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ACM-702

INTERNATIONAL FINANCIAL REPORTING STANDARDS [IFRS- 1,2,3,4,5]


IFRS 1- FIRST TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS IFRS 2- SHARE-BASED PAYMENTS IFRS 3- BUSINESS COMBINATIONS IFRS 4- INSURANCE CONTRACTS IFRS 5- NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATION

INTERNATIONAL FINANCIAL REPORTING STANDARDS


Introduction
nternational Financial Reporting Standards (IFRS) are principles-based standards, interpretations and the framework (1989) adopted by the International Accounting Standards Board(IASB). Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS). IAS were issued between 1973 and 2001 by the Board of the International Accounting Standards Committee (IASC). On April 1, 2001, the new IASB took over from the IASC the responsibility for setting International Accounting Standards. During its first meeting the new Board adopted existing IAS and Standing Interpretations Committee standards (SICs). The IASB has continued to develop standards calling the new standards IFRS.

Structure of IFRS
IFRS are considered a "principles based" set of standards in that they establish broad rules as well as dictating specific treatments.International Financial Reporting Standards comprise:

International Financial Reporting Standards (IFRS)standards issued after 2001 International Accounting Standards (IAS)standards issued before 2001 Standing Interpretations Committee (SIC)issued before 2001 Conceptual Framework for the Preparation and Presentation of Financial Statements (2010)

Role of framework
1.Objective of financial statements and Underlying assumptions A financial statement should reflect true and fair view of the business affairs of the organization. As these statements are used by various constituents of the society / regulators, they need to reflect true view of the financial position of the organization. and it is very helpful to check the financial position of the business for a specific period. The following are the four underlying assumptions in IFRS: (a). Accrual basis (b).Going concern

2. Qualitative characteristics of financial statements Qualitative characteristics of financial statements include: (a).Understandability (b).Reliability (c).Relevance (d).Comparability 3.Elements of financial statements (a).Definition Asset Liability Equity Revenue Expenses

(b). Recognition of elements of financial statements An item is recognized in the financial statements when: it is probable future economic benefit will flow to or from an entity. the resource can be reliably measured.

(c).Measurement of the elements of financial statements Measurement is the process of determining the monetary amounts at which the elements of the financial statements are to be recognized and carried in the balance sheet and income statement. This involves the selection of the particular basis of measurement. (d).Concepts of capital and capital maintenance The framework describes different concepts of capital maintenance and acknowledge that each leads to a different basis for measuring assets ( historical costs vs. current cost).the framework does not prescribe one measurement basis over another but indicates that it is applicable to a range of accounting models.

IFRS 1- First-time Adoption of International Financial Reporting Standards


Effective Date
The entity shall apply the IFRS if its first financial statements according to IFRS relate to a period beginning on or after January 1, 2004. Earlier application is encouraged.

Objective
The purpose of this IFRS is to ensure that the first financial statements under IFRS an entity, as well as their interim financial reports concerning a portion of the exercise covered by such financial statements, contain high quality information that: (a) is transparent to users and comparable for all periods presented; (b) provides an appropriate starting point for accounting under International Financial Reporting Standards (IFRS); (c) can be obtained at a cost not to exceed the benefits provided to users.

Scope
1. An entity shall apply the IFRS in: (a) its first financial statements under IFRS; (b) in each interim financial report, if any, present in accordance with IAS 34 interim financial reporting, related to one part of the exercise covered by its first financial statements under IFRS. 2.The first financial statements according to IFRS are the first annual financial statements in which an entity adopts IFRS, through a statement, explicit and unreserved contained in such financial statements, compliance with IFRS. The financial statements according to IFRS are the first financial statements of an entity under IFRS, for example, if the same: (a) has submitted its most recent previous financial statements: (i) under national requirements that are not consistent in all respects with IFRS; (ii) in accordance with IFRS in all respects, except that such financial statements do not contain a statement, explicit and unreserved compliance with IFRS; (iii) with an explicit statement of compliance with IFRS some, but not all; (iv) according to national requirements that are not consistent with IFRS, but applying some IFRS accounting for individual items for which there is no national legislation or (v) under national requirements, providing a reconciliation of some of the figures with the same magnitude as determined by IFRS; (b) has prepared financial statements under IFRS for internal use only, without making them available to owners of the entity or other external users; (c) has prepared a package of information according to IFRS, for use in the consolidation, which does not constitute a complete set of financial statements, as defined in IAS 1 Presentation of Financial Statements, or

(d) did not submit financial statements in prior periods.

