Beruflich Dokumente
Kultur Dokumente
Session Overview
Crash course in ASPE: The Basics
Example disclosures
Transition differences The Right Option for Your Company Closing and Questions
2011
Reminder re: effective date vs. transition date
policy to transactions, other events and conditions as if that policy had always been applied
ASPE Affects:
Fair value Prepaids Asset retirement obligations (ARO) Election for Property, Plant & Equipment Intangibles Employee future benefits Stock-based compensation Business combinations and Joint Ventures Goodwill Government payables Income taxes Opening balance sheet Cash flow statements
IFRS Affects
Revenue recognition Asset impairment Property, Plant and
Equipment Financial Instruments Investment property Foreign Exchange Provisions Leases Intangible Assets Related Party Transactions
Business Combinations Employee future benefits Income taxes Stock based compensation Hedging Mining, Oil & Gas Companies Joint Ventures Consolidations Earnings Per Share Opening balance sheet
2011
Reminder re: effective date vs. transition date
Standards (issued post April 2001) IAS International Accounting Standards (issued pre April 2001) IASB International Accounting Standards Board IFRIC International Financial Reporting Interpretations Committee SIC Standing Interpretations Committee
would make the F/S misleading IFRS does not allow comparative information to be omitted in the rare circumstances when it is not meaningful When applying an accounting policy retrospectively, IFRS requires a financial position for the earliest comparative period possible
statements
the items that need to be shown on the I/S IFRS (IAS 1) does not allow for disclosure on extraordinary items Disclosure of authorization for issue an entity is to disclose the date the F/S were authorized and by whom Current assets and current liabilities must be in order of liquidity (IAS 1) Concept of OCI (Other Comprehensive Income)
PPE (defn) are tangible items that (a) Are held for use in production or supply of goods or services,
for rental to others, or for administrative purposes; and (b) Are expected to be used for more than one period
Cost comprises: (a) Purchase price, including import duties, non-refundable taxes, less discounts (b) Amounts for bringing the asset to the location and making it operational (c) The initial estimate of dismantling and removing an item and restoring the site.
PPE Contd
Measurement subsequent to initial recognition: -
There are 2 options: (a) Cost Model PPE shall be carried at its costs less any accumulated depreciation and accumulated impairment losses (b) Revaluation Model PPE whose FV can be reliably measured shall be carried at fair value (on the date of revaluation) less any subsequent accumulated depreciation and accumulated impairment losses. Revaluations should be done regularly
PPE - Contd
The method chosen must be applied to an entire
class of asset
If an asset's carrying amount is increased as a
result of a revaluation, the increase shall be recognized in OCI and accumulated in equity under the heading of revaluation surplus. However, the increase shall be recognized in P&L to the extent that it reverses a revaluation decrease of the same asset previously recognized in P&L.
relationship between the depreciation method chosen and the pattern or expectation that the future economic benefits are to be consumed by a company over the life of the PPE
IFRS
Depreciation charged is: - The cost less residual value over the useful life of the asset
Estimates on the useful life, method of amortization are reviewed periodically and residual value only when an event occurs
Estimates of useful life, method of depreciation and residual values are reviewed at each reporting date (at least) or when expectations deviated from previous estimates
following estimated useful lives: The body of the ship 30 years Engine 15 years Furniture and fixtures on the ship 10 years
PPE Disclosure
For each Class of PPE the following should
be disclosed: the measurement basis the depreciation methods the useful life or depreciation rates gross carrying amt and accumulated depreciation
beginning and end of the period showing: additions assets classified as held for sale or included in disposal group classified as held for sale acquisition through business combinations increases /decreases resulting from revaluations and from impairment losses impairment losses recognized in P&L impairment losses reversed in P&L depreciation net exchange difference arising on translation of F/S other changes
PPE pledged as security the amount of expenditures recognized in the carrying amount of an item of PPE in the course of its construction the amount of contractual commitments related to PPE if not disclosed separately in the statement of comprehensive income, the amount of compensation from third parties for items of PPE that were impaired, lost or given up that is included in profit or loss
the FV the extent to which the FV was determined directly by reference to observable prices in an active market the carrying amount that would have been recognized had the assets been carried under the cost model the revaluation surplus, indicating the change for the year and any restrictions on distributions to shareholders
lived Assets
Leases
IAS 17 and ASPE 3065 IAS 17 apply to all leases except equipment used to
explore for or use minerals, oil, natural gas and nonregenerative resources and certain licensing agreements
Both IFRS and ASPE consider whether the benefits and
Leases Contd
Under IFRS leases have to be classified as either an
operating lease or a finance lease Guidance to determine if the risks and benefits of an asset have been transferred is provided including:
Ownership transfer by the end of the lease The lessee has an option to purchase the asset for a price
below FV The term of the lease is for the majority of the life of the asset At inception, the PV of the minimum lease pymts equals substantially all of the FV The asset is of such a specialized nature
Leases Contd
Lease classifications can only be changed if the
provisions of the lease have been changed Changes in estimates related to economic life, residual value , etc do not give rise to a new lease classification Under IFRS there is no specific guidance on how to account for the implications when lease terms are modified There are specific standards for land and building leases IAS 17 15A - 19
represents the lower of the PV of the minimum lease pymts or the FV of the asset
The asset is then amortized into operations
similar to other assets in the same class and the obligation is reduced by payments
IFRS
Discount rate: A Company is REQUIRED to use the implicit rate if it is practical to do so. If it is not practical a company can use incremental borrowing rate. Amortization period of asset: If the legal title is not expected to transfer, then the asset is amortized over the shorter of the lease term or the useful life of the asset.
