Cover	1
	Title-Page	3
	Copyright	4
	About this book	5
	Preface	7
	Abbreviations	15
	Authoritative literature	21
	Chapter 1 International GAAP	25
	1 WHY INTERNATIONAL FINANCIAL REPORTING STANDARDSMATTER	27
	2 THE IFRS FOUNDATION AND THE IASB	28
	2.1 The standard-setting structure	28
	2.2 The IFRS Foundation	29
	2.3 The Monitoring Board	30
	2.4 The International Accounting Standards Board (IASB)	32
	2.5 The IFRS Interpretations Committee (the Interpretations Committee)	33
	2.6 The IASB’s and IFRS Interpretations Committee’s Due Process Handbook	34
	2.7 The IFRS Advisory Council (the Advisory Council)	35
	2.8 Accounting Standards Advisory Forum (ASAF)	36
	2.9 Other advisory bodies	36
	3 THE IASB’S TECHNICAL AGENDA AND CONVERGENCE WITH USGAAP	37
	3.1 The IASB’s current priorities and future agenda	37
	3.2 IFRS/US GAAP convergence	38
	4 THE ADOPTION OF IFRS AROUND THE WORLD	39
	4.1 Worldwide adoption	39
	4.2 Europe	42
	4.3 Americas	46
	4.4 Asia	47
	4.5 Australia	51
	4.6 Africa – South Africa	52
	5 CONSISTENCY IN APPLICATION OF IFRS	52
	6 SUMMARY	53
	Chapter 2 The IASB’s Conceptual Framework	57
	1 INTRODUCTION	61
	1.1 What is a conceptual framework?	62
	1.2 Why is a conceptual framework necessary?	62
	2 THE IASB’S CONCEPTUAL FRAMEWORK	64
	2.1 Development of the IASB’s Conceptual Framework	64
	2.2 Contents, purpose and scope of the IASB’s Conceptual Framework	65
	2.3 Chapter 1: The objective of general purpose financial reporting	66
	2.4 Chapter 2: The reporting entity	70
	2.5 Chapter 3: Qualitative characteristics of useful financial information	70
	2.6 Chapter 4: The Framework (1989): the remaining text	76
	2.7 Management commentary	88
	3 FUTURE DEVELOPMENTS	89
	3.1 Objective of GPFR and qualitative characteristics of useful financialinformation	90
	3.2 Reporting entities	90
	3.3 Elements of financial statements	90
	3.4 Recognition and derecognition	91
	3.5 Measurement	92
	3.6 Presentation and disclosure	92
	3.7 Transition and effective date	93
	Chapter 3 Presentation of financial statements and accounting policies	95
	1 INTRODUCTION	99
	1.1 Objective and scope of IAS 1	99
	1.2 Objective and scope of IAS 8	101
	2 THE PURPOSE AND COMPOSITION OF FINANCIAL STATEMENTS	101
	2.1 The purpose of financial statements	101
	2.2 Frequency of reporting and period covered	102
	2.3 The components of a complete set of financial statements	102
	2.4 Comparative information	104
	2.5 Identification of the financial statements and accompanying information	106
	3 THE STRUCTURE OF FINANCIAL STATEMENTS	107
	3.1 The statement of financial position	108
	3.2 The statement of comprehensive income and the statement of profit or loss	118
	3.3 The statement of changes in equity	131
	3.4 The notes to the financial statements	134
	4 ACCOUNTING POLICIES	134
	4.1 General principles	135
	4.2 The distinction between accounting policies and accounting estimates	143
	4.3 The selection and application of accounting policies	143
	4.4 Changes in accounting policies	145
	4.5 Changes in accounting estimates	147
	4.6 Correction of errors	148
	4.7 Impracticability of restatement	150
	5 DISCLOSURE REQUIREMENTS	154
	5.1 Disclosures relating to accounting policies	154
	5.2 Disclosure of estimation uncertainty and changes in estimates	157
	5.3 Disclosure of prior period errors	160
	5.4 Disclosures about capital	160
	5.5 Other disclosures	163
	6 FUTURE DEVELOPMENTS	164
	6.1 The IASB’s disclosure initiative	164
	6.2 The IASB’s Conceptual Framework	165
	6.3 Proposed clarifications to the classification of liabilities	165
	Chapter 4 Non-current assets held for sale and discontinued operations	167
	1 OBJECTIVE AND SCOPE OF IFRS 5	169
	2 NON-CURRENT ASSETS (AND DISPOSAL GROUPS) HELD FOR SALE OR HELD FOR DISTRIBUTION TO OWNERS	170
	2.1 Classification of non-current assets (and disposal groups) held for saleor held for distribution to owners	170
	2.2 Measurement of non-current assets (and disposal groups) held for sale	178
	3 DISCONTINUED OPERATIONS	187
	3.1 Definition of a discontinued operation	187
	3.2 Presentation of discontinued operations	188
	3.3 Trading between continuing and discontinued operations	191
	4 COMPARATIVE INFORMATION	191
	4.1 Treatment of comparative information on initial classification as held forsale	192
	4.2 Treatment of comparative information on the cessation of classificationas held for sale	192
	5 DISCLOSURE REQUIREMENTS	193
	5.1 Requirements of IFRS 5	193
	5.2 Disclosures required by standards other than IFRS 5	194
	6 FUTURE DEVELOPMENTS	194
	Chapter 5 First-time adoption	197
	1 INTRODUCTION	205
	1.1 Objectives of first-time adoption	205
	1.2 First-time adoption under IFRS 1 and recent amendments	206
	1.3 Future developments	206
	2 WHO IS A FIRST-TIME ADOPTER?	206
	2.1 The first IFRS financial statements in scope of IFRS 1	206
	2.2 When should IFRS 1 be applied?	209
	2.3 Determining the previous GAAP	210
	3 OPENING IFRS STATEMENT OF FINANCIAL POSITION	213
	3.1 First-time adoption timeline	214
	3.2 Opening IFRS statement of financial position and accounting policies	215
	3.3 Defined terms	217
	3.4 Fair value and deemed cost	218
	3.5 Transitional provisions in other standards	218
	3.6 Departures from full retrospective application	219
	4 EXCEPTIONS TO RETROSPECTIVE APPLICATION OF OTHER IFRSs	221
	4.1 Introduction	221
	4.2 Estimates	221
	4.3 Derecognition of financial assets and liabilities	224
	4.4 Hedge accounting: prohibition on retrospective application	225
	4.5 Hedge accounting in the opening IFRS statement of financial position	226
	4.6 Hedge accounting: subsequent treatment	231
	4.7 Hedge accounting: examples	232
	4.8 Non-controlling interests	235
	4.9 Classification and measurement of financial instruments under IFRS 9	235
	4.10 Impairment of financial instruments	236
	4.11 Embedded derivatives	236
	4.12 Government loans	237
	5 OPTIONAL EXEMPTIONS FROM THE REQUIREMENTS OF CERTAIN IFRSs	238
	5.1 Introduction	238
	5.2 Business combinations and acquisitions of associates and joint ventures	239
	5.3 Share-based payment transactions	259
	5.4 Insurance contracts	263
	5.5 Deemed cost	264
	5.6 Leases	274
	5.7 Cumulative translation differences	275
	5.8 Investments in subsidiaries, joint ventures and associates	277
	5.9 Assets and liabilities of subsidiaries, associates and joint ventures	279
	5.10 Compound financial instruments	284
	5.11 Designation of previously recognised financial instruments – Entitiesapplying IAS 39	285
	5.12 Designation of previously recognised financial instruments – Entitiesadopting IFRS 9	288
	5.13 Fair value measurement of financial assets or financial liabilities at initialrecognition	290
	5.14 Decommissioning liabilities included in the cost of property, plant andequipment	290