Adjustments required to move from previous GAAP to IFRSs at the time of first-time adoption
Recognize all assets and liabilities whose recognition is required by IFRS. Not recognize items as assets or liabilities if IFRS does not permit such recognition. Reclassify items that do not match IFRS requirements. Apply IFRS in measuring all recognized assets and liabilities. Difference amount is adjusted with Retained Earning

Recognition and measurement:


Opening IFRS Balance Sheet Date of transition to IFRS Same accounting policies Throughout all periods

Different IFRS adoption dates of investor and investee


A parent or investor may become a first-time adopter earlier than or later than its subsidiary, associate, or joint venture investee. In these cases, IFRS 1 is applied as follows: 1. If the subsidiary has adopted IFRSs in its entity-only financial statements before the group to which it belongs adopts IFRS for the consolidated financial statements, then the subsidiary's first-time adoption date is still the date at which it adopted IFRS for the first-time, not that of the group. However, the group must use the IFRS measurements of the subsidiary's assets and liabilities for its first IFRS financial statements except for adjustments relating to the business combinations exemption and to conform group accounting policies. 2. If the group adopts IFRSs before the subsidiary adopts IFRSs in its entity-only financial statements, then the subsidiary has an option either (a) to elect that the group date of IFRS adoption is its transition date or (b) to first-time adopt in its entity-only financial statements. 3. If the group adopts IFRSs before the parent adopts IFRSs in its entity-only financial statements, then the parent's first-time adoption date is the date at which the group adopted IFRSs for the first time.

4. If the group adopts IFRSs before its associate or joint venture adopts IFRSs in its entity-only financial statements, then the associate or joint venture should have the option to elect that either the group date of IFRS adoption is its transition date or to first-time adopt in its entityonly financial statements.

IFRS 2 - Share-based Payment


Effective Date
An entity shall apply this IFRS for annual periods beginning on or after 1 January 2005. Earlier application is encouraged. If an entity applies the IFRS for a period beginning before 1 January 2005, it shall disclose that fact.

Objective
The objective of this IFRS is to specify the financial reporting by an entity when it undertakes a share-based payment transaction. In particular, it requires an entity to reflect in its profit or loss and financial position the effects of share-based payment transactions, including expenses associated with transactions in which share options are granted to employees.

Scope
An entity shall apply this IFRS in accounting for all share-based payment transactions including: (a) equity-settled share-based payment transactions, in which the entity receives goods or services as consideration for equity instruments of the entity (including shares or share options), (b) cash-settled share-based payment transactions, in which the entity acquires goods or services by incurring liabilities to the supplier of those goods or services for amounts that are based on the price (or value) of the entitys shares or other equity instruments of the entity, and (c) transactions in which the entity receives or acquires goods or services and the terms of the arrangement provide either the entity or the supplier of those goods or services with a choice ofwhether the entity settles the transaction in cash (or other assets)or by issuing equity instruments,

Recognition
1. An entity shall recognise the goods or services received or acquired in a share-based payment transaction when it obtains the goods or as the services are received. The entity shall recognise a corresponding increase in equity if the goods or services were received in an equity-settled sharebased payment transaction, or a liability if the goods or services were acquired in a cash-settled share-based payment transaction. 2. When the goods or services received or acquired in a sharebased payment transaction do not qualify for recognition as assets, they shall be recognised as expenses.

Equity- settled share-based payment transactions Overview


For equity-settled share-based payment transactions, the entity shall measure the goods or services received, and the corresponding increase in equity, directly, at the fair value of the goods or services received, unless that fair value cannot be estimated reliably. If the entity cannot estimate reliably the fair value of the goods or services received, the entity shall measure their value, and the corresponding increase in equity, indirectly, by reference to1 the fair value of the equity instruments granted

Cash-settled share-based payment transactions


For cash-settled share-based payment transactions, the entity shall measure the goods or services acquired and the liability incurred at the fair value of the liability. Until the liability is settled, the entity shall remeasure the fair value of the liability at each reporting date and at the date of settlement, with any changes in fair value recognised in profit or loss for the period.

Disclosures
1. An entity shall disclose information that enables users of the financial statements to understand the nature and extent of sharebased payment arrangements that existed during the period. (a) a description of each type of share-based payment arrangement that existed at any time during the period, including the general terms and conditions of each arrangement, such as vesting requirements, the maximum term of options granted, and the method of settlement (eg whether in cash or equity). (b) the number and weighted average exercise prices of share options for each of the following groups of options: (i) outstanding at the beginning of the period; (ii) granted during the period; (iii) forfeited during the period; (iv) exercised during the period; (v) expired during the period; (vi) outstanding at the end of the period; and (vii) exercisable at the end of the period. (c) for share options exercised during the period, the weighted average share price at the date of exercise. If options were exercised on a regular basis throughout the period, the entity may instead disclose the weighted average share price during the period. (d) for share options outstanding at the end of the period, the range of exercise prices and weighted average remaining contractual life. If the range of exercise prices is wide, the outstanding options shall be divided into ranges that are meaningful for assessing thenumber and timing of additional shares that may be issued and the cash that may be received upon exercise of those options. 2.An entity shall disclose information that enables users of the financial statements to understand how the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period was determined.

