International Accounting Standards

International Accounting Standards
Name
IAS 1
Presentation of Financial Statements
IAS 2
Inventories
IAS 3
Consolidated Financial Statements

Superseded in 1989 by IAS 27 and IAS 28
IAS 4
Depreciation Accounting
Withdrawn in 1999
IAS 5
Information to Be Disclosed in Financial Statements

Superseded by IAS 1 effective 1 July 1998
IAS 6
Accounting Responses to Changing Prices

Superseded by IAS 15, which was withdrawn December 2003
IAS 7
Statement of Cash Flows
IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors
IAS 9
Accounting for Research and Development Activities

IAS 10
Events After the Reporting Period
IAS 11
Construction Contracts
Will be superseded by IFRS 15 as of 1 January 2017

IAS 12
Income Taxes
IAS 13
Presentation of Current Assets and Current Liabilities

IAS 14
Segment Reporting
Superseded by IFRS 8 effective 1 January 2009
IAS 15
Information Reflecting the Effects of Changing Prices

Withdrawn December 2003
IAS 16
Property, Plant and Equipment
IAS 17
Leases
IAS 18
Revenue
Will be superseded by IFRS 15 as of 1 January 2017
IAS 19
Employee Benefits (1998)

Superseded by IAS 19 (2011) effective 1 January 2013
IAS 19
Employee Benefits (2011)
IAS 20
Accounting for Government Grants and Disclosure of Government Assistance
IAS 21
The Effects of Changes in Foreign Exchange Rates
IAS 22
Business Combinations
Superseded by IFRS 3 effective 31 March 2004
IAS 23
Borrowing Costs
IAS 24
Related Party Disclosures
IAS 25
Accounting for Investments

Superseded by IAS 39 and IAS 40 effective 2001
IAS 26
Accounting and Reporting by Retirement Benefit Plans
IAS 27
Separate Financial Statements (2011)

Consolidated and Separate Financial Statements
IAS 27
Superseded by IFRS 10, IFRS 12 and IAS 27 (2011) effective 1 January
2013
IAS 28
Investments in Associates and Joint Ventures (2011)
IAS 28
Investments in Associates
Superseded by IAS 28 (2011) and IFRS 12 effective 1 January 2013
IAS 29
Financial Reporting in Hyperinflationary Economies
IAS 30
Disclosures in the Financial Statements of Banks and Similar Financial Institutions

IAS 31
Interests In Joint Ventures

Superseded by IFRS 11 and IFRS 12 effective 1 January 2013
IAS 32
Financial Instruments: Presentation
IAS 33
Earnings Per Share
IAS 34
Interim Financial Reporting
IAS 35
Discontinuing Operations
IAS 36
Impairment of Assets
IAS 37
Provisions, Contingent Liabilities and Contingent Assets
IAS 38
Intangible Assets
IAS 39
Financial Instruments: Recognition and Measurement

Superseded by IFRS 9 effective 1 January 2018 where IFRS 9 is applied
IAS 40
Investment Property
IAS 41
Agriculture
IAS 2 Inventories
Overview
IAS 2 Inventories contains the requirements on how to account for most types of
inventory. The standard requires inventories to be measured at the lower of cost
and net realizable value (NRV) and outlines acceptable methods of determining
cost, including specific identification (in some cases), first-in first-out (FIFO) and
weighted average cost.
A revised version of IAS 2 was issued in December 2003 and applies to annual
periods beginning on or after 1 January 2005.
History of IAS 2
Date
Development
Comments
September 19
74
Exposure Draft E2 Valuation and

Presentation of Inventories in the
Context of the Historical Cost
System published
October 1975
IAS 2 Valuation and Presentation

of Inventories in the Context of
the Historical Cost System issued
August 1991
Exposure Draft
E38 Inventories published
December 19
93
IAS 9 (1993) Inventories issued
Operative for annual

financial statements
covering periods
beginning on or after
1 January 1995
18 December
2003
IAS 2 Inventories issued
Effective for annual

periods beginning on
or after 1 January
2005
Related Interpretations
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine
SIC-1 Consistency - Different Cost Formulas for Inventories. SIC-1 was

superseded by and incorporated into IAS 2 (Revised 2003).
Summary of IAS 2
Objective of IAS 2
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. It also
provides guidance on the cost formulas that are used to assign costs to inventories.
Scope
Inventories include assets held for sale in the ordinary course of business (finished
goods), assets in the production process for sale in the ordinary course of business
(work in process), and materials and supplies that are consumed in production (raw
materials). [IAS 2.6]
However, IAS 2 excludes certain inventories from its scope: [IAS 2.2]
work in process arising under construction contracts (see IAS 11 Construction

Contracts)
financial instruments (see IAS 39 Financial Instruments: Recognition and

Measurement)
biological assets related to agricultural activity and agricultural produce at

the point of harvest (see IAS 41 Agriculture).
Also, while the following are within the scope of the standard, IAS 2 does not apply
to the measurement of inventories held by: [IAS 2.3]
producers of agricultural and forest products, agricultural produce after

harvest, and minerals and mineral products, to the extent that they are
measured at net realisable value (above or below cost) in accordance with
well-established practices in those industries. When such inventories are
measured at net realisable value, changes in that value are recognised in
profit or loss in the period of the change
commodity brokers and dealers who measure their inventories at fair value
less costs to sell. When such inventories are measured at fair value less costs
to sell, changes in fair value less costs to sell are recognised in profit or loss
in the period of the change.
Fundamental principle of IAS 2

Inventories are required to be stated at the lower of cost and net realisable value
(NRV). [IAS 2.9]
Measurement of inventories
Cost should include all: [IAS 2.10]
costs of purchase (including taxes, transport, and handling) net of trade

discounts received
costs of conversion (including fixed and variable manufacturing overheads)

and
other costs incurred in bringing the inventories to their present location and
condition
IAS 23 Borrowing Costs identifies some limited circumstances where borrowing

costs (interest) can be included in cost of inventories that meet the definition of a
qualifying asset. [IAS 2.17 and IAS 23.4]
Inventory cost should not include: [IAS 2.16 and 2.18]
abnormal waste
storage costs
administrative overheads unrelated to production
selling costs
foreign exchange differences arising directly on the recent acquisition of

inventories invoiced in a foreign currency
interest cost when inventories are purchased with deferred settlement terms.
The standard cost and retail methods may be used for the measurement of cost,
provided that the results approximate actual cost. [IAS 2.21-22]
For inventory items that are not interchangeable, specific costs are attributed to the
specific individual items of inventory. [IAS 2.23]
For items that are interchangeable, IAS 2 allows the FIFO or weighted average cost
formulas. [IAS 2.25] The LIFO formula, which had been allowed prior to the 2003
revision of IAS 2, is no longer allowed.
The same cost formula should be used for all inventories with similar characteristics
as to their nature and use to the entity. For groups of inventories that have different
characteristics, different cost formulas may be justified. [IAS 2.25]
Write-down to net realisable value
NRV is the estimated selling price in the ordinary course of business, less the
estimated cost of completion and the estimated costs necessary to make the sale.
[IAS 2.6] Any write-down to NRV should be recognised as an expense in the period
in which the write-down occurs. Any reversal should be recognised in the income
statement in the period in which the reversal occurs. [IAS 2.34]
Expense recognition
IAS 18 Revenue addresses revenue recognition for the sale of goods. When
inventories are sold and revenue is recognised, the carrying amount of those
inventories is recognised as an expense (often called cost-of-goods-sold). Any writedown to NRV and any inventory losses are also recognised as an expense when they
occur. [IAS 2.34]
Disclosure
Required disclosures: [IAS 2.36]
accounting policy for inventories
Carrying amount, generally classified as merchandise, supplies, materials,

work in progress, and finished goods. The classifications depend on what is
appropriate for the entity
carrying amount of any inventories carried at fair value less costs to sell
amount of any write-down of inventories recognised as an expense in the

period
amount of any reversal of a write-down to NRV and the circumstances that

led to such reversal
carrying amount of inventories pledged as security for liabilities
cost of inventories recognised as expense (cost of goods sold).
IAS 2 acknowledges that some enterprises classify income statement expenses by

nature (materials, labour, and so on) rather than by function (cost of goods sold,
selling expense, and so on). Accordingly, as an alternative to disclosing cost of
goods sold expense, IAS 2 allows an entity to disclose operating costs recognised
during the period by nature of the cost (raw materials and consumables, labour
costs, other operating costs) and the amount of the net change in inventories for
the period). [IAS 2.39] This is consistent with IAS 1 Presentation of Financial
Statements, which allows presentation of expenses by function or nature.
IAS 8 Accounting Policies, Changes in Accounting Estimates and

Errors
Overview
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors is applied in
selecting and applying accounting policies, accounting for changes in estimates and
reflecting corrections of prior period errors.
The standard requires compliance with any specific IFRS applying to a transaction,
event or condition, and provides guidance on developing accounting policies for
other items that result in relevant and reliable information. Changes in accounting
policies and corrections of errors are generally retrospectively accounted for,
whereas changes in accounting estimates are generally accounted for on a
prospective basis.
IAS 8 was reissued in December 2005 and applies to annual periods beginning on or
after 1 January 2005.
History of IAS 8
October 1976
Exposure Draft E8 The Treatment in the Income Statement of

Unusual Items and Changes in Accounting Estimates and
Accounting Policies
February 197
8
IAS 8 Unusual and Prior Period Items and Changes in

Accounting Policies
July 1992
Exposure Draft E46 Extraordinary Items, Fundamental Errors

and Changes in Accounting Policies
December 19
93
IAS 8 (1993) Net Profit or Loss for the Period, Fundamental

Errors and Changes in Accounting Policies (revised as part of
the 'Comparability of Financial Statements' project)
1 January 199
5
Effective date of IAS 8 (1993)
18 December
2003
Revised version of IAS 8 issued by the IASB
1 January 200
5
IAS 8(2003) supersedes SIC-2 Consistency - Capitalisation of Borrowing Costs
IAS 8(2003) supersedes SIC-18 Consistency - Alternative Methods.
Amendments under consideration by the IASB
Disclosure initiative Principles of disclosure (research project)
Disclosure initiative Materiality (research project)
Summary of IAS 8
Key definitions [IAS 8.5]
Accounting policies are the specific principles, bases, conventions, rules

and practices applied by an entity in preparing and presenting financial
statements.
A change in accounting estimate is an adjustment of the carrying amount

of an asset or liability, or related expense, resulting from reassessing the
expected future benefits and obligations associated with that asset or liability.
International Financial Reporting Standardsare standards and

interpretations adopted by the International Accounting Standards Board
(IASB). They comprise:
o
International Financial Reporting Standards (IFRSs)
International Accounting Standards (IASs)
Interpretations developed by the International Financial Reporting

Interpretations Committee (IFRIC) or the former Standing
Interpretations Committee (SIC) and approved by the IASB.
Materiality. Omissions or misstatements of items are material if they could,

by their size or nature, individually or collectively, influence the economic
decisions of users taken on the basis of the financial statements.
Prior period errors are omissions from, and misstatements in, an entity's
financial statements for one or more prior periods arising from a failure to
use, or misuse of, reliable information that was available and could
reasonably be expected to have been obtained and taken into account in
preparing those statements. Such errors result from mathematical mistakes,
mistakes in applying accounting policies, oversights or misinterpretations of
facts, and fraud.
Selection and application of accounting policies