	5.15 Financial assets or intangible assets accounted for in accordance withIFRIC 12	293
	5.16 Borrowing costs	294
	5.17 Transfers of assets from customers	295
	5.18 Extinguishing financial liabilities with equity instruments	295
	5.19 Severe hyperinflation	295
	5.20 Joint arrangements	296
	5.21 Stripping costs in the production phase of a surface mine	296
	5.22 Regulatory deferral activities	297
	5.23 IFRS 15 – Revenue from Contracts with Customers	303
	5.24 Short-term exemption from restatement of comparative information forIFRS 9	304
	5.25 Short-term exemptions from comparative IFRS 7 disclosures	305
	6 PRESENTATION AND DISCLOSURE	306
	6.1 Comparative information	306
	6.2 Non-IFRS comparative information and historical summaries	306
	6.3 Explanation of transition to IFRSs	307
	6.4 Designation of financial instruments	320
	6.5 Disclosures regarding deemed cost	321
	6.6 Interim financial reports	322
	6.7 Disclosure of IFRS information before adoption of IFRSs	325
	7 ACCOUNTING POLICIES AND PRACTICAL APPLICATION ISSUES	327
	7.1 IAS 7 – Statement of Cash Flows	327
	7.2 IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors	328
	7.3 IAS 11 – Construction Contracts	329
	7.4 IAS 12 – Income Taxes	330
	7.5 IAS 16 – Property, Plant and Equipment – and IAS 40 – Investment Property (cost model)	334
	7.6 IAS 17 – Leases	336
	7.7 IAS 18 – Revenue	337
	7.8 IAS 19 – Employee Benefits	339
	7.9 IAS 21 – The Effects of Changes in Foreign Exchange Rates	340
	7.10 IAS 23 – Borrowing Costs	341
	7.11 IAS 28 – Investments in Associates and Joint Ventures	342
	7.12 IAS 29 – Financial Reporting in Hyperinflationary Economies	342
	7.13 IFRS 11 – Joint Arrangements	343
	7.14 IAS 36 – Impairment of Assets	343
	7.15 IAS 37 – Provisions, Contingent Liabilities and Contingent Assets	344
	7.16 IAS 38 – Intangible Assets	345
	8 REGULATORY ISSUES	346
	8.1 First-time adoption by foreign private issuers that are SEC registrants	346
	8.2 Disclosure of IFRS information in financial statements for periods priorto an entity’s first IFRS reporting period	350
	Chapter 6 Consolidatedfinancial statements	353
	1 INTRODUCTION	359
	1.1 Background	359
	1.2 Development of IFRS 10	360
	2 EFFECTIVE DATE, OBJECTIVE AND SCOPE OF IFRS 10	361
	2.1 Effective date	361
	2.2 Objective	362
	2.3 Scope	362
	3 CONTROL	372
	3.1 Assessing control	373
	3.2 Purpose and design of an investee	375
	4 POWER OVER AN INVESTEE	376
	4.1 Relevant activities	376
	4.2 Existing rights	381
	4.3 Voting rights	388
	4.4 Contractual arrangements	401
	4.5 Other evidence of power	404
	4.6 Determining whether sponsoring (designing) a structured entity givespower	405
	5 EXPOSURE TO VARIABLE RETURNS	406
	5.1 Exposure to variable returns can be an indicator of power	407
	5.2 Returns that appear fixed can be variable	407
	5.3 Evaluating whether derivatives provide an exposure to variable returns	408
	5.4 Exposures to variable returns not directly received from an investee	411
	5.5 Exposure to variable returns in bankruptcy filings	412
	5.6 Interaction of IFRS 10 with the derecognition requirements in IAS 39 (orIFRS 9)	412
	5.7 Reputational risk	413
	6 LINK BETWEEN POWER AND RETURNS: PRINCIPAL-AGENCYSITUATIONS	413
	6.1 Delegated power: principals and agents	414
	6.2 Scope of decision-making	415
	6.3 Rights held by other parties	416
	6.4 Remuneration	419
	6.5 Exposure to variability of returns from other interests	421
	6.6 Application examples in IFRS 10	424
	6.7 Other illustrative examples	428
	7 RELATED PARTIES AND DE FACTO AGENTS	429
	7.1 Customer-supplier relationships	430
	8 CONTROL OF SPECIFIED ASSETS	431
	8.1 Identifying a silo	432
	8.2 Evaluating control of a silo	433
	8.3 Consolidation of a silo	434
	9 CONTINUOUS ASSESSMENT	434
	9.1 Changes in market conditions	435
	9.2 Bankruptcy filings and troubled debt restructurings	437
	9.3 Control re-assessment as a result of action by others	438
	10 INVESTMENT ENTITIES	439
	10.1 Definition of an investment entity	440
	10.2 Determining whether an entity is an investment entity	441
	10.3 Accounting by an investment entity	452
	10.4 Accounting by a parent of an investment entity	455
	11 CONSOLIDATION PROCEDURES	456
	11.1 Non-controlling interests when there is a de facto agent	457
	12 DISCLOSURE REQUIREMENTS	457
	13 TRANSITIONAL ARRANGEMENTS	458
	13.1 Transitional arrangements on adoption of IFRS 10	458
	13.2 Transitional arrangements in respect of the December 2014amendments	458
	14 FUTURE DEVELOPMENTS	459
	Chapter 7 Consolidationprocedures andnon-controlling interests	461
	1 INTRODUCTION	465
	2 CONSOLIDATION PROCEDURES	466
	2.1 Basic principles	466
	2.2 Proportion consolidated	467
	2.3 Consolidating foreign operations	468
	2.4 Intragroup eliminations	469
	2.5 Non-coterminous accounting periods	470
	2.6 Consistent accounting policies	471
	3 CHANGES IN OWNERSHIP INTERESTS	471
	3.1 Commencement of consolidation	471
	3.2 Accounting for a loss of control	472
	3.3 Changes in ownership interest without a loss of control	486
	3.4 Demergers and distributions of non-cash assets to owners	491
	4 NON-CONTROLLING INTERESTS	493
	4.1 The definition of non-controlling interest	493
	4.2 Initial measurement of non-controlling interests in a business combination	494
	4.3 Presentation of non-controlling interests	497
	4.4 Non-controlling interests classified as financial liabilities	497
	4.5 Subsequent measurement of non-controlling interests	498
	5 CALL AND PUT OPTIONS OVER NON-CONTROLLING INTERESTS	499
	5.1 Call options only	500
	5.2 Put options only	501
	5.3 Combination of call and put options	510
	5.4 Call and put options entered into in relation to existing non-controllinginterests	511
	5.5 Put options over non-controlling interests – Interpretations Committeeand IASB developments	511
	6 TRANSITIONAL ARRANGEMENTS ON APPLYING IFRS 10	512
	6.1 Loss-making subsidiaries: subsequent accounting after transition toIAS 27 (2012)	513
	7 FUTURE DEVELOPMENTS	514
	7.1 Sale or Contribution of Assets between an Investor and its Associate orJoint Venture (Amendments to IFRS 10 and IAS 28)	515
	7.2 Fair value measurement: unit of account	516
	7.3 Put options written on non-controlling interests	517
	7.4 Mandatory purchase of non-controlling interests	518
	Chapter 8 Separate and individual financial statements	521
	1 SEPARATE AND INDIVIDUAL FINANCIAL STATEMENTS	525
	1.1 Consolidated financial statements and separate financial statements	526
	1.2 Entities incorporated in the EU and consolidated and separate financialstatements	531
	2 REQUIREMENTS OF SEPARATE FINANCIAL STATEMENTS	532
	2.1 Cost method	533
	2.2 IAS 39 method	542
	2.3 Equity method	544
	2.4 Dividends and other distributions	545
	3 DISCLOSURE	551