Transitional Provisions
1. For equity-settled share-based payment transactions, the entity shall apply this IFRS to grants of shares, share options or other equity instruments that were granted after 7 November 2002 and had not yet vested at the effective date of this IFRS. 2. The entity is encouraged, but not required, to apply this IFRS to other grants of equity instruments if the entity has disclosed publicly the fair value of those equity instruments, determined at the measurement date.

IFRS 3-Business Combinations


Effective Date
As issued at 1 January 2011. Includes IFRSs with an effective date after 1 January 2011 but not the IFRSs they will replace.

Objective
The objective of the IFRS is to enhance the relevance, reliability and comparability of the information that a reporting entity provides in its financial statements about a business combination and its effects. It does that by establishing principles and requirements for how an acquirer: (a) recognises and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree; (b) recognises and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.

Core principle
An acquirer of a business recognises the assets acquired and liabilities assumed at their acquisitiondate fair values and discloses information that enables users to evaluate the nature and financial effects of the acquisition.

Applying the acquisition method


The acquisition method (called the 'purchase method' in the 2004 version of IFRS 3) is used for all business combinations. Steps in applying the acquisition method are: 1.Identification of the 'acquirer' - the combining entity that obtains control of the acquiree. 2.Determination of the 'acquisition date' - the date on which the acquirer obtains control of the acquiree. 3.Recognition and measurement of the identifiable assets acquired, the liabilities assumed and any non-controlling interest (NCI, formerly called minority interest) in the acquiree. 4.Recognition and measurement of goodwill or a gain from a bargain purchase option.

Measurement of acquired assets and liabilities


Assets and liabilities are measured at their acquisition-date fair value (with a limited number of specified exceptions).

Goodwill- Goodwill is measured as the difference between:the aggregate of:


(a).the acquisition-date fair value of the consideration transferred. (b).the amount of any NCI, and (c).in a business combination achieved in stages , the acquisition date fair value of the acquirer's previously-held equity interest in the acquiree; and the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed (measured in accordance with IFRS 3).

Recognition and Measurement


The IFRS provides limited exceptions to these recognition and measurement principles: (a) Leases and insurance contracts are required to be classified on the basis of the contractual terms and other factors at the inception of the contract (or when the terms have changed) rather than on the basis of the factors that exist at the acquisition date. (b) Only those contingent liabilities assumed in a business combination that are a present obligation and can be measured reliably are recognised. (c) Some assets and liabilities are required to be recognised or measured in accordance with other IFRSs, rather than at fair value. The assets and liabilities affected are those falling within the scope of IAS 12 (d) There are special requirements for measuring a reacquired right. (e) Indemnification assets are recognised and measured on a basis that is consistent with the item that is subject to the indemnification, even if that measure is not fair value.

Disclosure
The IFRS requires the acquirer to disclose information that enables users of its financial statements to evaluate the nature and financial effect of business combinations that occurred during the current reporting period or after the reporting date but before the financial statements are authorised for issue. After a business combination, the acquirer must disclose any adjustments recognised in the current reporting period that relate to business combinations that occurred in the current or previous reporting periods.

IFRS 4- Insurance Contracts


Effective date
The entity shall apply the IFRS for annual periods beginning on or after January 1, 2005. We recommend the early implementation. If an entity applies the IFRS in a prior period, disclose that fact.

Objective
The purpose of this is to specify IFRS financial information to be provided on insurance contracts, the issuer of such contracts (which is named in the IFRS insurer), until the Council completes the second phase of this project insurance contracts. In particular, the IFRS requires: (a) Perform a set of limited improvements in accounting for insurance contracts by insurers. (b) Financial instruments that give a discretionary component of participation .

Scope
1. An entity shall apply this to IFRS: (a) Insurance contracts (including reinsurance contracts to accept) that emits and reinsurance contracts ceding. (b) Financial instruments that give a discretionary component of participation. IFRS 7 Financial Instruments: Disclosure requires disclosure on financial instruments, including instruments that contain this component. 2. This IFRS 3 does not address other aspects of the accounting of insurance companies, as the accounting for financial assets owned by insurance companies and financial liabilities issued by insurers (see IAS 32 and IAS 39 Financial Instruments: Recognition and Measurement). 3.A contract of reinsurance is a type of insurance. Accordingly, all references to insurance contracts, in the IFRS, also apply to contracts of reinsurance. Recognition and Measurement Temporary exemption from compliance with other IFRS 1.Accounting policies, changes in accounting estimates and errors specifies the criteria that the entity used to develop an accounting policy when there is no IFRS that is specifically applicable to a game. However, this IFRS exempts the insurer to apply these criteria in its accounting policies relating to: (a) insurance contracts it issues (including both procurement costs as intangible assets associated with them); (b) reinsurance contracts ceding. 2.However, this IFRS does not relieve the insurer to comply with certain implications of the criteria set out in IAS 8.Especially, the insurer: (a) not recognized as liabilities provisions for claims incurred but not reported whether these claims arising from insurance contracts which do not exist at the date of the financial statements (such as provisions for disasters or stabilization).

