reporting period, the entity
shall not recognise those dividends as a liability at the end of the
reporting period. That is a non-adjusting event.
Disclosure

Non-adjusting events should be disclosed if

they are of such importance that non-disclosure would
affect the ability of users to make proper evaluations
and decisions.
 The required disclosure is
(a) the nature of the event and
(b) an estimate of its financial effect or a
statement that a reasonable estimate of the effect
cannot be made.
 IAS 19 Employee Benefits
Overview
It is to prescribe the accounting and disclosure
for employee benefits, requiring an entity to recognize
a liability where an employee has provided service and
an expense when the entity consumes the economic
benefits of employee service.
Short-term

Short-term employee benefits are given to the

employee within 12 months of them providing a
service to the employer. That service might be
delivering their standard job, or delivering it to a
certain level of performance, for example. Short term
benefits include leave pay, time off in lieu and
bonuses.
Long-term Benefits

Long-term employee benefits are those that are

due after 12 months of an employee providing a service
to their employer. They can include anniversary
payment, share schemes based on years served and long-
term bonuses.
Termination

Termination employee benefits are awarded to

employees only after they have stopped working for an
employer. They include a number of common benefits,
such as pensions, lump sum pay-outs and post-
employment life insurance and medical care.
Basic principle
Short-term employee benefits (expected to
be settled wholly before 12 months after the
annual period in which the services were
rendered) are recognised as an expense in the
period in which the employee renders the
service.
 Profit-sharing and bonus payments are
recognised only when the entity has a legal or
constructive obligation to pay them and the costs
can be estimated reliably.
Post-employment benefits

Post-employment benefit plans (such as

pensions and health care) are categorised as
either defined contribution plans or defined
benefit plans.
Other long-term benefits

Other long-term employee benefits are

recognised and measured in the same way as
post-employment benefits under a defined
benefit plan. However, unlike defined benefit
plans, measurements are recognised immediately
in profit or loss.
Termination benefits are recognised at the earlier of
when the entity can no longer withdraw the offer of the
benefits and when the entity recognises costs for a
restructuring that is within the scope of IAS 37 and
involves the payment of termination benefits.
Disclosures about defined benefit plans
IAS 19(2011) sets the following disclosure
objectives in relation to defined benefit plans:
an explanation of the characteristics of an
entity's defined benefit plans, and the associated
risks.
identification and explanation of the amounts
arising in the financial statements from defined
benefit plans.
a description of how defined benefit plans may
affect the amount, timing and uncertainty of the
entity's future cash flows.
 IAS 12 Income Taxes
Overview

Sets out the accounting for current and deferred

tax.
Current Tax

Current tax liabilities and assets are

recognised for current and prior period taxes,
measured at the rates that have been enacted or
substantively enacted by the end of the reporting
period.
Deferred tax
Deferred tax assets and liabilities are the income
taxes recoverable or payable in future periods as a result
of differences between the amounts attributed to assets
and liabilities from applying IFRS Standards and the
amounts those assets and liabilities are attributed for tax
purposes.
Presentation of current and deferred tax

Current and deferred tax is recognised as

income or expense in profit or loss .
Deferred tax assets and liabilities are classified
as non-current items.
Disclosure
Major components of tax expense (tax income) include:
• current tax expense (income)
• any adjustments of taxes of prior periods
• amount of deferred tax expense (income) relating to the
origination and reversal of temporary differences
• amount of deferred tax expense (income) relating to changes
in tax rates or the imposition of new taxes
• amount of the benefit arising from a previously unrecognized
tax loss, tax credit or temporary difference of a prior period.
Other required disclosures:

Details of deferred tax assets

Tax consequences of future dividend
payments.
 IAS 41 Agriculture
Overview
The objective of IAS 41 is to establish
standards of accounting for agricultural activity – the
management of the biological transformation of
biological assets (living plants and animals) into
agricultural produce (harvested product of the entity's
biological assets).
Biological
A living animal or plant
asset

A living plant that:

Bearer plant* 1. is used in the production or supply of agricultural produce
2. is expected to bear produce for more than one period,

Agricultural
The harvested product from biological assets
produce

The incremental costs directly attributable to the disposal of an asset,

Costs to sell
excluding finance costs and income taxes
Measurement
Biological assets within the scope of IAS 41 are measured on
initial recognition and at subsequent reporting dates at fair value
less estimated costs to sell, unless fair value cannot be reliably
measured.
Agricultural produce is measured at fair value less estimated
costs to sell at the point of harvest. Because harvested produce is
a marketable commodity, there is no 'measurement reliability'
exception for produce.
Government grants

Unconditional government grants received

in respect of biological assets measured at fair
value less costs to sell are recognised in profit or
loss when the grant becomes receivable.
Disclosure
Disclosure requirements in IAS 41 include:
description of an entity's biological assets, by broad group
description of the nature of an entity's activities with each group of
biological assets and non-financial measures or estimates of physical
quantities of output during the period and assets on hand at the end of the
period
information about biological assets whose title is restricted or that are
pledged as security
commitments for development or acquisition of biological assets
financial risk management strategies
 IFRS 6 — Exploration for and Evaluation of
Mineral Resources
Overview

IFRS 6 Exploration for and Evaluation of Mineral

Resources has the effect of allowing entities adopting the
standard for the first time to use accounting policies for
exploration and evaluation assets that were applied before
adopting IFRSs.
Definition

Exploration for and evaluation of mineral resources

means the search for mineral resources, including minerals,
oil, natural gas and similar non-regenerative resources after
the entity has obtained legal rights to explore in a specific
area, as well as the determination of the technical feasibility
and commercial viability of extracting the mineral resource.
Accounting policies for exploration and evaluation

IFRS 6 permits an entity to develop an accounting policy

for recognition of exploration and evaluation expenditures as assets
without specifically considering the requirements of paragraphs 11
and 12 of IAS 8 in Accounting Estimates and Errors. Accounting
Policies, Changes
Thus, an entity adopting IFRS 6 may continue to use the
accounting policies applied immediately before adopting the IFRS.
This includes continuing to use recognition and measurement
practices that are part of those accounting policies.
Presentation and disclosure
IFRS 6 requires disclosure of information that identifies and explains the
amounts recognised in its financial statements arising from the exploration
for and evaluation of mineral resources, including:
its accounting policies for exploration and evaluation expenditures
including the recognition of exploration and evaluation assets
the amounts of assets, liabilities, income and expense and operating and
investing cash flows arising from the exploration for and evaluation of
mineral resources.