	3.1 Separate financial statements prepared by parent electing not to prepareconsolidated financial statements	551
	3.2 Separate financial statements prepared by an investment entity	552
	3.3 Separate financial statements prepared by an entity other than a parentelecting not to prepare consolidated financial statements	553
	4 COMMON CONTROL OR GROUP TRANSACTIONS ININDIVIDUAL FINANCIAL STATEMENTS	554
	4.1 Introduction	554
	4.2 Recognition	557
	4.3 Measurement	558
	4.4 Application of the principles in practice	559
	4.5 Disclosures	579
	Chapter 9 Business combinations	581
	1 INTRODUCTION	587
	1.1 IFRS 3 (as revised in 2008) and subsequent amendments	588
	2 SCOPE OF IFRS 3	591
	2.1 Mutual entities	591
	2.2 Arrangements out of scope of IFRS 3	591
	2.3 Acquisition by an investment entity	593
	3 IDENTIFYING A BUSINESS COMBINATION	593
	3.1 Identifying a business combination	594
	3.2 Definition of a business	594
	4 ACQUISITION METHOD OF ACCOUNTING	600
	4.1 Identifying the acquirer	600
	4.2 Determining the acquisition date	604
	5 RECOGNITION AND MEASUREMENT OF ASSETS ACQUIRED,LIABILITIES ASSUMED AND NON-CONTROLLING INTERESTS	605
	5.1 General principles	605
	5.2 Recognising identifiable assets acquired and liabilities assumed	605
	5.3 Acquisition-date fair values of identifiable assets acquired and liabilitiesassumed	606
	5.4 Classifying or designating identifiable assets acquired and liabilitiesassumed	607
	5.5 Recognising and measuring particular assets acquired and liabilitiesassumed	609
	5.6 Exceptions to the recognition and/or measurement principles	625
	6 RECOGNISING AND MEASURING GOODWILL OR A GAIN IN ABARGAIN PURCHASE	630
	6.1 Subsequent accounting for goodwill	631
	7 CONSIDERATION TRANSFERRED	631
	7.1 Contingent consideration	632
	7.2 Replacement share-based payment awards	638
	7.3 Acquisition-related costs	639
	7.4 Business combinations achieved without the transfer of consideration	639
	7.5 Combinations involving mutual entities	641
	8 RECOGNISING AND MEASURING NON-CONTROLLINGINTERESTS	641
	8.1 Measuring qualifying non-controlling interests at acquisition-date fairvalue	643
	8.2 Measuring qualifying non-controlling interests at the proportionateshare of the value of net identifiable assets acquired	643
	8.3 Implications of method chosen for measuring non-controlling interests	643
	8.4 Measuring share-based payment and other components of noncontrollinginterests	646
	8.5 Call and put options over non-controlling interests	647
	9 BUSINESS COMBINATIONS ACHIEVED IN STAGES (‘STEPACQUISITIONS’)	648
	10 BARGAIN PURCHASE TRANSACTIONS	654
	11 ASSESSING WHAT IS PART OF THE EXCHANGE FOR THEACQUIREE	656
	11.1 Effective settlement of pre-existing relationships	657
	11.2 Remuneration for future services of employees or former owners of theacquiree	661
	11.3 Reimbursement for paying the acquirer’s acquisition-related costs	664
	11.4 Restructuring plans	665
	12 MEASUREMENT PERIOD	666
	12.1 Adjustments made during measurement period to provisional amounts	667
	12.2 Adjustments made after end of measurement period	669
	13 SUBSEQUENT MEASUREMENT AND ACCOUNTING	669
	14 REVERSE ACQUISITIONS	670
	14.1 Measuring the consideration transferred	671
	14.2 Measuring goodwill	672
	14.3 Preparation and presentation of consolidated financial statements	673
	14.4 Non-controlling interest	675
	14.5 Earnings per share	677
	14.6 Cash consideration	678
	14.7 Share-based payments	680
	14.8 Reverse acquisitions involving a non-trading shell company	681
	14.9 Reverse acquisitions and acquirers that are not legal entities	683
	15 PUSH DOWN ACCOUNTING	683
	16 DISCLOSURES	684
	16.1 Nature and financial effect of business combinations	684
	16.2 Financial effects of adjustments recognised in the current reportingperiod	687
	16.3 Other necessary information	689
	16.4 Illustrative disclosures	689
	Chapter 10 Common controlbusiness combinations	693
	1 INTRODUCTION	695
	1.1 Background	695
	1.2 Development of the IFRS 3 exemption for business combinationsinvolving entities or businesses under common control	696
	1.3 Possible future developments: IASB project on business combinationsunder common control	696
	1.4 Scope of this chapter	698
	2 THE IFRS 3 EXEMPTION	699
	2.1 Common control exemption	699
	3 ACCOUNTING FOR BUSINESS COMBINATIONS INVOLVINGENTITIES OR BUSINESSES UNDER COMMON CONTROL	704
	3.1 Pooling of interests method or acquisition method	704
	3.2 Application of the acquisition method under IFRS 3	708
	3.3 Application of the pooling of interests method	710
	4 GROUP REORGANISATIONS	719
	4.1 Introduction	719
	4.2 Setting up a new top holding company	720
	4.3 Inserting a new intermediate parent within an existing group	724
	4.4 Transferring businesses outside an existing group using a Newco	726
	4.5 Transferring associates/joint ventures within an existing group	727
	Chapter 11 Investments in associatesand joint ventures	733
	1 INTRODUCTION	737
	2 OBJECTIVE AND SCOPE OF IAS 28	737
	2.1 Objective	737
	2.2 Scope	738
	3 DEFINITIONS	738
	4 SIGNIFICANT INFLUENCE	739
	4.1 Lack of significant influence	740
	4.2 Holdings of less than 20% of the voting power	740
	4.3 Potential voting rights	741
	4.4 Voting rights held in a fiduciary capacity	741
	5 EXEMPTIONS FROM APPLYING THE EQUITY METHOD	742
	5.1 Parents exempt from preparing consolidated financial statements	742
	5.2 Subsidiaries meeting certain criteria	742
	5.3 Investments held in associates or joint ventures held by venture capitalorganisations and similar organisations	743
	5.4 Partial use of fair value measurement of associates	745
	6 CLASSIFICATION AS HELD FOR SALE (IFRS 5)	748
	7 APPLICATION OF THE EQUITY METHOD	748
	7.1 Overview	748
	7.2 Comparison between equity accounting and consolidation	750
	7.3 Date of commencement of equity accounting	751
	7.4 Initial carrying amount of an associate or joint venture	751
	7.5 Share of the investee	763
	7.6 Transactions between the reporting entity and its associates or jointventures	766
	7.7 Non-coterminous accounting periods	784
	7.8 Consistent accounting policies	785
	7.9 Loss-making associates or joint ventures	785
	7.10 Distributions received in excess of the carrying amount	787
	7.11 Equity transactions in an associate’s or joint venture’s financialstatements	787
	7.12 Discontinuing the use of the equity method	794
	8 IMPAIRMENT LOSSES	800
	8.1 General	800
	8.2 Goodwill	801
	8.3 Allocation and reversal of impairment	803
	9 SEPARATE FINANCIAL STATEMENTS	805
	9.1 Impairment of investments in associates or joint ventures in separatefinancial statements	806
	10 PRESENTATION AND DISCLOSURES	806
	10.1 Presentation	806
	10.2 Disclosures	809
	11 FUTURE DEVELOPMENTS	809
	Chapter 12 Joint arrangements	813
	1 INTRODUCTION	817