When a Standard or an Interpretation specifically applies to a transaction, other
event or condition, the accounting policy or policies applied to that item must be
determined by applying the Standard or Interpretation and considering any relevant
Implementation Guidance issued by the IASB for the Standard or Interpretation. [IAS
8.7]
In the absence of a Standard or an Interpretation that specifically applies to a
transaction, other event or condition, management must use its judgement in
developing and applying an accounting policy that results in information that is
relevant and reliable. [IAS 8.10]. In making that judgement, management must refer
to, and consider the applicability of, the following sources in descending order:
the requirements and guidance in IASB standards and interpretations dealing

with similar and related issues; and
the definitions, recognition criteria and measurement concepts for assets,

liabilities, income and expenses in the Framework. [IAS 8.11]
Management may also consider the most recent pronouncements of other standardsetting bodies that use a similar conceptual framework to develop accounting
standards, other accounting literature and accepted industry practices, to the
extent that these do not conflict with the sources in paragraph 11. [IAS 8.12]
Consistency of accounting policies
An entity shall select and apply its accounting policies consistently for similar
transactions, other events and conditions, unless a Standard or an Interpretation
specifically requires or permits categorization of items for which different policies
may be appropriate. If a Standard or an Interpretation requires or permits such
categorization, an appropriate accounting policy shall be selected and applied
consistently to each category. [IAS 8.13]
Changes in accounting policies
An entity is permitted to change an accounting policy only if the change:
is required by a standard or interpretation; or
Results in the financial statements providing reliable and more relevant

information about the effects of transactions, other events or conditions on
the entity's financial position, financial performance, or cash flows. [IAS 8.14]
Note that changes in accounting policies do not include applying an accounting

policy to a kind of transaction or event that did not occur previously or were
immaterial. [IAS 8.16]
If a change in accounting policy is required by a new IASB standard or
interpretation, the change is accounted for as required by that new pronouncement
or, if the new pronouncement does not include specific transition provisions, then
the change in accounting policy is applied retrospectively. [IAS 8.19]
Retrospective application means adjusting the opening balance of each affected
component of equity for the earliest prior period presented and the other
comparative amounts disclosed for each prior period presented as if the new
accounting policy had always been applied. [IAS 8.22]
However, if it is impracticable to determine either the period-specific effects

or the cumulative effect of the change for one or more prior periods
presented, the entity shall apply the new accounting policy to the carrying
amounts of assets and liabilities as at the beginning of the earliest period for
which retrospective application is practicable, which may be the current
period, and shall make a corresponding adjustment to the opening balance of
each affected component of equity for that period. [IAS 8.24]
Also, if it is impracticable to determine the cumulative effect, at the

beginning of the current period, of applying a new accounting policy to all
prior periods, the entity shall adjust the comparative information to apply the
new accounting policy prospectively from the earliest date practicable. [IAS
8.25]
Disclosures relating to changes in accounting policies

Disclosures relating to changes in accounting policy caused by a new standard or
interpretation include: [IAS 8.28]
the title of the standard or interpretation causing the change
the nature of the change in accounting policy
a description of the transitional provisions, including those that might have

an effect on future periods
for the current period and each prior period presented, to the extent
practicable, the amount of the adjustment:
o
for each financial statement line item affected, and
for basic and diluted earnings per share (only if the entity is applying
IAS 33)
the amount of the adjustment relating to periods before those presented, to

the extent practicable
if retrospective application is impracticable, an explanation and description of

how the change in accounting policy was applied.
Financial statements of subsequent periods need not repeat these disclosures.

Disclosures relating to voluntary changes in accounting policy include: [IAS 8.29]
the nature of the change in accounting policy
the reasons why applying the new accounting policy provides reliable and
more relevant information
for the current period and each prior period presented, to the extent
practicable, the amount of the adjustment:
IAS 33)
the amount of the adjustment relating to periods before those presented, to

the extent practicable
if retrospective application is impracticable, an explanation and description of

how the change in accounting policy was applied.

If an entity has not applied a new standard or interpretation that has been issued
but is not yet effective, the entity must disclose that fact and any and known or
reasonably estimable information relevant to assessing the possible impact that the
new pronouncement will have in the year it is applied. [IAS 8.30]
Changes in accounting estimates
The effect of a change in an accounting estimate shall be recognized prospectively
by including it in profit or loss in: [IAS 8.36]
the period of the change, if the change affects that period only, or
the period of the change and future periods, if the change affects both.
However, to the extent that a change in an accounting estimate gives rise to

changes in assets and liabilities, or relates to an item of equity, it is recognized by
adjusting the carrying amount of the related asset, liability, or equity item in the
period of the change. [IAS 8.37]
Disclosures relating to changes in accounting estimates
Disclose:
the nature and amount of a change in an accounting estimate that has an

effect in the current period or is expected to have an effect in future periods
if the amount of the effect in future periods is not disclosed because

estimating it is impracticable, an entity shall disclose that fact. [IAS 8.39-40]
Errors
The general principle in IAS 8 is that an entity must correct all material prior period
errors retrospectively in the first set of financial statements authorised for issue
after their discovery by: [IAS 8.42]
restating the comparative amounts for the prior period(s) presented in which
the error occurred; or
if the error occurred before the earliest prior period presented, restating the
opening balances of assets, liabilities and equity for the earliest prior period
presented.
However, if it is impracticable to determine the period-specific effects of an error on

comparative information for one or more prior periods presented, the entity must
restate the opening balances of assets, liabilities, and equity for the earliest period
for which retrospective restatement is practicable (which may be the current
period). [IAS 8.44]
Further, if it is impracticable to determine the cumulative effect, at the beginning of
the current period, of an error on all prior periods, the entity must restate the
comparative information to correct the error prospectively from the earliest date
practicable. [IAS 8.45]
Disclosures relating to prior period errors
Disclosures relating to prior period errors include: [IAS 8.49]
the nature of the prior period error
for each prior period presented, to the extent practicable, the amount of the
correction:
o
IAS 33)
the amount of the correction at the beginning of the earliest prior period
presented
if retrospective restatement is impracticable, an explanation and description

of how the error has been corrected.
IAS 10 Events After the Reporting Period

Overview
IAS 10 Events after the Reporting Period contains requirements for when events
after the end of the reporting period should be adjusted in the financial statements.
Adjusting events are those providing evidence of conditions existing at the end of
the reporting period, whereas non-adjusting events are indicative of conditions
arising after the reporting period (the latter being disclosed where material).
IAS 10 was reissued in December 2003 and applies to annual periods beginning on
or after 1 January 2005.
History of IAS 10
July 1977
Exposure Draft E10 Contingencies and Events Occurring

After the Balance Sheet Date
October 1978
IAS 10 Contingencies and Events Occurring After the Balance

Sheet Date effective 1 January 1980
1994
IAS 10 (1978) was reformatted
August 1997
Exposure Draft E59 Provisions, Contingent Liabilities and

Contingent Assets
September 19
98
IAS 37 Provisions, Contingent Liabilities and Contingent

Assets
1 July 1999
Effective date of IAS 37, which superseded those portions of

IAS 10 (1978) dealing with contingencies
November 19
98
Exposure Draft E63 Events After the Balance Sheet Date
May 1999
IAS 10 (1999) Events After the Balance Sheet

Date superseded those portions of IAS 10 (1978) dealing with
events after the balance sheet date
1 January 200
0
18 December
2003
1 January 200
5
Effective date of IAS 10 (Revised 2003)
6 September
2007
Retiled Events after the Reporting Period as a consequential

amendment resulting from revisions to IAS 1
None
Summary of IAS 10
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. [IAS 10.3]
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. [IAS 10.3]
Non-adjusting event: An event after the reporting period that is indicative of a
condition that arose after the end of the reporting period. [IAS 10.3]
Accounting
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, including events that indicate that the going concern
assumption in relation to the whole or part of the enterprise is not
appropriate. [IAS 10.8]
Do not adjust for non-adjusting events - events or conditions that arose after
the end of the reporting period. [IAS 10.10]
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. [IAS 10.12]
Going concern issues arising after end of the reporting period

An entity shall not prepare its financial statements on a going concern basis if
management determines after the end of the reporting period either that it intends
to liquidate the entity or to cease trading, or that it has no realistic alternative but
to do so. [IAS 10.14]
Disclosure
Non-adjusting events should be disclosed if they are of such importance that nondisclosure 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 10.21]
A company should update disclosures that relate to conditions that existed at the
end of the reporting period to reflect any new information that it receives after the
reporting period about those conditions. [IAS 10.19]
Companies must disclose the date when the financial statements were authorised
for issue and who gave that authorisation. If the enterprise's owners or others have
the power to amend the financial statements after issuance, the enterprise must
disclose that fact. [IAS 10.17]
IAS 11 Construction Contracts

Overview
IAS 11 Construction Contracts provides requirements on the allocation of contract
revenue and contract costs to accounting periods in which construction work is
performed. Contract revenues and expenses are recognised by reference to the
stage of completion of contract activity where the outcome of the construction
contract can be estimated reliably, otherwise revenue is recognised only to the
extent of recoverable contract costs incurred.
IAS 11 was reissued in December 1993 and is applicable for periods beginning on or
History of IAS 11
December
1977
Exposure Draft E11 Accounting for Construction Contracts
March 1979
IAS 11 Accounting for Construction Contracts
1 January 1
980
Effective date of IAS 11
May 1992
Exposure Draft E42 Construction Contracts
December
1993
IAS 11 (1993) Construction Contracts (revised as part of the

'Comparability of Financial Statements' project)
1 January 1
995
1 January
2017
IAS 11 will be superseded by IFRS 15 Revenue from Contracts

with Customers
IFRIC 15 Agreements for the Construction of Real Estate
IFRIC 12 Service Concession Arrangements
Summary of IAS 11
Objective of IAS 11
The objective of IAS 11 is to prescribe the accounting treatment of revenue and
costs associated with construction contracts.
What is a construction contract?
A construction contract is a contract specifically negotiated for the construction of
an asset or a group of interrelated assets. [IAS 11.3]
Under IAS 11, if a contract covers two or more assets, the construction of each
asset should be accounted for separately if (a) separate proposals were submitted
for each asset, (b) portions of the contract relating to each asset were negotiated
separately, and (c) costs and revenues of each asset can be measured. Otherwise,
the contract should be accounted for in its entirety. [IAS 11.8]
Two or more contracts should be accounted for as a single contract if they were
negotiated together and the work is interrelated. [IAS 11.9]
If a contract gives the customer an option to order one or more additional assets,
construction of each additional asset should be accounted for as a separate contract
if either (a) the additional asset differs significantly from the original asset(s) or (b)
the price of the additional asset is separately negotiated. [IAS 11.10]
What is included in contract revenue and costs?
Contract revenue should include the amount agreed in the initial contract, plus
revenue from alternations in the original contract work, plus claims and incentive
payments that (a) are expected to be collected and (b) that can be measured
reliably. [IAS 11.11]
Contract costs should include costs that relate directly to the specific contract, plus
costs that are attributable to the contractor's general contracting activity to the
extent that they can be reasonably allocated to the contract, plus such other costs
that can be specifically charged to the customer under the terms of the contract.
[IAS 11.16]
Accounting
If the outcome of a construction contract can be estimated reliably, revenue and
costs should be recognised in proportion to the stage of completion of contract
activity. This is known as the percentage of completion method of accounting. [IAS