Direct initial costs: Costs incurrent on initial set-up are capitalized as part of the asset.
payments at year-end, and their present value (PV) for each of the following periods: 1 year; 1 to 5 years; and later than 5 years contingent rents recognized as an expense in the period. the total of future minimum sublease payments expected to be received under non-cancellable subleases at the end of the reporting period a general description of the lessee's material leasing arrangements including, but not limited to, the following: the basis on which contingent rent payable is determined; the existence and terms of renewals or purchase options, escalation clauses; and restrictions imposed by lease arrangements, such as dividends, additional debt and leases
lease assets First time adoption issues are covered in IFRIC 4 and IFRS 1 There is an optional exemption to retrospective application for leases
Transition date a lessee or lessor determines the
classification of a lease
SO.....QUESTIONS?
Anyone?
COFFEE TIME!
except that IFRS specifically identifies postemployment benefit plans as related Measurement IFRS provides no specific guidance on measurement whereas ASPE has a decision tree for carrying vs. exchange amounts Disclosure IFRS requires disclosure of all related parties irrespective of transactions or balances
category:
The parent; Entities with joint control/significant influence; Subsidiaries; Associates; Joint ventures; Key management personnel of the entity or its
transaction, amounts, terms of repayment etc. Additional disclosures are required for the following:
Key management personnel compensation Provision for doubtful debts related to outstanding balances
with related parties Expense recognised during the period in respect of bad or doubtful debts due from related parties
IFRS does provide some exemptions regarding
IFRIC 17 Distribution of Non-Cash Assets to Owners IAS 27 Consolidated financial statements IAS 28 Investments in Associates; and IAS 31 Interest in Joint Ventures
IFRS
Includes all taxes
No specific guidance
AMT and rate regulated Probable is defined as greater than 50% Classification current and non-current for future taxes
for refundable, AMT or rate regulated Must record if probable (no specific definition indicated) Classification noncurrent for all deferred taxes
IFRS
Must record both:
Current taxes - asset
accounting under which an enterprise reports as an expense (income) of the period only the cost (benefit) of current income taxes for that period, determined in accordance with the rules established by taxation authorities The future income taxes method is a method of accounting under which an enterprise reports as an expense (income) of the period the cost (benefit) of current income taxes and the cost (benefit) of future income taxes, determined in accordance with the rules established by taxation authorities
tax basis of an asset or liability and its carrying amount in the balance sheet. Temporary differences may be either:
(i)
Deductible temporary differences, which are temporary differences that will result in deductible amounts in determining taxable income of future periods when the carrying amount of the asset or liability is recovered or settled; or (ii) Taxable temporary differences, which are temporary differences that will result in taxable amounts in determining taxable income of future periods when the carrying amount of the asset or liability is recovered or settled
Future Taxes
Current income tax exp
(benefit) Reconciliation Amount and timing of capital gains reserves or similar reserves for 5 years Unused income tax losses CF and unused credits Portion of income tax related to transactions charged or credited to equity
(benefit) Future income tax exp (benefit) Amount and timing of capital gains reserves or similar reserves for 5 years Unused income tax losses CF and unused credits Portion of income tax related to transactions charged or credited to equity
expense(income) included in the determination of the profit(loss) for the period, including:
Current tax expense(income); Adjustments recognized in the year for current tax of
prior periods; Amount of deferred tax expense(income) relating to changes in tax rates or the imposition of new taxes; Amount of benefit arising from previously unrecognized tax loss, tax credit or temp difference of a prior period that is used to reduce current tax expense; Likewise for deferred tax expense; Deferred tax expense arising from the write-down or reversal of a previous write-down of a deferred tax asset
Financial Instruments
ASPE 3856 and IFRS 7, IAS 32 and IAS 39
scope for ASPE such as investment companies, certain types of contracts, and certain types of derivatives and insurance contracts Classification IFRS requires classification into loans and receivables, held-to-maturity, fair value through profit or available for-sale, financial liabilities measured at amortized cost Classification & presentation equity vs. liability Measurement fair value, F/X, impairments
assets with fixed or determinable payments and fixed maturity that an entity has the positive intention and ability to hold to maturity
Available-for-sale (AFS) financial assets are those non-derivative
financial assets that are designated as available for sale or are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss.
Fair value through profit or loss is a financial asset (liability) that
EXAMPLES
Whos on first? Whats on second? Where did third go?
Transition Implications
Impact on the bottom line
Subsequent impact on performance compensation,
results (fair value accounting) Volume and complexity of financial disclosures (ASPE vs. IFRS) Transparency and comparability to other entities
Competitors, suppliers, customers etc.
Transition Steps
ASPE
Identify, Analyze,
IFRS
Identify, Analyze,
liabilities required under ASPE Re-measure and reclassify according to ASPE (as necessary)
liabilities required under IFRS Remove those balances not complying with IFRS Re-measure and reclassify according to IFRS (as necessary)
from current generally accepted accounting standards (GAAP) to ASPE Facts to consider
Current operations (your target markets); Future plans (IPO); and Users of the financial statements (investors, lenders,
etc).