	1.1 The nature of joint arrangements	817
	1.2 Development of IFRS 11	819
	1.3 Future developments	819
	2 EFFECTIVE DATE, OBJECTIVE AND SCOPE OF IFRS 11	820
	2.1 Effective date	820
	2.2 Objective	820
	2.3 Scope	821
	3 JOINT ARRANGEMENT	821
	3.1 Unit of account	822
	4 JOINT CONTROL	824
	4.1 Relevant activities in a joint arrangement	825
	4.2 Rights to control collectively	827
	4.3 Unanimous consent	830
	4.4 Other practical issues with assessing joint control	832
	5 CLASSIFICATION OF A JOINT ARRANGEMENT: JOINTOPERATIONS AND JOINT VENTURES	834
	5.1 Separate vehicle or not	836
	5.2 Legal form of the separate vehicle	837
	5.3 Contractual terms	838
	5.4 Other facts and circumstances	841
	5.5 Illustrative examples accompanying IFRS 11	848
	6 ACCOUNTING FOR JOINT OPERATIONS	855
	6.1 Joint arrangements not structured through a separate vehicle	855
	6.2 Difference from proportionate consolidation	856
	6.3 Determining the relevant IFRS	856
	6.4 Parties to a joint operation without joint control	858
	6.5 Joint operations with a non-controlling interest/passive investor	859
	6.6 Transactions between a joint operator and a joint operation	859
	6.7 Accounting for a joint operation in separate financial statements	860
	7 ACCOUNTING FOR JOINT VENTURES	861
	7.1 Interest in a joint venture without joint control	861
	7.2 Contributions of non-monetary assets to a joint venture	862
	7.3 Accounting for a joint venture in separate financial statements	862
	8 CONTINUOUS ASSESSMENT	863
	8.1 When to reassess under IFRS 11	863
	8.2 Changes in ownership of a joint venture	864
	8.3 Changes in ownership of a joint operation	868
	9 DISCLOSURES	873
	10 TRANSITION	873
	Chapter 13 Disclosure of interestsin other entities	875
	1 INTRODUCTION	879
	1.1 The development of IFRS 12	879
	2 OBJECTIVE, SCOPE AND EFFECTIVE DATE OF IFRS 12	880
	2.1 Objective	880
	2.2 Scope	881
	2.3 Effective date	889
	3 DISCLOSURE OF SIGNIFICANT ESTIMATES AND JUDGEMENTS	890
	4 DISCLOSURE OF INTERESTS IN SUBSIDIARIES	893
	4.1 Disclosure about the composition of the group	893
	4.2 Disclosure of interests of non-controlling interests	895
	4.3 Disclosure of the nature and extent of significant restrictions	898
	4.4 Disclosure of risks associated with interests in consolidated structuredentities	899
	4.5 Disclosure of changes in ownership interests in subsidiaries	902
	4.6 Disclosures required by investment entities	903
	5 DISCLOSURE OF INTERESTS IN JOINT ARRANGEMENTS ANDASSOCIATES	905
	5.1 Disclosure of the nature, extent and financial effects of interests in jointarrangements and associates	906
	5.2 Risks associated with interests in joint ventures and associates	912
	6 DISCLOSURE OF INTERESTS IN UNCONSOLIDATEDSTRUCTURED ENTITIES	914
	6.1 Disclosure of the nature of interests in unconsolidated structuredentities	916
	6.2 Disclosure of the nature of risks of unconsolidated structured entities	922
	6.3 Additional disclosures regarding the nature of risks from interests inunconsolidated structured entities	924
	Chapter 14 Fair value measurement	929
	1 INTRODUCTION AND BACKGROUND	937
	1.1 Introduction	937
	1.2 Overview of IFRS 13	938
	1.3 Objective of IFRS 13	940
	2 SCOPE	941
	2.1 Items in the scope of IFRS 13	941
	2.2 Scope exclusions	943
	2.3 Present value techniques	944
	2.4 Fair value measurement exceptions and practical expedients in otherstandards	945
	2.5 Measurement exceptions and practical expedients within IFRS 13	945
	3 DEFINITIONS	948
	4 THE FAIR VALUE FRAMEWORK	950
	4.1 Definition of fair value	950
	4.2 The fair value measurement framework	951
	5 THE ASSET OR LIABILITY	953
	5.1 The unit of account	953
	5.2 Characteristics of the asset or liability	958
	6 THE PRINCIPAL (OR MOST ADVANTAGEOUS) MARKET	962
	6.1 The principal market	962
	6.2 The most advantageous market	966
	7 MARKET PARTICIPANTS	967
	7.1 Characteristics of market participants	967
	7.2 Market participant assumptions	968
	8 THE TRANSACTION	971
	8.1 Evaluating whether there has been a significant decrease in the volumeand level of activity for an asset or liability	972
	8.2 Identifying transactions that are not orderly	975
	8.3 Estimating fair value when there has been a significant decrease in thevolume and level of activity	977
	9 THE PRICE	982
	9.1 Transaction costs	982
	9.2 Transportation costs	984
	10 APPLICATION TO NON-FINANCIAL ASSETS	985
	10.1 Highest and best use	985
	10.2 Valuation premise for non-financial assets	991
	11 APPLICATION TO LIABILITIES AND AN ENTITY’S OWN EQUITY	995
	11.1 General principles	996
	11.2 Measuring the fair value of a liability or an entity’s own equity whenquoted prices for the liability or equity instruments are not available	998
	11.3 Non-performance risk	1006
	11.4 Restrictions preventing the transfer of a liability or an entity’s own equity	1019
	11.5 Financial liability with a demand feature	1020
	12 FINANCIAL ASSETS AND LIABILITIES WITH OFFSETTINGPOSITIONS	1020
	12.1 Criteria for using the portfolio approach for offsetting positions	1021
	12.2 Measuring fair value for offsetting positions	1024
	13 FAIR VALUE AT INITIAL RECOGNITION	1028
	13.1 Exit price versus entry price	1028
	13.2 Day one gains and losses	1029
	13.3 Related party transactions	1031
	14 VALUATION TECHNIQUES	1032
	14.1 Selecting appropriate valuation techniques	1032
	14.2 Market approach	1039
	14.3 Cost approach	1039
	14.4 Income approach	1041
	15 INPUTS TO VALUATION TECHNIQUES	1041
	15.1 General principles	1041
	15.2 Premiums and discounts	1043
	15.3 Pricing within the bid-ask spread	1046
	15.4 Risk premiums	1047
	15.5 Broker quotes and pricing services	1048
	16 THE FAIR VALUE HIERARCHY	1050
	16.1 The fair value hierarchy	1050
	16.2 Categorisation within the fair value hierarchy	1051
	17 LEVEL 1 INPUTS	1056
	17.1 Use of Level 1 inputs	1056
	17.2 Alternative pricing methods	1058
	17.3 Quoted prices in active markets that are not representative of fair value	1058
	17.4 Unit of account	1058
	18 LEVEL 2 INPUTS	1059
	18.1 Level 2 inputs	1059
	18.2 Examples of Level 2 inputs	1059
	18.3 Market corroborated inputs	1060
	18.4 Making adjustments to a Level 2 input	1061
	18.5 Recently observed prices in an inactive market	1062
	19 LEVEL 3 INPUTS	1063
	19.1 Use of Level 3 inputs	1063
	19.2 Examples of Level 3 inputs	1064
	20 DISCLOSURES	1064
	20.1 Disclosure objectives	1065
	20.2 Accounting policy disclosures	1068
	20.3 Disclosures for recognised fair value measurements	1070
	20.4 Disclosures for unrecognised fair value measurements	1087
	20.5 Disclosures regarding liabilities issued with an inseparable third-partycredit enhancement	1088
	21 APPLICATION GUIDANCE – PRESENT VALUE TECHNIQUES	1088
	21.1 General principles for use of present value techniques	1088