11.22]
To be able to estimate the outcome of a contract reliably, the entity must be able to
make a reliable estimate of total contract revenue, the stage of completion, and the
costs to complete the contract. [IAS 11.23-24]
If the outcome cannot be estimated reliably, no profit should be recognised. Instead,
contract revenue should be recognised only to the extent that contract costs
incurred are expected to be recoverable and contract costs should be expensed as
incurred. [IAS 11.32]
The stage of completion of a contract can be determined in a variety of ways including the proportion that contract costs incurred for work performed to date
bear to the estimated total contract costs, surveys of work performed, or
completion of a physical proportion of the contract work. [IAS 11.30]
An expected loss on a construction contract should be recognised as an expense as
soon as such loss is probable. [IAS 11.22 and 11.36]
Disclosure
amount of contract revenue recognised; [IAS 11.39(a)]
method used to determine revenue; [IAS 11.39(b)]
method used to determine stage of completion; [IAS 11.39(c)] and
for contracts in progress at balance sheet date: [IAS 11.40]

o
aggregate costs incurred and recognised profit
amount of advances received
amount of retentions
Presentation
The gross amount due from customers for contract work should be shown as an
asset. [IAS 11.42]
The gross amount due to customers for contract work should be shown as a liability.
[IAS 11.42]
IAS 12 Income Taxes
Overview
IAS 12 Income Taxes implements a so-called 'comprehensive balance sheet method'
of accounting for income taxes which recognises both the current tax consequences
of transactions and events and the future tax consequences of the future recovery
or settlement of the carrying amount of an entity's assets and liabilities. Differences
between the carrying amount and tax base of assets and liabilities, and carried
forward tax losses and credits, are recognised, with limited exceptions, as deferred
tax liabilities or deferred tax assets, with the latter also being subject to a 'probable
profits' test.
IAS 12 was reissued in October 1996 and is applicable to annual periods beginning
on or after 1 January 1998.
History of IAS 12
Date
Development
Comments
April 1978
Exposure Draft E13 Accounting

for Taxes on Income published
July 1979
IAS 12 Accounting for Taxes on

Income issued
January 1989
Exposure Draft E33 Accounting

for Taxes on Income published
1994
October 1994
Exposure Draft E49 Income

Taxes published
October 1996
IAS 12 Income Taxes issued
Operative for financial

statements covering
or after 1 January
1988
October 2000
Limited Revisions to IAS 12

published (tax consequences of
dividends)
Operative for financial

statements covering
or after 1 January
2001
31 March 200
9
Exposure Draft
ED/2009/2 Income Tax published
Comment deadline 31
July 2009
(proposals were not
finalised)
10 September
2010
Exposure Draft
ED/2010/11 Deferred Tax:
Recovery of Underlying Assets
(Proposed amendments to IAS
12) published
Comment deadline 9
November 2010
20 December
Amended by Deferred Tax:
2010
Recovery of Underlying Assets
or after 1 January
2012
IFRIC 7 Applying the Restatement Approach under IAS 29 'Financial Reporting

in Hyperinflationary Economies'
SIC-21 Income Taxes Recovery of Revalued Non-Depreciable Assets (SIC-21

was incorporated into IAS 12 and withdrawn by the December 2010
amendments made by Deferred Tax: Recovery of Underlying Assets)
SIC-25 Income Taxes Changes in the Tax Status of an Enterprise or its

Shareholders
IAS 12 Recognition of deferred tax assets for unrealised losses
Research project Income taxes (longer term)
Summary of IAS 12
Objective of IAS 12
The objective of IAS 12 (1996) is to prescribe the accounting treatment for income
taxes.
In meeting this objective, IAS 12 notes the following:
It is inherent in the recognition of an asset or liability that that asset or

liability will be recovered or settled, and this recovery or settlement may give
rise to future tax consequences which should be recognised at the same time
as the asset or liability
An entity should account for the tax consequences of transactions and other
events in the same way it accounts for the transactions or other events
themselves.
Key definitions
[IAS 12.5]
Tax base
The tax base of an asset or liability is the amount attributed

to that asset or liability for tax purposes
Temporary
Differences between the carrying amount of an asset or
differences
liability in the statement of financial position and its tax

bases
Taxable
temporary
differences
Temporary differences that will result in taxable amounts in

determining taxable profit (tax loss) of future periods when
the carrying amount of the asset or liability is recovered or
settled
Deductible
temporary
differences
Temporary differences that will result in amounts that are

deductible in determining taxable profit (tax loss) of future
periods when the carrying amount of the asset or liability is
recovered or settled
Deferred tax
liabilities
The amounts of income taxes payable in future periods in

respect of taxable temporary differences
Deferred tax
assets
The amounts of income taxes recoverable in future periods in

respect of:
1. deductible temporary differences
2. the carryforward of unused tax losses, and
3. the carryforward of unused tax credits

Current tax
Current tax for the current and prior periods is recognised as a liability to the extent
that it has not yet been settled, and as an asset to the extent that the amounts
already paid exceed the amount due. [IAS 12.12] The benefit of a tax loss which can
be carried back to recover current tax of a prior period is recognised as an asset.
[IAS 12.13]
Current tax assets and liabilities are measured at the amount expected to be paid to
(recovered from) taxation authorities, using the rates/laws that have been enacted
or substantively enacted by the balance sheet date. [IAS 12.46]
Calculation of deferred taxes
Formulae
Temporary difference
Carrying amount - Tax base

=
Deferred tax asset or liability
Temporary difference x Tax rate

=
Deferred tax assets and deferred tax liabilities can be calculated using the following
formulae:
The following formula can be used in the calculation of deferred taxes arising from
unused tax losses or the following formula can be used in the calculation of deferred
taxes arising from unused tax losses or unused tax credits:
Deferred tax asset
Unused tax loss or unused tax credits x Tax rate

=
Tax bases
The tax base of an item is crucial in determining the amount of any temporary
difference, and effectively represents the amount at which the asset or liability
would be recorded in a tax-based balance sheet. IAS 12 provides the following
guidance on determining tax bases:
Assets. The tax base of an asset is the amount that will be deductible
against taxable economic benefits from recovering the carrying amount of
the asset. Where recovery of an asset will have no tax consequences, the tax
base is equal to the carrying amount. [IAS 12.7]
Revenue received in advance. The tax base of the recognised liability is its
carrying amount, less revenue that will not be taxable in future periods [IAS
12.8]
Other liabilities. The tax base of a liability is its carrying amount, less any
amount that will be deductible for tax purposes in respect of that liability in
future periods [IAS 12.8]
Unrecognized items. If items have a tax base but are not recognised in the
statement of financial position, the carrying amount is nil [IAS 12.9]
Tax bases not immediately apparent. If the tax base of an item is not
immediately apparent, the tax base should effectively be determined in such
as manner to ensure the future tax consequences of recovery or settlement

of the item is recognised as a deferred tax amount [IAS 12.10]
Consolidated financial statements. In consolidated financial statements,

the carrying amounts in the consolidated financial statements are used, and
the tax bases determined by reference to any consolidated tax return (or
otherwise from the tax returns of each entity in the group). [IAS 12.11]
Examples
The determination of the tax base will depend on the applicable tax laws and
the entity's expectations as to recovery and settlement of its assets and
liabilities. The following are some basic examples:
Property, plant and equipment. The tax base of property, plant

and equipment that is depreciable for tax purposes that is used in the
entity's operations is the unclaimed tax depreciation permitted as
deduction in future periods
Receivables. If receiving payment of the receivable has no tax

consequences, its tax base is equal to its carrying amount
Goodwill. If goodwill is not recognised for tax purposes, its tax base is
nil (no deductions are available)
Revenue in advance. If the revenue is taxed on receipt but deferred

for accounting purposes, the tax base of the liability is equal to its
carrying amount (as there are no future taxable amounts). Conversely,
if the revenue is recognised for tax purposes when the goods or
services are received, the tax base will be equal to nil
Loans. If there are no tax consequences from repayment of the loan,

the tax base of the loan is equal to its carrying amount. If the
repayment has tax consequences (e.g. taxable amounts or deductions
on repayments of foreign currency loans recognised for tax purposes
at the exchange rate on the date the loan was drawn down), the tax
consequence of repayment at carrying amount is adjusted against the
carrying amount to determine the tax base (which in the case of the
aforementioned foreign currency loan would result in the tax base of
the loan being determined by reference to the exchange rate on the
draw down date).
Recognition and measurement of deferred taxes

Recognition of deferred tax liabilities
The general principle in IAS 12 is that a deferred tax liability is recognised for all
taxable temporary differences. There are three exceptions to the requirement to
recognise a deferred tax liability, as follows:
liabilities arising from initial recognition of goodwill [IAS 12.15(a)]
liabilities arising from the initial recognition of an asset/liability other than in

a business combination which, at the time of the transaction, does not affect
either the accounting or the taxable profit [IAS 12.15(b)]
liabilities arising from temporary differences associated with investments in

subsidiaries, branches, and associates, and interests in joint arrangements,
but only to the extent that the entity is able to control the timing of the
reversal of the differences and it is probable that the reversal will not occur in
the foreseeable future. [IAS 12.39]
Example
An entity undertaken a business combination which results in the recognition of
goodwill in accordance with IFRS 3 Business Combinations. The goodwill is not
tax depreciable or otherwise recognised for tax purposes.
As no future tax deductions are available in respect of the goodwill, the tax
base is nil. Accordingly, a taxable temporary difference arises in respect of the
entire carrying amount of the goodwill. However, the taxable temporary
difference does not result in the recognition of a deferred tax liability because
of the recognition exception for deferred tax liabilities arising from goodwill.
Recognition of deferred tax assets

A deferred tax asset is recognised for deductible temporary differences, unused tax
losses and unused tax credits to the extent that it is probable that taxable profit will
be available against which the deductible temporary differences can be utilised,
unless the deferred tax asset arises from: [IAS 12.24]
the initial recognition of an asset or liability other than in a business

combination which, at the time of the transaction, does not affect accounting
profit or taxable profit.
Deferred tax assets for deductible temporary differences arising from investments
in subsidiaries, branches and associates, and interests in joint arrangements, are
only recognised to the extent that it is probable that the temporary difference will
reverse in the foreseeable future and that taxable profit will be available against
which the temporary difference will be utilised. [IAS 12.44]
The carrying amount of deferred tax assets are reviewed at the end of each
reporting period and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow the benefit of part or all of that
deferred tax asset to be utilised. Any such reduction is subsequently reversed to the
extent that it becomes probable that sufficient taxable profit will be available.
[IAS 12.37]
A deferred tax asset is recognised for an unused tax loss carryforward or unused tax
credit if, and only if, it is considered probable that there will be sufficient future
taxable profit against which the loss or credit carryforward can be utilised.
[IAS 12.34]
Measurement of deferred tax
Deferred tax assets and liabilities are measured at the tax rates that are expected
to apply to the period when the asset is realised or the liability is settled, based on
tax rates/laws that have been enacted or substantively enacted by the end of the
reporting period. [IAS 12.47] The measurement reflects the entity's expectations, at
the end of the reporting period, as to the manner in which the carrying amount of
its assets and liabilities will be recovered or settled. [IAS 12.51]
IAS 12 provides the following guidance on measuring deferred taxes:
Where the tax rate or tax base is impacted by the manner in which the entity
recovers its assets or settles its liabilities (e.g. whether an asset is sold or
used), the measurement of deferred taxes is consistent with the way in which
an asset is recovered or liability settled [IAS 12.51A]
Where deferred taxes arise from revalued non-depreciable assets (e.g.