(b) to carry out the test of adequacy in liabilities. (c) remove a liability arising from insurance (or part thereof) of its balance sheet when and only when it is extinguished, i.e. when the obligation specified in the contract is awarded or canceled or expires its enforceability . (d) not compensated: (i) assets arising from reinsurance contract with liabilities arising from insurance that relate to them, or (ii) expenses or income from reinsurance contracts with income or expenditure, respectively, of insurance contracts that relate to them. (e) has deteriorated considerably if the value of its assets arising from reinsurance contracts.

Changes in accounting policies


An insurer may change its accounting policies for insurance contracts if, and only if, the change to make financial statements more relevant, but no less reliable for the purposes of making economic decisions of users, or more reliable, but no less important to meet those needs. The insurer will judge the relevance and reliability according to the criteria of IAS 8.

Disclosure
Explanation of the amounts recognized. 1.The insurer disclosed in its financial statements, information that helps users of the same to identify and explain the amounts that come from their insurance contracts. 2.In order to comply with the provisions of paragraph 36, the insurer disclose the following information: (a) Its accounting policies relating to insurance contracts and assets, liabilities, income and expense that relate to them. (b) Assets, liabilities, revenues and expenses recognized (and, in this case that the cash flow statement by the direct method, cash flows) coming from insurance contracts. In addition, if the insurer is also assignor reinsurance, revealed: (i) gains and losses recognized in profit or loss for reinsurance ceded; (ii) whether the transferor postponed amortization and gains and losses from reinsurance ceded, the depreciation of the financial year and figures to remain any unamortized at the beginning and end of it. (c) The procedure used to determine the assumptions that have a greater effect on the valuation of the amounts recognized referred to in paragraph (b). Whenever possible, the insurer will also quantitative information regarding these assumptions. (d) The effect of changes in the assumptions used to value assets arising from insurance contracts and liabilities arising from insurance contracts, showing separately the effect of each of the changes that have had a significant effect in states Financial. (e) Reconciliations of changes in liabilities arising from insurance contracts, assets arising from reinsurance contracts and, where appropriate, in deferred acquisition costs that relate to the past. The nature and extent of risks arising out of insurance contracts 3. The insurance company will reveal information that enables users of its financial statements, assessing the nature and extent of risks arising from insurance contracts.

IFRS-5 Non-current Assets Held for Sale and Discontinued Operations


Effective Date
The entity shall apply the IFRS for annual periods beginning on or after January 1, 2005. Earlier application is encouraged. If an entity applies IFRS for an exercise that starts before January 1, 2005, disclose that fact.

Objective
The purpose of this is to specify the IFRS accounting treatment of assets held for sale, as well as disclosure and presentation on discontinued operations. In particular, the IFRS requires: (a) assets that meet the requirements for classification as held for sale, are valued at the lowest value between its carrying amount and fair value less selling costs as well as stop the depreciation of such assets; (b) assets that meet the requirements for classification as held for sale, submitted separately in the balance sheet, and that the results of discontinued operations are presented separately in the income statement.

Scope
1. The requirements for classification and presentation of the IFRS will apply to all assets not corrientes1 recognized, and all groups alienation of elements of the entity. The requirements for assessing the IFRS will apply to all non-current assets and recognized groups disposition of elements which will continue being valued in accordance with the Standard that is indicates the same. 2.An entity to classify an asset not aware as held for sale if its carrying amount will be recovered primarily through a sales transaction, rather than by its continued use. Disclosure and Presentation 1.An entity shall disclose information and to enable users of financial statements to assess the financial effects of discontinued operations and the sale or other disposition by way of non-current assets (or groups disposition of elements). 2.The entity shall disclose: (a) the income statement, an amount that includes only the total: (i) after tax result of discontinued operations; (ii) the result after tax recognized by the valuation at fair value less selling costs, either by sale or other disposition by way of assets or groups disposition of elements that constitute the activity interrupted. (b) An analysis of the amount collected detailing: (i) ordinary income, expenditure and the result before tax from discontinued operations; (ii) spending by gains tax on the previous result, as required by IAS 12; (iii) the result has been recognized by the valuation at fair value less selling costs, either by sale or other disposition by way of assets or groups disposition of elements that constitute the activity interrupted and (iv) spending by gains tax on the previous result, as required IAS 12;

REFERENCES

Notes provided by sanil sir in class www.google.com www.en.wikipedia.org www.ifrs.com