	21.2 The components of a present value measurement	1089
	21.3 Discount rate adjustment technique	1092
	21.4 Expected present value technique	1094
	22 EFFECTIVE DATE AND TRANSITION	1099
	23 CONVERGENCE WITH US GAAP	1099
	23.1 The development of IFRS 13	1099
	23.2 Convergence with US GAAP	1100
	Chapter 15 Foreign exchange	1105
	1 INTRODUCTION	1109
	1.1 Background	1109
	1.2 Relevant pronouncements	1110
	2 IAS 21: OBJECTIVE, SCOPE AND DEFINITIONS	1110
	2.1 Objective of the standard	1110
	2.2 Scope	1110
	2.3 Definitions of terms	1111
	3 SUMMARY OF THE APPROACH REQUIRED BY IAS 21	1112
	4 DETERMINATION OF AN ENTITY’S FUNCTIONAL CURRENCY	1112
	4.1 General	1112
	4.2 Intermediate holding companies or finance subsidiaries	1114
	4.3 Investment holding companies	1116
	4.4 Branches and divisions	1116
	4.5 Documentation of judgements made	1117
	5 REPORTING FOREIGN CURRENCY TRANSACTIONS IN THEFUNCTIONAL CURRENCY OF AN ENTITY	1117
	5.1 Initial recognition	1117
	5.2 Reporting at the ends of subsequent reporting periods	1121
	5.3 Treatment of exchange differences	1122
	5.4 Determining whether an item is monetary or non-monetary	1125
	5.5 Change in functional currency	1130
	5.6 Books and records not kept in functional currency	1132
	6 USE OF A PRESENTATION CURRENCY OTHER THAN THEFUNCTIONAL CURRENCY	1132
	6.1 Translation to the presentation currency	1133
	6.2 Translation of equity items	1143
	6.3 Exchange differences on intragroup balances	1144
	6.4 Non-coterminous period ends	1152
	6.5 Goodwill and fair value adjustments	1153
	6.6 Disposal or partial disposal of a foreign operation	1155
	7 CHANGE OF PRESENTATION CURRENCY	1163
	8 INTRODUCTION OF THE EURO	1168
	9 TAX EFFECTS OF ALL EXCHANGE DIFFERENCES	1170
	10 DISCLOSURE REQUIREMENTS	1170
	10.1 Exchange differences	1170
	10.2 Presentation and functional currency	1170
	10.3 Convenience translations of financial statements or other financialinformation	1171
	10.4 Judgements made in applying IAS 21 and related disclosures	1171
	11 FUTURE DEVELOPMENTS	1172
	Chapter 16 Hyperinflation	1175
	1 INTRODUCTION	1177
	1.1 Background	1177
	1.2 Hyperinflationary economies	1178
	1.3 Restatement approach	1178
	2 THE REQUIREMENTS OF IAS 29	1179
	2.1 The context of IAS 29	1179
	2.2 Scope	1180
	2.3 Definition of hyperinflation	1180
	2.4 The IAS 29 restatement process	1181
	3 SELECTION OF A GENERAL PRICE INDEX	1182
	3.1 Selecting a general price index	1182
	3.2 General price index not available for all periods	1182
	4 ANALYSIS AND RESTATEMENT OF THE STATEMENT OFFINANCIAL POSITION	1183
	4.1 Monetary and non-monetary items	1183
	4.2 Inventories	1189
	4.3 Restatement of associates, joint ventures and subsidiaries	1189
	4.4 Calculation of deferred taxation	1190
	5 RESTATEMENT OF THE STATEMENT OF CHANGES IN EQUITY	1192
	6 RESTATEMENT OF THE STATEMENT OF COMPREHENSIVEINCOME AND INCOME STATEMENT	1193
	6.1 Restatement of interest and exchange differences	1195
	6.2 Calculation of the gain or loss on the net monetary position	1195
	7 RESTATEMENT OF THE STATEMENT OF CASH FLOWS	1196
	8 RESTATEMENT OF COMPARATIVE FIGURES	1197
	9 INTERIM REPORTING	1197
	10 TRANSITION	1198
	10.1 Economies becoming hyperinflationary	1198
	10.2 Economies ceasing to be hyperinflationary	1199
	10.3 Economies exiting severe hyperinflation	1200
	11 TRANSLATION TO A DIFFERENT PRESENTATION CURRENCY	1200
	12 DISCLOSURES	1201
	Chapter 17 Intangible assets	1205
	1 INTRODUCTION	1209
	1.1 Background	1209
	1.2 Terms used in IAS 38	1210
	2 OBJECTIVE AND SCOPE OF IAS 38	1212
	2.1 What is an intangible asset?	1213
	2.2 Is IAS 38 the appropriate IFRS?	1216
	3 RECOGNITION AND MEASUREMENT	1219
	3.1 Recognition	1219
	3.2 Measurement	1222
	3.3 Subsequent expenditure	1223
	4 SEPARATE ACQUISITION	1223
	4.1 Recognition	1223
	4.2 Components of cost	1224
	4.3 Costs to be expensed	1224
	4.4 Income from incidental operations while an asset is being developed	1225
	4.5 Measurement of intangible assets acquired for contingent consideration	1226
	4.6 Acquisition by way of government grant	1227
	4.7 Exchanges of assets	1228
	5 ACQUISITION AS PART OF A BUSINESS COMBINATION	1229
	5.1 Recognition of intangible assets acquired in a business combination	1230
	5.2 Examples of intangible assets acquired in a business combination	1233
	5.3 Measuring the fair value of intangible assets acquired in a businesscombination	1234
	5.4 Customer relationship intangible assets acquired in a businesscombination	1234
	5.5 In-process research and development	1236
	6 INTERNALLY GENERATED INTANGIBLE ASSETS	1237
	6.1 Internally generated goodwill	1237
	6.2 Internally generated intangible assets	1237
	6.3 Cost of an internally generated intangible asset	1247
	7 RECOGNITION OF AN EXPENSE	1248
	7.1 Catalogues and other advertising costs	1249
	8 MEASUREMENT AFTER INITIAL RECOGNITION	1250
	8.1 Cost model for measurement of intangible assets	1250
	8.2 Revaluation model for measurement of intangible assets	1251
	9 AMORTISATION OF INTANGIBLE ASSETS	1255
	9.1 Assessing the useful life of an intangible asset as finite or indefinite	1255
	9.2 Intangible assets with a finite useful life	1259
	9.3 Intangible assets with an indefinite useful life	1265
	9.4 Impairment losses	1266
	9.5 Retirements and disposals	1267
	10 DISCLOSURE	1269
	10.1 General disclosures	1269
	10.2 Statement of financial position presentation	1272
	10.3 Profit or loss presentation	1273
	10.4 Additional disclosures when the revaluation model is applied	1273
	10.5 Disclosure of research and development expenditure	1274
	11 SPECIFIC REGULATORY AND ENVIRONMENTAL ISSUESREGARDING INTANGIBLE ASSETS	1274
	11.1 Rate-regulated activities	1274
	11.2 Emissions trading schemes	1275
	11.3 Accounting for green certificates or renewable energy certificates	1282
	11.4 Accounting for REACH costs	1284
	Chapter 18 Property, plant andequipment	1287
	1 INTRODUCTION	1291
	2 THE REQUIREMENTS OF IAS 16	1292
	2.1 Scope	1292
	2.2 Definitions used in IAS 16	1292
	3 RECOGNITION	1293
	3.1 Aspects of recognition	1294
	3.2 Accounting for parts (‘components’) of assets	1299
	3.3 Initial and subsequent expenditure	1300
	4 MEASUREMENT AT RECOGNITION	1302
	4.1 Elements of cost and cost measurement	1302
	4.2 Incidental and non-incidental income	1309
	4.3 Accounting for changes in decommissioning and restoration costs	1311
	4.4 Exchanges of assets	1311
	4.5 Assets held under finance leases	1313
	4.6 Assets acquired with the assistance of government grants	1313
	5 MEASUREMENT AFTER RECOGNITION: COST MODEL	1314
	5.1 Significant parts of assets	1314
	5.2 Depreciable amount and residual values	1315
	5.3 Depreciation charge	1316
	5.4 Useful lives	1316
	5.5 When depreciation starts	1319
	5.6 Depreciation methods	1319
	5.7 Impairment	1321