revalued land), deferred taxes reflect the tax consequences of selling the
asset [IAS 12.51B]
Deferred taxes arising from investment property measured at fair value

under IAS 40 Investment Property reflect the rebuttable presumption that the
investment property will be recovered through sale [IAS 12.51C-51D]
If dividends are paid to shareholders, and this causes income taxes to be

payable at a higher or lower rate, or the entity pays additional taxes or
receives a refund, deferred taxes are measured using the tax rate applicable
to undistributed profits [IAS 12.52A]
Deferred tax assets and liabilities cannot be discounted. [IAS 12.53]

Recognition of tax amounts for the period
Amount of income tax to recognise
The following formula summarises the amount of tax to be recognised in an
accounting period:
Tax to recognise for the

period
Current tax for the

period
Movement in deferred tax balances for the pe
Where to recognise income tax for the period

Consistent with the principles underlying IAS 12, the tax consequences of
transactions and other events are recognised in the same way as the items giving
rise to those tax consequences. Accordingly, current and deferred tax is recognised
as income or expense and included in profit or loss for the period, except to the
extent that the tax arises from: [IAS 12.58]
transactions or events that are recognised outside of profit or loss (other

comprehensive income or equity) - in which case the related tax amount is
also recognised outside of profit or loss [IAS 12.61A]
a business combination - in which case the tax amounts are recognised as

identifiable assets or liabilities at the acquisition date, and accordingly
effectively taken into account in the determination of goodwill when
applying IFRS 3 Business Combinations. [IAS 12.66]
Example
An entity undertakes a capital raising and incurs incremental costs directly
attributable to the equity transaction, including regulatory fees, legal costs and
stamp duties. In accordance with the requirements of IAS 32 Financial
Instruments: Presentation, the costs are accounted for as a deduction from
equity.
Assume that the costs incurred are immediately deductible for tax purposes,
reducing the amount of current tax payable for the period. When the tax benefit
of the deductions is recognised, the current tax amount associated with the
costs of the equity transaction is recognised directly in equity, consistent with
the treatment of the costs themselves.
IAS 12 provides the following additional guidance on the recognition of income tax
for the period:
Where it is difficult to determine the amount of current and deferred tax

relating to items recognised outside of profit or loss (e.g. where there are
graduated rates or tax), the amount of income tax recognised outside of
profit or loss is determined on a reasonable pro-rata allocation, or using

another more appropriate method [IAS 12.63]
In the circumstances where the payment of dividends impacts the tax rate or
results in taxable amounts or refunds, the income tax consequences of
dividends are considered to be more directly linked to past transactions or
events and so are recognised in profit or loss unless the past transactions or
events were recognised outside of profit or loss [IAS 12.52B]
The impact of business combinations on the recognition of pre-combination

deferred tax assets are not included in the determination of goodwill as part
of the business combination, but are separately recognised [IAS 12.68]
The recognition of acquired deferred tax benefits subsequent to a business

combination are treated as 'measurement period' adjustments
(see IFRS 3 Business Combinations) if they qualify for that treatment, or
otherwise are recognised in profit or loss [IAS 12.68]
Tax benefits of equity settled share based payment transactions that exceed
the tax effected cumulative remuneration expense are considered to relate to
an equity item and are recognised directly in equity. [IAS 12.68C]
Presentation
Current tax assets and current tax liabilities can only be offset in the statement of
financial position if the entity has the legal right and the intention to settle on a net
basis. [IAS 12.71]
Deferred tax assets and deferred tax liabilities can only be offset in the statement of
financial position if the entity has the legal right to settle current tax amounts on a
net basis and the deferred tax amounts are levied by the same taxing authority on
the same entity or different entities that intend to realise the asset and settle the
liability at the same time. [IAS 12.74]
The amount of tax expense (or income) related to profit or loss is required to be
presented in the statement(s) of profit or loss and other comprehensive income.
[IAS 12.77]
The tax effects of items included in other comprehensive income can either be
shown net for each item, or the items can be shown before tax effects with an
aggregate amount of income tax for groups of items (allocated between items that
will and will not be reclassified to profit or loss in subsequent periods). [IAS 1.91]
Disclosure
IAS 12.80 requires the following disclosures:
major components of tax expense (tax income) [IAS 12.79] Examples 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 unrecognised tax loss,

tax credit or temporary difference of a prior period
write down, or reversal of a previous write down, of a deferred tax

asset
amount of tax expense (income) relating to changes in accounting

policies and corrections of errors.
IAS 12.81 requires the following disclosures:
aggregate current and deferred tax relating to items recognised directly in

equity
tax relating to each component of other comprehensive income
explanation of the relationship between tax expense (income) and the tax
that would be expected by applying the current tax rate to accounting profit
or loss (this can be presented as a reconciliation of amounts of tax or a
reconciliation of the rate of tax)
changes in tax rates
amounts and other details of deductible temporary differences, unused tax

losses, and unused tax credits
temporary differences associated with investments in subsidiaries, branches

and associates, and interests in joint arrangements
for each type of temporary difference and unused tax loss and credit, the
amount of deferred tax assets or liabilities recognised in the statement of
financial position and the amount of deferred tax income or expense
recognised in profit or loss
tax relating to discontinued operations
tax consequences of dividends declared after the end of the reporting period
information about the impacts of business combinations on an acquirer's

deferred tax assets
recognition of deferred tax assets of an acquiree after the acquisition date.
Other required disclosures:
details of deferred tax assets [IAS 12.82]
tax consequences of future dividend payments. [IAS 12.82A]
In addition to the disclosures required by IAS 12, some disclosures relating to

income taxes are required by IAS 1 Presentation of Financial Statements, as follows:
Disclosure on the face of the statement of financial position about current tax
assets, current tax liabilities, deferred tax assets, and deferred tax liabilities
[IAS 1.54(n) and (o)]
Disclosure of tax expense (tax income) in the profit or loss section of the
statement of profit or loss and other comprehensive income (or separate
statement if presented). [IAS 1.82(d)]
IAS 14 Segment Reporting (Superseded)

Overview
IAS 14 Segment Reporting requires reporting of financial information by business or
geographical area. It requires disclosures for 'primary' and 'secondary' segment
reporting formats, with the primary format based on whether the entity's risks and
returns are affected predominantly by the products and services it produces or by
the fact that it operates in different geographical areas.
IAS 14 was issued in August 1997, was applicable to annual periods beginning on or
after 1 July 1998, and was superseded by IFRS 8 Operating Segments with effect
from annual periods beginning on or after 1 January 2009.
History of IAS 14
March 1980
Exposure Draft E15 Reporting Financial Information by

Segment
August 1981
IAS 14 Reporting Financial Information by Segment
1 January 198
3
1994
December 19
95
Exposure Draft E51 Reporting Financial Information by

Segment
August 1997
IAS 14 Segment Reporting
1 July 1998
30 November
2006
IAS 14 is superseded by IFRS 8 Operating

Segments effective for annual periods beginning 1
January 2009
None
Summary of IAS 14
Objective of IAS 14
The objective of IAS 14 (Revised 1997) is to establish principles for reporting
financial information by line of business and by geographical area. It applies to
entities whose equity or debt securities are publicly traded and to entities in the
process of issuing securities to the public. In addition, any entity voluntarily
providing segment information should comply with the requirements of the
Standard.
Applicability
IAS 14 must be applied by entities whose debt or equity securities are publicly
traded and those in the process of issuing such securities in public securities
markets. [IAS 14.3]
If an entity that is not publicly traded chooses to report segment information and
claims that its financial statements conform to IFRSs, then it must follow IAS 14 in
full. [IAS 14.5]
Segment information need not be presented in the separate financial statements of
a (a) parent, (b) subsidiary, (c) equity method associate, or (d) equity method joint
venture that are presented in the same report as the consolidated statements. [IAS
14.6-7]
Key definitions
Business segment: a component of an entity that (a) provides a single product or

service or a group of related products and services and (b) that is subject to risks
and returns that are different from those of other business segments. [IAS 14.9]
Geographical segment: a component of an entity that (a) provides products and
services within a particular economic environment and (b) that is subject to risks
and returns that are different from those of components operating in other
economic environments. [IAS 14.9]
Reportable segment: a business segment or geographical segment for which IAS
14 requires segment information to be reported. [IAS 14.9]
Segment revenue: revenue, including intersegment revenue, that is directly
attributable or reasonably allocable to a segment. Includes interest and dividend
income and related securities gains only if the segment is a financial segment
(bank, insurance company, etc.). [IAS 14.16]
Segment expenses: expenses, including expenses relating to intersegment
transactions, that (a) result from operating activities and (b) are directly attributable
or reasonably allocable to a segment. Includes interest expense and related
securities losses only if the segment is a financial segment (bank, insurance
company, etc.). Segment expenses do not include:
interest
losses on sales of investments or debt extinguishments
losses on investments accounted for by the equity method
income taxes
general corporate administrative and head-office expenses that relate to the

entity as a whole [IAS 14.16]
Segment result: segment revenue minus segment expenses, before deducting

minority interest. [IAS 14.16]
Segment assets and segment liabilities: those operating assets (liabilities) that
are directly attributable or reasonably allocable to a segment. [IAS 14.16]
Identifying business and geographical segments
An entity must look to its organisational structure and internal reporting system to
identify reportable segments. In particular, IAS 14 presumes that segmentation in
internal financial reports prepared for the board of directors and chief executive
officer should normally determine segments for external financial reporting
purposes. Only if internal segments are not along either product/service or
geographical lines is further disaggregation appropriate. [IAS 14.26]
Geographical segments may be based either on where the entity's assets are
located or on where its customers are located. [IAS 14.14] Whichever basis is used,
several items of data must be presented on the other basis if significantly different.
[IAS 14.71-72]
Primary and secondary segments
For most entities one basis of segmentation is primary and the other is secondary,
with considerably less disclosure required for secondary segments. The entity
should determine whether business or geographical segments are to be used for its
primary segment reporting format based on whether the entity's risks and returns
are affected predominantly by the products and services it produces or by the fact
that it operates in different geographical areas. The basis for identification of the
predominant source and nature of risks and differing rates of return facing the
entity will usually be the entity's internal organisational and management structure
and its system of internal financial reporting to senior management. [IAS 14.26-27]
Which segments are reportable?
The entity's reportable segments are its business and geographical segments for
which a majority of their revenue is earned from sales to external customers and for
which: [IAS 14.35]
revenue from sales to external customers and from transactions with other
segments is 10% or more of the total revenue, external and internal, of all
segments; or
segment result, whether profit or loss, is 10% or more the combined result of
all segments in profit or the combined result of all segments in loss,
whichever is greater in absolute amount; or
assets are 10% or more of the total assets of all segments.
Segments deemed too small for separate reporting may be combined with each
other, if related, but they may not be combined with other significant segments for
which information is reported internally. Alternatively, they may be separately
reported. If neither combined nor separately reported, they must be included as an
unallocated reconciling item. [IAS 14.36]
If total external revenue attributable to reportable segments identified using the
10% thresholds outlined above is less than 75% of the total consolidated or entity
revenue, additional segments should be identified as reportable segments until at
least 75% of total consolidated or entity revenue is included in reportable segments.
[IAS 14.37]
Vertically integrated segments (those that earn a majority of their revenue from
intersegment transactions) may be, but need not be, reportable segments. [IAS
14.39] If not separately reported, the selling segment is combined with the buying
segment. [IAS 14.41]
IAS 14.42-43 contains special rules for identifying reportable segments in the years
in which a segment reaches or loses 10% significance.
What accounting policies should a segment follow?
Segment accounting policies must be the same as those used in the consolidated
financial statements. [IAS 14.44]
If assets used jointly by two or more segments are allocated to segments, the
related revenue and expenses must also be allocated. [IAS 14.47]
What must be disclosed?
IAS 14 has detailed guidance as to which items of revenue and expense are
included in segment revenue and segment expense. All companies will report a
standardised measure of segment result basically operating profit before interest,
taxes, and head office expenses. For an entity's primary segments, revised IAS 14
requires disclosure of: [IAS 14.51-67]
sales revenue (distinguishing between external and intersegment)
result
assets
the basis of intersegment pricing
liabilities
capital additions
depreciation and amortisation
significant unusual items
non-cash expenses other than depreciation
equity method income
Segment revenue includes "sales" from one segment to another. Under IAS 14,
these intersegment transfers must be measured on the basis that the entity actually
used to price the transfers. [IAS 14.75]
For secondary segments, disclose: [IAS 14.69-72]
revenue
assets
capital additions
Other disclosure matters addressed in IAS 14:
Disclosure is required of external revenue for a segment that is not deemed a