	6 MEASUREMENT AFTER RECOGNITION: REVALUATION MODEL	1322
	6.1 The meaning of fair value	1323
	6.2 Accounting for valuation surpluses and deficits	1326
	6.3 Reversals of downward valuations	1328
	6.4 Adopting a policy of revaluation	1330
	6.5 Assets held under finance leases	1330
	7 DERECOGNITION AND DISPOSAL	1330
	7.1 IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations	1331
	7.2 Sale of assets held for rental	1331
	7.3 Partial disposals and undivided interests	1332
	8 IAS 16 DISCLOSURE REQUIREMENTS	1334
	8.1 General disclosures	1335
	8.2 Additional disclosures for revalued assets	1337
	8.3 Other disclosures	1338
	Chapter 19 Investment property	1341
	1 INTRODUCTION	1345
	2 DEFINITIONS AND SCOPE	1346
	2.1 Property interests held under operating leases	1347
	2.2 Land	1348
	2.3 Property leased to others	1348
	2.4 Property held for own use (‘owner-occupied’)	1349
	2.5 Property under construction for investment	1349
	2.6 Property held or under construction for sale in the ordinary course of business	1350
	2.7 Property with dual uses	1350
	2.8 Property with the provision of ancillary services	1352
	2.9 Property where rentals are determined by reference to the operations inthe property	1353
	2.10 Group of assets leased out under a single operating lease	1353
	3 RECOGNITION	1355
	3.1 Expenditure prior to planning permissions/zoning consents	1355
	3.2 Other aspects of cost recognition	1355
	3.3 Acquisition of investment property or a business combination?	1356
	4 INITIAL MEASUREMENT	1358
	4.1 Attributable costs	1358
	4.2 Start-up costs and self-built property	1358
	4.3 Deferred payments	1359
	4.4 Reclassifications from property, plant and equipment (‘PP&E’) or frominventory	1359
	4.5 Initial measurement of property held under a lease	1359
	4.6 Initial measurement of assets acquired in exchange transactions	1359
	4.7 Initial recognition of tenanted investment property subsequentlymeasured using the cost model	1360
	4.8 Borrowing costs	1360
	4.9 Lease incentives and initial costs of leasing a property	1360
	4.10 Contingent costs	1362
	4.11 Income from tenanted property during development	1363
	4.12 Payments by the vendor to the purchaser	1363
	5 MEASUREMENT AFTER INITIAL RECOGNITION	1363
	5.1 Property held under an operating lease	1364
	5.2 Measurement by insurers and similar entities	1364
	6 THE FAIR VALUE MODEL	1365
	6.1 Estimating fair value	1365
	6.2 Inability to determine fair value of completed investment property	1369
	6.3 The fair value of investment property under construction	1370
	6.4 Transaction costs incurred by the reporting entity on acquisition	1371
	6.5 Fixtures and fittings subsumed within fair value	1372
	6.6 Prepaid and accrued operating lease income	1373
	6.7 The fair value of properties held under a lease	1376
	6.8 Future capital expenditure and development value (‘Highest and bestuse’)	1377
	6.9 Negative present value	1378
	6.10 Deferred taxation for property held by a ‘single asset’ entity	1379
	7 THE COST MODEL	1379
	7.1 Initial recognition	1379
	7.2 Incidence of use of the cost model	1381
	7.3 Impairment	1382
	8 IFRS 5 AND INVESTMENT PROPERTY	1382
	9 TRANSFER OF ASSETS INTO OR FROM INVESTMENT PROPERTY	1384
	9.1 Transfers from inventory	1384
	9.2 Transfers to inventory	1386
	9.3 Treatment of transfers	1387
	9.4 Transfers of investment property held under operating leases	1388
	10 DISPOSAL OF INVESTMENT PROPERTY	1389
	10.1 Calculation of gain or loss on disposal	1390
	10.2 Sale prior to completion of construction	1390
	10.3 Replacement of parts of investment property	1391
	10.4 Compensation from third parties	1391
	11 INTERIM REPORTING AND IAS 40	1392
	12 THE DISCLOSURE REQUIREMENTS OF IAS 40	1393
	12.1 Disclosures under both fair value and cost models	1393
	12.2 Additional disclosures for the fair value model	1401
	12.3 Additional disclosures for the cost model	1404
	12.4 Presentation of sales proceeds	1405
	13 FUTURE DEVELOPMENTS	1405
	13.1 New revenue recognition standard	1405
	13.2 The Leasing Project	1407
	Chapter 20 Impairment of fixed assets and goodwill	1409
	1 INTRODUCTION	1414
	1.1 The theory behind the impairment review	1414
	1.2 Key features of the impairment review	1415
	2 THE REQUIREMENTS OF IAS 36	1417
	2.1 Scope	1417
	2.2 When an impairment test is required	1418
	2.3 Recoverable amount	1421
	3 FAIR VALUE LESS COSTS OF DISPOSAL	1423
	3.1 Estimating FVLCD	1424
	4 DETERMINING VALUE IN USE (VIU)	1429
	4.1 Dividing the entity into cash-generating units (CGUs)	1430
	4.2 Goodwill and its allocation to cash-generating units	1437
	4.3 Identifying the carrying amount of CGU assets	1446
	4.4 Estimating the future pre-tax cash flows of the CGU under review	1453
	4.5 Identifying an appropriate discount rate and discounting the future cashflows	1462
	4.6 Differences between fair value and value in use	1479
	5 IMPAIRMENT OF GOODWILL	1480
	5.1 When to test cash-generating units with goodwill for impairment	1480
	5.2 Impairment of assets and goodwill recognised on acquisition	1483
	5.3 Non-controlling interests	1486
	5.4 Disposal of operation within a cash-generating unit to which goodwillhas been allocated	1494
	5.5 Impairment of intangible assets with an indefinite useful life	1496
	6 RECOGNISING AND REVERSING IMPAIRMENT LOSSES	1497
	6.1 Impairment losses on individual assets	1498
	6.2 Impairment losses and CGUs	1499
	6.3 Reversal of impairment loss relating to goodwill prohibited	1501
	6.4 Reversal of impairment losses relating to assets other than goodwill	1502
	7 DISCLOSURES REQUIRED BY IAS 36	1505
	7.1 Introduction	1505
	7.2 IAS 36 disclosures	1505
	7.3 Annual impairment disclosures required for goodwill and intangibleassets with an indefinite useful life	1508
	8 TESTING FOR IMPAIRMENT: GROUP ISSUES	1514
	8.1 Separate financial statements of parent entities: FVLCD for investmentsin subsidiaries, associates and joint ventures	1516
	8.2 Separate financial statements of parent entities: calculating VIU forinvestments in subsidiaries, associates and joint ventures	1516
	8.3 Sub group consolidated financial statements and impairment testing	1520
	Chapter 21 Capitalisation of borrowing costs	1527
	1 INTRODUCTION	1529
	2 THE REQUIREMENTS OF IAS 23	1530
	2.1 Core principle	1530
	2.2 Scope	1530
	3 QUALIFYING ASSETS	1530
	3.1 Inventories	1530
	3.2 Assets measured at fair value	1531
	3.3 Construction contracts	1532
	3.4 Financial assets	1532
	4 DEFINITION OF BORROWING COSTS	1532
	4.1 The definition of borrowing costs in IAS 23	1532
	4.2 Other finance costs	1533
	5 BORROWING COSTS ELIGIBLE FOR CAPITALISATION	1533
	5.1 Directly attributable borrowing costs	1533
	5.2 Specific borrowings	1534
	5.3 General borrowings	1534