reportable segment because a majority of its sales are intersegment sales
but nonetheless its external sales are 10% or more of consolidated revenue.
[IAS 14.74]
Special disclosures are required for changes in segment accounting policies.

[IAS 14.76]
Where there has been a change in the identification of segments, prior year
information should be restated. If this is not practicable, segment data should
be reported for both the old and new bases of segmentation in the year of
change. [IAS 14.76]
Disclosure is required of the types of products and services included in each

reported business segment and of the composition of each reported
geographical segment, both primary and secondary. [IAS 14.81]
An entity must present a reconciliation between information reported for segments

and consolidated information. At a minimum: [IAS 14.67]
segment revenue should be reconciled to consolidated revenue
segment result should be reconciled to a comparable measure of

consolidated operating profit or loss and consolidated net profit or loss
segment assets should be reconciled to entity assets
Segment liabilities should be reconciled to entity liabilities.
IAS 15 Information Reflecting the Effects of Changing Prices

Withdrawn December 2003
December 2003Withdrawn effective 1 January 2005
IAS 16 Property, Plant and Equipment
Overview
IAS 16 Property, Plant and Equipment outlines the accounting treatment for most
types of property, plant and equipment. Property, plant and equipment is initially
measured at its cost, subsequently measured either using a cost or revaluation
model, and depreciated so that its depreciable amount is allocated on a systematic
basis over its useful life.
History of IAS 16
Date
Development
Comments
August 1980
Exposure Draft E18 Accounting for

Property, Plant and Equipment in
the Context of the Historical Cost
System published
March 1982
IAS 16 Accounting for Property,

Plant and Equipment issued
1 January 199
2
Exposure Draft E43 Property, Plant

and Equipment published
December 19
93
IAS 16 Property, Plant and

Equipment issued
(revised as part of the
'Comparability of Financial
Statements' project)
Operative for
covering periods
1 January 1995
April and July

1998
Amended to be consistent with IAS

22, IAS 36 and IAS 37
Operative for annual

covering periods
1 July 1999
18 December
2003
IAS 16 Property, Plant and

Equipment issued

Operative for
covering periods
1 January 1983
or after 1 January
2005
22 May 2008
Amended by Improvements to
IFRSs (routine sales of assets held
for rental)

or after 1 January
2009
17 May 2012
Amended by Annual Improvements

2009-2011 Cycle (classification of
servicing equipment)

or after 1 January
2013
12 December
2013

to IFRSs 20102012
Cycle (proportionate restatement of
accumulated depreciation under
the revaluation method)

or after 1 July 2014
12 May 2014
Amended by Clarification of
Acceptable Methods of
Depreciation and Amortisation
(Amendments to IAS 16 and IAS 38)

or after 1 January
2016
30 June 2014
Amended by Agriculture: Bearer

Plants (Amendments to IAS 16 and
IAS 41)

or after 1 January
2016
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine
SIC-6 Costs of Modifying Existing Software. SIC-6 was superseded by and

incorporated into IAS 16 (2003).
SIC-14 Property, Plant and Equipment Compensation for the Impairment or

Loss of Items. SIC-14 was superseded by and incorporated into IAS 16
(2003).
SIC-23 Property, Plant and Equipment - Major Inspection or Overhaul

Costs. SIC-23 was superseded by and incorporated into IAS 16 (2003).
none
Summary of IAS 16
Objective of IAS 16
The objective of 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 recognised in relation to them.
Scope
IAS 16 applies to the accounting for property, plant and equipment, except where
another standards requires or permits differing accounting treatments, for example:
assets classified as held for sale in accordance with IFRS 5 Non-current

Assets Held for Sale and Discontinued Operations
biological assets related to agricultural activity accounted for

under IAS 41 Agriculture
exploration and evaluation assets recognised in accordance

with IFRS 6 Exploration for and Evaluation of Mineral Resources
mineral rights and mineral reserves such as oil, natural gas and similar nonregenerative resources.
The standard does apply to property, plant, and equipment used to develop or
maintain the last three categories of assets. [IAS 16.3]
The cost model in IAS 16 also applies to investment property accounted for using
the cost model under IAS 40 Investment Property. [IAS 16.5]
The standard does apply to bearer plants but it does not apply to the produce on
bearer plants. [IAS 16.3]
Note: Bearer plants were brought into the scope of IAS 16 by Agriculture: Bearer
Plants (Amendments to IAS 16 and IAS 41), which applies to annual periods
beginning on or after 1 January 2016.
Recognition
Items of property, plant, and equipment should be recognised as assets when it is
probable that: [IAS 16.7]
it is probable that the future economic benefits associated with the asset will
flow to the entity, and
the cost of the asset can be measured reliably.
This recognition principle is applied to all property, plant, and equipment costs at
the time they are incurred. These costs include costs incurred initially to acquire or
construct an item of property, plant and equipment and costs incurred subsequently
to add to, replace part of, or service it.
IAS 16 does not prescribe the unit of measure for recognition what constitutes an
item of property, plant, and equipment. [IAS 16.9] Note, however, that if the cost
model is used (see below) each part of an item of property, plant, and equipment
with a cost that is significant in relation to the total cost of the item must be
depreciated separately. [IAS 16.43]
IAS 16 recognises that parts of some items of property, plant, and equipment may
require replacement at regular intervals. The carrying amount of an item of
property, plant, and equipment will include the cost of replacing the part of such an
item when that cost is incurred if the recognition criteria (future benefits and
measurement reliability) are met. The carrying amount of those parts that are
replaced is derecognised in accordance with the derecognition provisions of IAS
16.67-72. [IAS 16.13]
Also, continued operation of an item of property, plant, and equipment (for
example, an aircraft) may require regular major inspections for faults regardless of
whether parts of the item are replaced. When each major inspection is performed,
its cost is recognised in the carrying amount of the item of property, plant, and
equipment as a replacement if the recognition criteria are satisfied. If necessary,
the estimated cost of a future similar inspection may be used as an indication of
what the cost of the existing inspection component was when the item was acquired
or constructed. [IAS 16.14]
Initial measurement
An item of property, plant and equipment should initially be recorded at cost. [IAS
16.15] Cost includes all costs necessary to bring the asset to working condition for
its intended use. This would include not only its original purchase price but also
costs of site preparation, delivery and handling, installation, related professional
fees for architects and engineers, and the estimated cost of dismantling and
removing the asset and restoring the site (see IAS 37 Provisions, Contingent
Liabilities and Contingent Assets). [IAS 16.16-17]
If payment for an item of property, plant, and equipment is deferred, interest at a
market rate must be recognised or imputed. [IAS 16.23]
If an asset is acquired in exchange for another asset (whether similar or dissimilar in
nature), the cost will be measured at the fair value unless (a) the exchange
transaction lacks commercial substance or (b) the fair value of neither the asset
received nor the asset given up is reliably measurable. If the acquired item is not
measured at fair value, its cost is measured at the carrying amount of the asset
given up. [IAS 16.24]
Measurement subsequent to initial recognition
IAS 16 permits two accounting models:
Cost model. The asset is carried at cost less accumulated depreciation and
impairment. [IAS 16.30]
Revaluation model. The asset is carried at a revalued amount, being its fair
value at the date of revaluation less subsequent depreciation and
impairment, provided that fair value can be measured reliably. [IAS 16.31]
The revaluation model

Under the revaluation model, revaluations should be carried out regularly, so that
the carrying amount of an asset does not differ materially from its fair value at the
balance sheet date. [IAS 16.31]
If an item is revalued, the entire class of assets to which that asset belongs should
be revalued. [IAS 16.36]
Revalued assets are depreciated in the same way as under the cost model (see
below).
If a revaluation results in an increase in value, it should be credited to other
comprehensive income and accumulated in equity under the heading "revaluation
surplus" unless it represents the reversal of a revaluation decrease of the same
asset previously recognised as an expense, in which case it should be recognised in
profit or loss. [IAS 16.39]
A decrease arising as a result of a revaluation should be recognised as an expense
to the extent that it exceeds any amount previously credited to the revaluation
surplus relating to the same asset. [IAS 16.40]
When a revalued asset is disposed of, any revaluation surplus may be transferred
directly to retained earnings, or it may be left in equity under the heading
revaluation surplus. The transfer to retained earnings should not be made through
profit or loss. [IAS 16.41]
Depreciation (cost and revaluation models)
For all depreciable assets:
The depreciable amount (cost less residual value) should be allocated on a
systematic basis over the asset's useful life [IAS 16.50].
The residual value and the useful life of an asset should be reviewed at least at
each financial year-end and, if expectations differ from previous estimates, any
change is accounted for prospectively as a change in estimate under IAS 8. [IAS