	5.4 Exchange differences as a borrowing cost	1540
	5.5 Other finance costs as a borrowing cost	1542
	5.6 Capitalisation of borrowing costs in hyperinflationary economies	1546
	5.7 Group considerations	1546
	6 COMMENCEMENT, SUSPENSION AND CESSATION OFCAPITALISATION	1547
	6.1 Commencement of capitalisation	1547
	6.2 Suspension of capitalisation	1549
	6.3 Cessation of capitalisation	1550
	7 DISCLOSURE REQUIREMENTS	1551
	7.1 The requirements of IAS 23	1551
	7.2 Disclosure requirements in other IFRSs	1551
	Chapter 22 Inventories	1553
	1 INTRODUCTION	1555
	2 THE SCOPE OF IAS 2	1556
	2.1 Scope issues: IAS 2 or another IFRS	1557
	3 MEASUREMENT	1559
	3.1 What may be included in cost?	1560
	3.2 Cost measurement methods	1565
	3.3 Transfers of rental assets to inventory	1567
	3.4 Net realisable value	1567
	3.5 Consignment stock and sale and repurchase agreements	1569
	4 REAL ESTATE INVENTORY	1570
	4.1 Classification of real estate as inventory	1570
	4.2 Costs of real estate inventory	1570
	5 RECOGNITION IN PROFIT OR LOSS	1572
	6 DISCLOSURE REQUIREMENTS OF IAS 2	1573
	Chapter 23 Construction contracts (IAS 11)	1575
	1 INTRODUCTION	1577
	1.1 Scope and definitions of IAS 11	1577
	1.2 Whether an arrangement is a construction contract	1578
	1.3 Service concession agreements	1580
	1.4 Sale of real estate based on a third party’s specifications	1580
	2 COMBINATION AND SEGMENTATION OF CONTRACTS	1581
	2.1 Options for the construction of an additional asset	1582
	3 CONTRACT REVENUE, COSTS AND EXPENSES	1583
	3.1 Contract revenue	1583
	3.2 Contract costs	1585
	3.3 The recognition of contract revenue and expenses	1587
	4 DISCLOSURE REQUIREMENTS OF IAS 11	1596
	Chapter 24 Leases	1601
	1 INTRODUCTION	1605
	2 WHAT IS A LEASE?	1606
	2.1 Determining whether an arrangement contains a lease	1606
	2.2 Transactions that are not, in substance, leases	1615
	3 SCOPE AND DEFINITIONS OF IAS 17	1619
	3.1 Scope of IAS 17	1619
	3.2 Lease classification	1621
	3.3 Leases of land – finance or operating leases?	1627
	3.4 Defined terms	1633
	3.5 Leases as financial instruments	1639
	4 ACCOUNTING FOR FINANCE LEASES	1640
	4.1 Accounting by lessees	1641
	4.2 Accounting by lessors	1644
	4.3 Termination of finance leases	1649
	4.4 Manufacturer or dealer lessors	1652
	5 ACCOUNTING FOR OPERATING LEASES	1653
	5.1 Operating leases in the financial statements of lessees	1653
	5.2 Operating leases in the financial statements of lessors	1657
	5.3 Payments made in connection with the termination of operating leases	1658
	6 MODIFYING THE TERMS OF LEASES	1661
	6.1 IAS 17 and accounting for renegotiations	1661
	7 SALE AND LEASEBACK TRANSACTIONS	1668
	7.1 Sale and finance leaseback	1669
	7.2 Operating leaseback	1670
	7.3 Sale and leaseback arrangements including repurchase agreements andoptions	1672
	8 SUB-LEASES AND BACK-TO-BACK LEASES	1674
	8.1 Introduction	1674
	9 DISCLOSURES REQUIRED BY IAS 17	1677
	9.1 Disclosures relating to financial assets and liabilities	1677
	9.2 Disclosure by lessees	1677
	9.3 Disclosure by lessors	1680
	10 UPDATING LEASE ACCOUNTING: A NEW IFRS EXPECTEDSHORTLY	1682
	10.1 Introduction	1683
	10.2 The new lease model	1685
	Chapter 25 Government grants	1691
	1 INTRODUCTION	1693
	1.1 Overview of IAS 20	1693
	1.2 Terms used in this chapter	1694
	2 SCOPE OF IAS 20	1695
	2.1 Government assistance	1695
	2.2 Government grants	1695
	2.3 Scope exclusions	1697
	3 RECOGNITION AND MEASUREMENT	1699
	3.1 General requirements of IAS 20	1699
	3.2 Non-monetary grants	1700
	3.3 Forgivable loans	1700
	3.4 Loans at lower than market rates of interest	1700
	3.5 Recognition in the income statement	1702
	3.6 Repayment of government grants	1706
	3.7 Government assistance	1706
	4 PRESENTATION OF GRANTS	1707
	4.1 Presentation of grants related to assets	1707
	4.2 Presentation of grants related to income	1708
	5 GOVERNMENT GRANTS RELATED TO BIOLOGICAL ASSETS INTHE SCOPE OF IAS 41	1709
	6 DISCLOSURES	1710
	6.1 Government assistance	1711
	Chapter 26 Service concessionarrangements	1713
	1 INTRODUCTION	1717
	1.1 The Interpretations Committee’s approach to accounting for serviceconcessions	1719
	1.2 Terms used in this chapter	1720
	2 SCOPE OF IFRIC 12	1720
	2.1 Public-to-private service concession arrangements within scope	1722
	2.2 Arrangements that are not in the scope of IFRIC 12	1726
	2.3 IFRIC 4 and IFRIC 12: outsourcing arrangements and SCAs	1727
	2.4 Private-to-private arrangements	1729
	2.5 Accounting by grantors	1730
	3 THE CONTROL MODEL	1730
	3.1 Regulation of services	1730
	3.2 Control of the residual interest	1731
	3.3 Assets within scope	1734
	3.4 Partially regulated assets	1736
	4 ACCOUNTING BY THE CONCESSION OPERATOR: THEFINANCIAL ASSET AND INTANGIBLE ASSET MODELS	1737
	4.1 Consideration for services provided and the choice between the two models	1739
	4.2 The financial asset model	1742
	4.3 The intangible asset model	1746
	4.4 Revenue recognition implications of the two models	1751
	4.5 ‘Bifurcation’ – single arrangements that contain both financial andintangible assets	1751
	4.6 Accounting for residual interests	1752
	4.7 Accounting for contractual payments to be made by an operator to agrantor	1754
	5 REVENUE AND EXPENDITURE DURING THE OPERATIONS PHASEOF THE CONCESSION AGREEMENT	1760
	5.1 Additional construction and upgrade services	1760
	5.2 Accounting for the operations phase	1763
	5.3 Items provided to the operator by the grantor	1766
	5.4 Additional considerations for entities applying IFRS 15	1766
	6 DISCLOSURE REQUIREMENTS: SIC-29	1768
	Chapter 27 Provisions, contingent liabilities and contingent assets	1775
	1 INTRODUCTION	1779
	1.1 Background	1779
	1.2 Interpretations related to the application of IAS 37	1780
	1.3 Terms used in this chapter	1781
	2 OBJECTIVE AND SCOPE OF IAS 37	1782
	2.1 Objective	1782
	2.2 Scope of IAS 37	1782
	3 RECOGNITION	1787
	3.1 Determining when a provision should be recognised	1787
	3.2 Contingencies	1792
	3.3 Recognising an asset when recognising a provision	1796
	4 MEASUREMENT	1797
	4.1 Best estimate of provision	1797
	4.2 Dealing with risk and uncertainty in measuring a provision	1799
	4.3 Discounting the estimated cash flows to a present value	1800
	4.4 Anticipating future events that may affect the estimate of cash flows	1807
	4.5 Reimbursements, insurance and other recoveries from third parties	1808
	4.6 Joint and several liability	1809
	4.7 Provisions are not reduced for gains on disposal of related assets	1810
	4.8 Changes and uses of provisions	1810
	4.9 Changes in contingent liabilities recognised in a business combination	1811
	5 CASES IN WHICH NO PROVISION SHOULD BE RECOGNISED	1811
	5.1 Future operating losses	1812
	5.2 Repairs and maintenance of owned assets	1812
	5.3 Staff training costs	1814