16.51]
The depreciation method used should reflect the pattern in which the asset's
economic benefits are consumed by the entity [IAS 16.60]; a depreciation method
that is based on revenue that is generated by an activity that includes the use of an
asset is not appropriate. [IAS 16.62A]
Note: The clarification regarding the revenue-based depreciation method was
introduced by Clarification of Acceptable Methods of Depreciation and Amortisation,
which applies to annual periods beginning on or after 1 January 2016.
The depreciation method should be reviewed at least annually and, if the pattern of
consumption of benefits has changed, the depreciation method should be changed
prospectively as a change in estimate under IAS 8. [IAS 16.61] Expected future
reductions in selling prices could be indicative of a higher rate of consumption of
the future economic benefits embodied in an asset. [IAS 16.56]
Note: The guidance on expected future reductions in selling prices was introduced
by Clarification of Acceptable Methods of Depreciation and Amortisation, which
applies to annual periods beginning on or after 1 January 2016.
Depreciation should be charged to profit or loss, unless it is included in the carrying
amount of another asset [IAS 16.48].
Depreciation begins when the asset is available for use and continues until the
asset is derecognised, even if it is idle. [IAS 16.55]
Recoverability of the carrying amount
IAS 16 Property, Plant and Equipment requires impairment testing and, if necessary,
recognition for property, plant, and equipment. An item of property, plant, or
equipment shall not be carried at more than recoverable amount. Recoverable
amount is the higher of an asset's fair value less costs to sell and its value in use.
Any claim for compensation from third parties for impairment is included in profit or
loss when the claim becomes receivable. [IAS 16.65]
Derecognition (retirements and disposals)
An asset should be removed from the statement of financial position on disposal or
when it is withdrawn from use and no future economic benefits are expected from
its disposal. The gain or loss on disposal is the difference between the proceeds and
the carrying amount and should be recognised in profit and loss. [IAS 16.67-71]
If an entity rents some assets and then ceases to rent them, the assets should be
transferred to inventories at their carrying amounts as they become held for sale in
the ordinary course of business. [IAS 16.68A]
Disclosure
Information about each class of property, plant and equipment
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
reconciliation of the carrying amount at the beginning and the end of the
period, showing:
o
additions
disposals
acquisitions through business combinations
revaluation increases or decreases
impairment losses
reversals of impairment losses
depreciation
net foreign exchange differences on translation
other movements
Additional disclosures
The following disclosures are also required: [IAS 16.74]
restrictions on title and items pledged as security for liabilities
expenditures to construct property, plant, and equipment during the period
contractual commitments to acquire property, plant, and equipment
compensation from third parties for items of property, plant, and equipment
that were impaired, lost or given up that is included in profit or loss.
IAS 16 also encourages, but does not require, a number of additional disclosures.
[IAS 16.79]
Revalued property, plant and equipment
If property, plant, and equipment is stated at revalued amounts, certain additional

disclosures are required: [IAS 16.77]
the effective date of the revaluation
whether an independent valuer was involved
for each revalued class of property, the carrying amount that would have
been recognised had the assets been carried under the cost model
the revaluation surplus, including changes during the period and any
restrictions on the distribution of the balance to shareholders.
IAS 17 Leases
Overview
IAS 17 Leases prescribes the accounting policies and disclosures applicable to
leases, both for lessees and lessors. Leases are required to be classified as either
finance leases (which transfer substantially all the risks and rewards of ownership,
and give rise to asset and liability recognition by the lessee and a receivable by the
lessor) and operating leases (which result in expense recognition by the lessee, with
the asset remaining recognised by the lessor).
History of IAS 17
October 1980
Exposure Draft E19 Accounting for Leases
September 19
82
IAS 17 Accounting for Leases
1 January 198
4
1994
April 1997
Exposure Draft E56, Leases
December 19
97
IAS 17 Leases
1 January 199
9
Effective date of IAS 17 (1997) Leases
18 December
2003
1 January 200
5
Effective date of IAS 17 (Revised 2003)
16 April 2009
IAS 17 amended for Annual Improvements to IFRSs

2009 about classification of land leases
1 January 201
0
Effective date of the April 2009 revisions to IAS 17, with early
application permitted (with disclosure)
IFRIC 4 Determining Whether an Arrangement Contains a Lease
SIC-15 Operating Leases Incentives
SIC-27 Evaluating the Substance of Transactions in the Legal Form of a Lease
Leases Comprehensive project
Summary of IAS 17
Objective of IAS 17
The objective of IAS 17 (1997) is to prescribe, for lessees and lessors, the
appropriate accounting policies and disclosures to apply in relation to finance and
operating leases.
Scope
IAS 17 applies to all leases other than lease agreements for minerals, oil, natural
gas, and similar regenerative resources and licensing agreements for films, videos,
plays, manuscripts, patents, copyrights, and similar items. [IAS 17.2]
However, IAS 17 does not apply as the basis of measurement for the following
leased assets: [IAS 17.2]
property held by lessees that is accounted for as investment property for

which the lessee uses the fair value model set out in IAS 40
investment property provided by lessors under operating leases (see IAS 40)
biological assets held by lessees under finance leases (see IAS 41)
biological assets provided by lessors under operating leases (see IAS 41)
Classification of leases
A lease is classified as a finance lease if it transfers substantially all the risks and
rewards incident to ownership. All other leases are classified as operating leases.
Classification is made at the inception of the lease. [IAS 17.4]
Whether a lease is a finance lease or an operating lease depends on the substance
of the transaction rather than the form. Situations that would normally lead to a
lease being classified as a finance lease include the following: [IAS 17.10]
the lease transfers ownership of the asset to the lessee by the end of the
lease term
the lessee has the option to purchase the asset at a price which is expected
to be sufficiently lower than fair value at the date the option becomes
exercisable that, at the inception of the lease, it is reasonably certain that the
option will be exercised
the lease term is for the major part of the economic life of the asset, even if
title is not transferred
at the inception of the lease, the present value of the minimum lease
payments amounts to at least substantially all of the fair value of the leased
asset
the lease assets are of a specialised nature such that only the lessee can use
them without major modifications being made
Other situations that might also lead to classification as a finance lease are: [IAS
17.11]
if the lessee is entitled to cancel the lease, the lessor's losses associated with
the cancellation are borne by the lessee
gains or losses from fluctuations in the fair value of the residual fall to the
lessee (for example, by means of a rebate of lease payments)
the lessee has the ability to continue to lease for a secondary period at a rent
that is substantially lower than market rent
When a lease includes both land and buildings elements, an entity assesses the
classification of each element as a finance or an operating lease separately. In
determining whether the land element is an operating or a finance lease, an
important consideration is that land normally has an indefinite economic life [IAS
17.15A]. Whenever necessary in order to classify and account for a lease of land
and buildings, the minimum lease payments (including any lump-sum upfront
payments) are allocated between the land and the buildings elements in proportion
to the relative fair values of the leasehold interests in the land element and
buildings element of the lease at the inception of the lease. [IAS 17.16] For a lease
of land and buildings in which the amount that would initially be recognised for the
land element is immaterial, the land and buildings may be treated as a single unit
for the purpose of lease classification and classified as a finance or operating lease.
[IAS 17.17] However, separate measurement of the land and buildings elements is
not required if the lessee's interest in both land and buildings is classified as an
investment property in accordance with IAS 40 and the fair value model is adopted.
[IAS 17.18]
Accounting by lessees
The following principles should be applied in the financial statements of lessees:
at commencement of the lease term, finance leases should be recorded as an

asset and a liability at the lower of the fair value of the asset and the present
value of the minimum lease payments (discounted at the interest rate
implicit in the lease, if practicable, or else at the entity's incremental
borrowing rate) [IAS 17.20]
finance lease payments should be apportioned between the finance charge

and the reduction of the outstanding liability (the finance charge to be
allocated so as to produce a constant periodic rate of interest on the
remaining balance of the liability) [IAS 17.25]
the depreciation policy for assets held under finance leases should be
consistent with that for owned assets. If there is no reasonable certainty that
the lessee will obtain ownership at the end of the lease the asset should be
depreciated over the shorter of the lease term or the life of the asset [IAS
17.27]
for operating leases, the lease payments should be recognised as an expense

in the income statement over the lease term on a straight-line basis, unless
another systematic basis is more representative of the time pattern of the
user's benefit [IAS 17.33]
Incentives for the agreement of a new or renewed operating lease should be

recognised by the lessee as a reduction of the rental expense over the lease term,
irrespective of the incentive's nature or form, or the timing of payments. [SIC-15]
Accounting by lessors
The following principles should be applied in the financial statements of lessors:
at commencement of the lease term, the lessor should record a finance lease
in the balance sheet as a receivable, at an amount equal to the net
investment in the lease [IAS 17.36]
the lessor should recognise finance income based on a pattern reflecting a

constant periodic rate of return on the lessor's net investment outstanding in
respect of the finance lease [IAS 17.39]
assets held for operating leases should be presented in the balance sheet of
the lessor according to the nature of the asset. [IAS 17.49] Lease income
should be recognised over the lease term on a straight-line basis, unless
another systematic basis is more representative of the time pattern in which
use benefit is derived from the leased asset is diminished [IAS 17.50]
Incentives for the agreement of a new or renewed operating lease should be

recognised by the lessor as a reduction of the rental income over the lease term,
irrespective of the incentive's nature or form, or the timing of payments. [SIC-15]
Manufacturers or dealer lessors should include selling profit or loss in the same
period as they would for an outright sale. If artificially low rates of interest are
charged, selling profit should be restricted to that which would apply if a
commercial rate of interest were charged. [IAS 17.42]
Under the 2003 revisions to IAS 17, initial direct and incremental costs incurred by
lessors in negotiating leases must be recognised over the lease term. They may no
longer be charged to expense when incurred. This treatment does not apply to
manufacturer or dealer lessors where such cost recognition is as an expense when
the selling profit is recognised.
Sale and leaseback transactions
For a sale and leaseback transaction that results in a finance lease, any excess of
proceeds over the carrying amount is deferred and amortised over the lease term.
[IAS 17.59]
For a transaction that results in an operating lease: [IAS 17.61]
if the transaction is clearly carried out at fair value - the profit or loss should
be recognised immediately
if the sale price is below fair value - profit or loss should be recognised
immediately, except if a loss is compensated for by future rentals at below
market price, the loss it should be amortised over the period of use
if the sale price is above fair value - the excess over fair value should be
deferred and amortised over the period of use
if the fair value at the time of the transaction is less than the carrying amount
a loss equal to the difference should be recognised immediately [IAS 17.63]
Disclosure: lessees finance leases [IAS 17.31]
carrying amount of asset
reconciliation between total minimum lease payments and their present

value
amounts of minimum lease payments at balance sheet date and the present
value thereof, for:
o
the next year
years 2 through 5 combined
beyond five years
contingent rent recognised as an expense
total future minimum sublease income under noncancellable subleases
general description of significant leasing arrangements, including contingent

rent provisions, renewal or purchase options, and restrictions imposed on
dividends, borrowings, or further leasing
Disclosure: lessees operating leases [IAS 17.35]
amounts of minimum lease payments at balance sheet date under

noncancellable operating leases for:
o
the next year
beyond five years
total future minimum sublease income under noncancellable subleases
lease and sublease payments recognised in income for the period
contingent rent recognised as an expense
general description of significant leasing arrangements, including contingent

rent provisions, renewal or purchase options, and restrictions imposed on
dividends, borrowings, or further leasing
Disclosure: lessors finance leases [IAS 17.47]
reconciliation between gross investment in the lease and the present value of
minimum lease payments;
gross investment and present value of minimum lease payments receivable

for:
o
the next year
beyond five years
unearned finance income
unguaranteed residual values
accumulated allowance for uncollectible lease payments receivable
contingent rent recognised in income
general description of significant leasing arrangements
Disclosure: lessors operating leases [IAS 17.56]
amounts of minimum lease payments at balance sheet date under

noncancellable operating leases in the aggregate and for:
o
the next year
beyond five years
contingent rent recognised as in income
general description of significant leasing arrangements
IAS 18 Revenue
Overview
IAS 18 Revenue outlines the accounting requirements for when to recognise
revenue from the sale of goods, rendering of services, and for interest, royalties and
dividends. Revenue is measured at the fair value of the consideration received or
receivable and recognised when prescribed conditions are met, which depend on
the nature of the revenue.
IAS 18 was reissued in December 1993 and is operative for periods beginning on or
History of IAS 18
April 1981
Exposure Draft E20 Revenue Recognition
December
1982
IAS 18 Revenue Recognition
1 January 1
984
May 1992
E41 Revenue Recognition
December
1993
IAS 18 Revenue Recognition (revised as part of the

'Comparability of Financial Statements' project)
1 January 1
995
Effective date of IAS 18 (1993) Revenue Recognition
December
1998
Amended by IAS 39 Financial Instruments: Recognition and

Measurement, effective 1 January 2001
16 April 20
09
Appendix to IAS 18 amended for Annual Improvements to IFRSs

2009. It now provides guidance for determining whether an
entity is acting as a principal or as an agent.
1 January
2017
IAS 18 will be superseded by IFRS 15 Revenue from Contracts

with Customers
IFRIC 18 Transfers of Assets from Customers
IFRIC 15 Agreements for the Construction of Real Estate
IFRIC 13 Customer Loyalty Programmes
IFRIC 12 Service Concession Arrangements
SIC-27 Evaluating the Substance of Transactions in the Legal Form of a Lease
SIC-31 Revenue Barter Transactions Involving Advertising Services
Summary of IAS 18
Objective of IAS 18
The objective of IAS 18 is to prescribe the accounting treatment for revenue arising
from certain types of transactions and events.
Key definition
Revenue: the gross inflow of economic benefits (cash, receivables, other assets)
arising from the ordinary operating activities of an entity (such as sales of goods,
sales of services, interest, royalties, and dividends). [IAS 18.7]
Measurement of revenue
Revenue should be measured at the fair value of the consideration received or
receivable. [IAS 18.9] An exchange for goods or services of a similar nature and
value is not regarded as a transaction that generates revenue. However, exchanges
for dissimilar items are regarded as generating revenue. [IAS 18.12]
If the inflow of cash or cash equivalents is deferred, the fair value of the
consideration receivable is less than the nominal amount of cash and cash
equivalents to be received, and discounting is appropriate. This would occur, for
instance, if the seller is providing interest-free credit to the buyer or is charging a
below-market rate of interest. Interest must be imputed based on market rates. [IAS
18.11]
Recognition of revenue
Recognition, as defined in the IASB Framework, means incorporating an item that
meets the definition of revenue (above) in the income statement when it meets the
following criteria:
it is probable that any future economic benefit associated with the item of
revenue will flow to the entity, and
the amount of revenue can be measured with reliability
IAS 18 provides guidance for recognising the following specific categories of

revenue:
Sale of goods
Revenue arising from the sale of goods should be recognised when all of the
following criteria have been satisfied: [IAS 18.14]
the seller has transferred to the buyer the significant risks and rewards of
ownership
the seller retains neither continuing managerial involvement to the degree

usually associated with ownership nor effective control over the goods sold
the amount of revenue can be measured reliably
it is probable that the economic benefits associated with the transaction will
flow to the seller, and
the costs incurred or to be incurred in respect of the transaction can be

measured reliably
Rendering of services
For revenue arising from the rendering of services, provided that all of the following
criteria are met, revenue should be recognised by reference to the stage of
completion of the transaction at the balance sheet date (the percentage-ofcompletion method): [IAS 18.20]
the amount of revenue can be measured reliably;
it is probable that the economic benefits will flow to the seller;
the stage of completion at the balance sheet date can be measured reliably;
and
the costs incurred, or to be incurred, in respect of the transaction can be

measured reliably.
When the above criteria are not met, revenue arising from the rendering of services
should be recognised only to the extent of the expenses recognised that are
recoverable (a "cost-recovery approach". [IAS 18.26]
Interest, royalties, and dividends
For interest, royalties and dividends, provided that it is probable that the economic
benefits will flow to the enterprise and the amount of revenue can be measured
reliably, revenue should be recognised as follows: [IAS 18.29-30]
interest: using the effective interest method as set out in IAS 39
royalties: on an accruals basis in accordance with the substance of the

relevant agreement
dividends: when the shareholder's right to receive payment is established
Disclosure [IAS 18.35]
accounting policy for recognising revenue
amount of each of the following types of revenue:

o
sale of goods
rendering of services
interest
royalties
dividends
within each of the above categories, the amount of revenue from

exchanges of goods or services
Implementation guidance
Appendix A to IAS 18 provides illustrative examples of how the above principles
apply to certain transactions.
Overview
IAS 19 Employee Benefits (amended 2011) outlines the accounting requirements for
employee benefits, including short-term benefits (e.g. wages and salaries, annual
leave), post-employment benefits such as retirement benefits, other long-term
benefits (e.g. long service leave) and termination benefits. The standard establishes
the principle that the cost of providing employee benefits should be recognised in
the period in which the benefit is earned by the employee, rather than when it is
paid or payable, and outlines how each category of employee benefits are
measured, providing detailed guidance in particular about post-employment
benefits.
IAS 19 (2011) was issued in 2011, supersedes IAS 19 Employee Benefits (1998), and
is applicable to annual periods beginning on or after 1 January 2013.
History of IAS 19
Date
Development
Comments
April 1980
Exposure Draft E16 Accounting for

Retirement Benefits in Financial
Statements of Employers published
January 1983
IAS 19 Accounting for Retirement

Benefits in Financial Statements of
Employers issued
December 19
92
E47 Retirement Benefit

Costs published
December 19
93
IAS 19 Retirement Benefit

Costs issued
Operative for
covering periods
beginning on or
after 1 January 1995
October 1996
E54 Employee Benefits published
Comment deadline
Operative for
covering periods
beginning on or
31 January 1997
February 1998
IAS 19 Employee Benefits issued
Operative for
covering periods
beginning on or
July 2000
E67 Pension Plan Assets published
October 2000
Amended to change the definition

of plan assets and to introduce
recognition, measurement and
disclosure requirements for
reimbursements
Operative for
annual financial
statements
covering periods
beginning on or
May 2002
Amended to prevent the recognition

of gains solely as a result of
actuarial losses or past service cost
and the recognition of losses solely
as a result of actuarial gains
Operative for
annual financial
statements
covering periods
ending on or after
31 May 2002
5 December 2
002
ED 2 Share-based
Payment published, proposing to
replace the equity compensation
benefits requirements of IAS 19
Comment deadline
7 March 2003
February 2004
Equity compensation benefits

requirements replaced by IFRS
2 Share-based Payment

reporting periods
beginning on or
29 April 2004
Exposure Draft Proposed

Amendments to IAS 19 Employee
Benefits: Actuarial Gains and
Losses, Group Plans and
Disclosures published
Comment deadline
31 July 2004
19 December
Actuarial Gains and Losses, Group
2004
Plans and Disclosures issued
periods beginning
on or after 1
January 2006
22 May 2008

to IFRSs (negative past service
costs and curtailments)

periods beginning
on or after 1
January 2009
20 August 200
9
ED/2009/10 Discount Rate for

Employee Benefits (Proposed
amendments to IAS 19) published
Comment deadline
30 September 2009
(proposals were not
finalised)
29 April 2010
ED/2010/3 Defined Benefit Plans

(Proposed amendments to
IAS 19) published
Comment deadline
6 September 2010
16 June 2011
IAS 19 Employee Benefits (amended

2011) issued

periods beginning
on or after 1
January 2013
25 March 201
3
ED/2013/4 Defined Benefit Plans:

Employee Contributions (Proposed
amendments to IAS 19) published
Comment deadline
25 July 2013
21 November
2013
Defined Benefit Plans: Employee

Contributions (Amendments to
IAS 19) issued

periods beginning
on or after 1 July
2014
25 September
2014
Amended by Improvements to
IFRSs 2014 (discount rate: regional
market issue)

periods beginning
on or after 1
January 2016
IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding

Requirements and their Interaction
IAS 19/IFRIC 14 Remeasurement at a plan amendment, curtailment or

settlement / Availability of a refund of a surplus from a defined benefit plan
Research project Discount rates
Post-employment Benefits Comprehensive reconsideration of

IAS 19 (longer term project)
In addition, the IASB has signalled an intention to conduct a post-implementation

review, commencing in 2015.
Summary of IAS 19 (2011)
Amended version of IAS 19 issued in 2011
IAS 19 Employee Benefits (2011) is an amended version of, and supersedes,
IAS 19 Employee Benefits (1998), effective for annual periods beginning on or
after 1 January 2013. The summary that follows refers to IAS 19 (2011).
Readers interested in the requirements of IAS 19 Employee Benefits (1998)
should refer to our summary of IAS 19 (1998).
Changes introduced by IAS 19 (2011) as compared to IAS 19 (1998) include:
Introducing a requirement to fully recognise changes in the net defined

benefit liability (asset) including immediate recognition of defined benefit
costs, and require disaggregation of the overall defined benefit cost into
components and requiring the recognition of remeasurements in other
comprehensive income (eliminating the 'corridor' approach)
Introducing enhanced disclosures about defined benefit plans
Modifications to the accounting for termination benefits, including

distinguishing between benefits provided in exchange for service and
benefits provided in exchange for the termination of employment, and
changing the recognition and measurement of termination benefits
Clarification of miscellaneous issues, including the classification of

employee benefits, current estimates of mortality rates, tax and
administration costs and risk-sharing and conditional indexation features
Incorporating other matters submitted to the IFRS Interpretations

Committee.
Objective of IAS 19 (2011)

The objective of IAS 19 is to prescribe the accounting and disclosure for employee
benefits, requiring an entity to recognise a liability where an employee has provided
service and an expense when the entity consumes the economic benefits of
employee service. [IAS 19(2011).2]
Scope
IAS 19 applies to (among other kinds of employee benefits):
wages and salaries
compensated absences (paid vacation and sick leave)
profit sharing and bonuses
medical and life insurance benefits during employment
non-monetary benefits such as houses, cars, and free or subsidised goods or

services
retirement benefits, including pensions and lump sum payments
post-employment medical and life insurance benefits
long-service or sabbatical leave
'jubilee' benefits
deferred compensation programmes
termination benefits.
IAS 19 (2011) does not apply to employee benefits within the scope of IFRS 2 Sharebased Payment or the reporting by employee benefit plans (see IAS 26 Accounting
and Reporting by Retirement Benefit Plans).
Short-term employee benefits
Short-term employee benefits are those expected to be settled wholly before twelve
months after the end of the annual reporting period during which employee services
are rendered, but do not include termination benefits.[IAS 19(2011).8] Examples
include wages, salaries, profit-sharing and bonuses and non-monetary benefits paid
to current employees.
The undiscounted amount of the benefits expected to be paid in respect of service
rendered by employees in an accounting period is recognised in that period.
[IAS 19(2011).11] The expected cost of short-term compensated absences is
recognised as the employees render service that increases their entitlement or, in
the case of non-accumulating absences, when the absences occur, and includes any
additional amounts an entity expects to pay as a result of unused entitlements at
the end of the period. [IAS 19(2011).13-16]
Profit-sharing and bonus payments

An entity recognises the expected cost of profit-sharing and bonus payments when,
and only when, it has a legal or constructive obligation to make such payments as a
result of past events and a reliable estimate of the expected obligation can be
made. [IAS 19.19]
Types of post-employment benefit plans
Post-employment benefit plans are informal or formal arrangements where an entity
provides post-employment benefits to one or more employees, e.g. retirement
benefits (pensions or lump sum payments), life insurance and medical care.
The accounting treatment for a post-employment benefit plan depends on the
economic substance of the plan and results in the plan being classified as either a
defined contribution plan or a defined benefit plan:
Defined contribution plans. Under a defined contribution plan, the entity

pays fixed contributions into a fund but has no legal or constructive obligation
to make further payments if the fund does not have sufficient assets to pay
all of the employees' entitlements to post-employment benefits. The entity's
obligation is therefore effectively limited to the amount it agrees to
contribute to the fund and effectively place actuarial and investment risk on
the employee
Defined benefit plans These are post-employment benefit plans other than
a defined contribution plans. These plans create an obligation on the entity to
provide agreed benefits to current and past employees and effectively places
actuarial and investment risk on the entity.
Defined contribution plans

For defined contribution plans, the amount recognised in the period is the
contribution payable in exchange for service rendered by employees during the
period. [IAS 19(2011).51]
Contributions to a defined contribution plan which are not expected to be wholly
settled within 12 months after the end of the annual reporting period in which the
employee renders the related service are discounted to their present value.
[IAS 19.52]
Defined benefit plans
Basic requirements
An entity is required to recognise the net defined benefit liability or asset in its
statement of financial performance. [IAS 19(2011).63] However, the measurement
of a net defined benefit asset is the lower of any surplus in the fund and the 'asset
ceiling' (i.e. the present value of any economic benefits available in the form of
refunds from the plan or reductions in future contributions to the plan).

[IAS 19(2011).64]
Measurement
The measurement of a net defined benefit liability or assets requires the application
of an actuarial valuation method, the attribution of benefits to periods of service,
and the use of actuarial assumptions. [IAS 19(2011).66] The fair value of any plan
assets is deducted from the present value of the defined benefit obligation in
determining the net deficit or surplus. [IAS 19(2011).113]
The determination of the net defined benefit liability (or asset) is carried out with
sufficient regularity such that the amounts recognised in the financial statements do
not differ materially from those that would be determined at end of the reporting
period. [IAS 19(2011).58]
The present value of an entity's defined benefit obligations and related service costs
is determined using the 'projected unit credit method', which sees each period of
service as giving rise to an additional unit of benefit entitlement and measures each
unit separately in building up the final obligation. [IAS 19(2011).67-68] This requires
an entity to attribute benefit to the current period (to determine current service
cost) and the current and prior periods (to determine the present value of defined
benefit obligations). Benefit is attributed to periods of service using the plan's
benefit formula, unless an employee's service in later years will lead to a materially
higher of benefit than in earlier years, in which case a straight-line basis is used
[IAS 19(2011).70]
Actuarial assumptions used in measurement
The overall actuarial assumptions used must be unbiased and mutually compatible,
and represent the best estimate of the variables determining the ultimate postemployment benefit cost. [IAS 19(2011).75-76]:
Financial assumptions must be based on market expectations at the end of

the reporting period [IAS 19(2011).80]
Mortality assumptions are determined by reference to the best estimate of

the mortality of plan members during and after employment
[IAS 19(2011).81]
The discount rate used is determined by reference to market yields at the

end of the reporting period on high quality corporate bonds, or where there is
no deep market in such bonds, by reference to market yields on government
bonds. Currencies and terms of bond yields used must be consistent with the
currency and estimated term of the obligation being discounted
[IAS 19(2011).83]
Assumptions about expected salaries and benefits reflect the terms of the
plan, future salary increases, any limits on the employer's share of cost,
contributions from employees or third parties*, and estimated future changes
in state benefits that impact benefits payable [IAS 19(2011).87]
Medical cost assumptions incorporate future changes resulting from inflation

and specific changes in medical costs [IAS 19(2011).96]
* Defined Benefit Plans: Employee Contributions (Amendments to IAS 19 Employee

Benefits) amends IAS 19(2011) to clarify the requirements that relate to how
contributions from employees or third parties that are linked to service should be
attributed to periods of service. In addition, it permits a practical expedient if the
amount of the contributions is independent of the number of years of service, in
that contributions, can, but are not required, to be recognised as a reduction in the
service cost in the period in which the related service is rendered. These
amendments are effective for annual periods beginning on or after 1 July 2014.
Past service costs
Past service cost is the term used to describe the change in a defined benefit
obligation for employee service in prior periods, arising as a result of changes to
plan arrangements in the current period (i.e. plan amendments introducing or
changing benefits payable, or curtailments which significantly reduce the number of
covered employees) .
Past service cost may be either positive (where benefits are introduced or improved)
or negative (where existing benefits are reduced). Past service cost is recognised as
an expense at the earlier of the date when a plan amendment or curtailment occurs
and the date when an entity recognises any termination benefits, or related
restructuring costs under IAS 37 Provisions, Contingent Liabilities and Contingent
Assets. [IAS 19(2011).103]
Gains or losses on the settlement of a defined benefit plan are recognised when the
settlement occurs. [IAS 19(2011).110]
Before past service costs are determined, or a gain or loss on settlement is
recognised, the net defined benefit liability or asset is required to be remeasured,
however an entity is not required to distinguish between past service costs resulting
from curtailments and gains and losses on settlement where these transactions
occur together. [IAS 19(2011).99-100]
Recognition of defined benefit costs
The components of defined benefit cost is recognised as follows: [IAS 19(2011).120130]
Component
Recognition
Service cost attributable to the current and past

periods
Profit or loss
Net interest on the net defined benefit liability or

asset, determined using the discount rate at the
beginning of the period
Profit or loss
Remeasurements of the net defined benefit

liability or asset, comprising:
Other comprehensive
income
(Not reclassified to profit
or loss in a subsequent
period)
actuarial gains and losses
return on plan assets
some changes in the effect of the asset

ceiling
Other guidance
IAS 19 also provides guidance in relation to:
when an entity should recognise a reimbursement of expenditure to settle a

defined benefit obligation [IAS 19(2011).116-119]
when it is appropriate to offset an asset relating to one plan against a liability

relating to another plan [IAS 19(2011).131-132]
accounting for multi-employer plans by individual employers

[IAS 19(2011).32-39]
defined benefit plans sharing risks between entities under common control
[IAS 19.40-42]
entities participating in state plans [IAS 19(2011).43-45]
insurance premiums paid to fund post-employment benefit plans

[IAS 19(2011).46-49]
Disclosures about defined benefit plans

IAS 19(2011) sets the following disclosure objectives in relation to defined benefit
plans [IAS 19(2011).135]:
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.
Extensive specific disclosures in relation to meeting each the above objectives are
specified, e.g. a reconciliation from the opening balance to the closing balance of
the net defined benefit liability or asset, disaggregation of the fair value of plan
assets into classes, and sensitivity analysis of each significant actuarial assumption.
[IAS 19(2011).136-147]
Additional disclosures are required in relation to multi-employer plans and defined
benefit plans sharing risk between entities under common control.
[IAS 19(2011).148-150].
Other long-term benefits
IAS 19 (2011) prescribes a modified application of the post-employment benefit
model described above for other long-term employee benefits: [IAS 19(2011).153154]
the recognition and measurement of a surplus or deficit in an other long-term

employee benefit plan is consistent with the requirements outlined above
service cost, net interest and remeasurements are all recognised in profit or
loss (unless recognised in the cost of an asset under another IFRS), i.e. when
compared to accounting for defined benefit plans, the effects of
remeasurements are not recognised in other comprehensive income.
Termination benefits
A termination benefit liability is recognised at the earlier of the following dates:
[IAS 19.165-168]
when the entity can no longer withdraw the offer of those benefits additional guidance is provided on when this date occurs in relation to an
employee's decision to accept an offer of benefits on termination, and as a
result of an entity's decision to terminate an employee's employment
when the entity recognises costs for a restructuring under IAS 37 Provisions,
Contingent Liabilities and Contingent Assets which involves the payment of
termination benefits.
Termination benefits are measured in accordance with the nature of employee

benefit, i.e. as an enhancement of other post-employment benefits, or otherwise as
a short-term employee benefit or other long-term employee benefit.
[IAS 19(2011).169]

International Accounting Standards

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International Accounting Standards

Presentation of Financial Statements

Consolidated Financial Statements

Information to Be Disclosed in Financial Statements

Accounting Responses to Changing Prices

Statement of Cash Flows

Accounting Policies, Changes in Accounting Estimates and Errors

Accounting for Research and Development Activities

Events After the Reporting Period

Will be superseded by IFRS 15 as of 1 January 2017

Presentation of Current Assets and Current Liabilities

Information Reflecting the Effects of Changing Prices

Property, Plant and Equipment

Employee Benefits (1998)

Employee Benefits (2011)

Accounting for Government Grants and Disclosure of Government Assistance

The Effects of Changes in Foreign Exchange Rates

Related Party Disclosures

Accounting for Investments

Accounting and Reporting by Retirement Benefit Plans

Separate Financial Statements (2011)

Superseded by IFRS 10, IFRS 12 and IAS 27 (2011) effective 1 January

Investments in Associates and Joint Ventures (2011)

Financial Reporting in Hyperinflationary Economies

Disclosures in the Financial Statements of Banks and Similar Financial Institutions

Interests In Joint Ventures

Financial Instruments: Presentation

Earnings Per Share

Interim Financial Reporting

Provisions, Contingent Liabilities and Contingent Assets

Financial Instruments: Recognition and Measurement

Exposure Draft E2 Valuation and

IAS 2 Valuation and Presentation

IAS 9 (1993) Inventories issued

Operative for annual

IAS 2 Inventories issued

Effective for annual

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine

SIC-1 Consistency - Different Cost Formulas for Inventories. SIC-1 was

The objective of IAS 2 is to prescribe the accounting treatment for inventories. It

work in process arising under construction contracts (see IAS 11 Construction

financial instruments (see IAS 39 Financial Instruments: Recognition and

biological assets related to agricultural activity and agricultural produce at

producers of agricultural and forest products, agricultural produce after

Fundamental principle of IAS 2

costs of purchase (including taxes, transport, and handling) net of trade

costs of conversion (including fixed and variable manufacturing overheads)

IAS 23 Borrowing Costs identifies some limited circumstances where borrowing

administrative overheads unrelated to production

foreign exchange differences arising directly on the recent acquisition of

accounting policy for inventories

Carrying amount, generally classified as merchandise, supplies, materials,

amount of any write-down of inventories recognised as an expense in the

amount of any reversal of a write-down to NRV and the circumstances that

carrying amount of inventories pledged as security for liabilities

cost of inventories recognised as expense (cost of goods sold).

IAS 2 acknowledges that some enterprises classify income statement expenses by

IAS 8 Accounting Policies, Changes in Accounting Estimates and

Exposure Draft E8 The Treatment in the Income Statement of

IAS 8 Unusual and Prior Period Items and Changes in

Exposure Draft E46 Extraordinary Items, Fundamental Errors

IAS 8 (1993) Net Profit or Loss for the Period, Fundamental

Effective date of IAS 8 (1993)

Revised version of IAS 8 issued by the IASB