	5.4 Rate-regulated activities	1814
	6 SPECIFIC EXAMPLES OF PROVISIONS AND CONTINGENCIES	1816
	6.1 Restructuring provisions	1817
	6.2 Onerous contracts	1823
	6.3 Decommissioning provisions	1829
	6.4 Environmental provisions – general guidance in IAS 37	1840
	6.5 Liabilities associated with emissions trading schemes	1843
	6.6 Green certificates compared to emissions trading schemes	1845
	6.7 EU Directive on ‘Waste Electrical and Electronic Equipment’ (IFRIC 6)	1846
	6.8 Levies imposed by governments	1847
	6.9 Dilapidation and other provisions relating to leased assets	1852
	6.10 Warranty provisions	1854
	6.11 Litigation and other legal claims	1855
	6.12 Refunds policy	1856
	6.13 Self insurance	1857
	6.14 Obligations to make donations to non-profit organisations	1857
	7 DISCLOSURE REQUIREMENTS	1860
	7.1 Provisions	1860
	7.2 Contingent liabilities	1863
	7.3 Contingent assets	1864
	7.4 Reduced disclosure when information is seriously prejudicial	1864
	Chapter 28 Revenue recognition (IAS 18)	1867
	1 INTRODUCTION	1871
	2 THE TIMING OF REVENUE RECOGNITION	1872
	2.1 The critical event approach	1872
	2.2 The accretion approach	1875
	3 THE REQUIREMENTS OF IAS 18	1876
	3.1 Scope	1876
	3.2 The distinction between income, revenue and gains	1877
	3.3 Revenue and agency relationships	1878
	3.4 Income and distributable profits	1879
	3.5 Measurement of revenue	1879
	3.6 Identifying the transaction	1880
	3.7 The sale of goods	1882
	3.8 The rendering of services	1885
	3.9 Exchanges of goods and services	1888
	3.10 Exchanges of property plant and equipment and intangible assets	1889
	3.11 Barter transactions involving advertising services	1889
	3.12 Interest, royalties and dividends	1891
	3.13 Uncollectible revenue	1892
	3.14 Disclosure	1892
	3.15 Revenue in the statement of profit or loss and other comprehensiveincome	1893
	4 REVENUE RECOGNITION UNDER US GAAP	1896
	4.1 Applicability of US literature	1896
	4.2 The general approach to revenue recognition under US GAAP	1896
	4.3 US GAAP requirements for multiple-element transactions	1897
	5 PRACTICAL ISSUES	1898
	5.1 Sale of goods	1900
	5.2 Receipt of initial fees	1903
	5.3 Subscriptions to publications	1913
	5.4 Installation fees	1913
	5.5 Advertising revenue	1914
	5.6 Software revenue recognition	1914
	5.7 Revenue recognition issues in the telecommunications sector	1917
	5.8 Excise taxes and goods and services taxes: recognition of gross versusnet revenues	1925
	5.9 Sales incentives	1927
	5.10 Film exhibition and television broadcast rights	1929
	5.11 The disposal of property, plant and equipment	1931
	5.12 IFRIC 15 and pre-completion contracts	1933
	5.13 Regulatory assets and liabilities	1939
	5.14 Transfers of assets from customers and IFRIC 18	1939
	5.15 Customer loyalty programmes and IFRIC 13	1944
	5.16 Revenue recognition from gambling	1949
	Chapter 29 Revenue from contracts with customers (IFRS 15)	1953
	1 INTRODUCTION	1961
	1.1 Overview	1961
	1.2 Effective date and transition	1963
	1.3 Application considerations	1969
	1.4 Definitions	1970
	2 SCOPE	1971
	2.1 Definition of a customer	1972
	2.2 Collaborative arrangements	1973
	2.3 Interaction with other standards	1973
	3 IDENTIFY THE CONTRACT WITH THE CUSTOMER	1976
	3.1 Attributes of a contract	1977
	3.2 Combining contracts	1984
	3.3 Contract modifications	1985
	3.4 Arrangements that do not meet the definition of a contract under thestandard	1990
	4 IDENTIFY THE PERFORMANCE OBLIGATIONS IN THE CONTRACT	1992
	4.1 Identifying the promised goods and services in the contract	1993
	4.2 Separate performance obligations	1998
	4.3 Goods and services that are not distinct	2005
	4.4 Principal versus agent considerations	2006
	4.5 Consignment arrangements	2012
	4.6 Customer options for additional goods or services	2012
	4.7 Sale of products with a right of return	2015
	5 DETERMINE THE TRANSACTION PRICE	2016
	5.1 Variable consideration	2018
	5.2 Accounting for specific types of variable consideration	2028
	5.3 Significant financing component	2031
	5.4 Non-cash consideration	2038
	5.5 Consideration paid or payable to a customer	2041
	5.6 Non-refundable upfront fees	2045
	6 ALLOCATE THE TRANSACTION PRICE TO THE PERFORMANCEOBLIGATIONS	2046
	6.1 Estimating stand-alone selling prices	2046
	6.2 Applying the relative stand-alone selling price method	2054
	6.3 Allocating variable consideration	2055
	6.4 Allocating a discount	2057
	6.5 Changes in transaction price after contract inception	2060
	6.6 Allocation of transaction price to components outside the scope of IFRS 15	2061
	7 SATISFACTION OF PERFORMANCE OBLIGATIONS	2062
	7.1 Performance obligations satisfied over time	2062
	7.2 Control transferred at a point in time	2077
	7.3 Repurchase agreements	2080
	7.4 Bill-and-hold arrangements	2083
	7.5 Customer acceptance	2085
	7.6 Licensing and rights to use	2086
	7.7 Recognising revenue when a right of return exists	2086
	7.8 Breakage and prepayments for future goods or services	2087
	7.9 Onerous contracts	2088
	8 OTHER MEASUREMENT AND RECOGNITION TOPICS	2088
	8.1 Warranties	2088
	8.2 Onerous contracts	2092
	8.3 Contract costs	2093
	8.4 Licences of intellectual property	2100
	9 PRESENTATION AND DISCLOSURE	2110
	9.1 Presentation of contract assets, contract liabilities and revenue	2110
	9.2 Disclosure objective and general requirements	2112
	9.3 Specific disclosure requirements	2114
	Chapter 30 Income taxes	2125
	1 INTRODUCTION	2133
	1.1 The nature of taxation	2133
	1.2 Allocation between periods	2133
	1.3 The development of IAS 12	2136
	2 OBJECTIVE AND SCOPE OF IAS 12	2137
	2.1 Objective	2137
	2.2 Overview	2138
	3 DEFINITIONS	2139
	4 SCOPE	2140
	4.1 What is an ‘income tax’?	2141
	4.2 Withholding and similar taxes	2143
	4.3 Investment tax credits	2144
	4.4 Interest and penalties	2146
	4.5 Effectively tax-free entities	2147
	5 CURRENT TAX	2147
	5.1 Enacted or substantively enacted tax legislation	2148
	5.2 Uncertain tax positions	2149
	5.3 ‘Prior year adjustments’ of previously presented tax balances andexpense (income)	2149
	5.4 Intra-period allocation, presentation and disclosure	2150
	6 DEFERRED TAX – TAX BASES AND TEMPORARY DIFFERENCES	2150
	6.1 Tax base	2152
	6.2 Examples of temporary differences	2156
	7 DEFERRED TAX – RECOGNITION	2164
	7.1 The basic principles	2164
	7.2 The initial recognition exception	2166
	7.3 Assets carried at fair value or revalued amount	2185
	7.4 Restrictions on recognition of deferred tax assets	2186
	7.5 ‘Outside’ temporary differences relating to subsidiaries, branches,associates and joint arrangements	2194
	7.6 ‘Tax-transparent’ (‘flow-through’) entities	2200
	7.7 Deferred taxable gains	2201
	8 DEFERRED TAX – MEASUREMENT	2202
	8.1 Legislation at the end of the reporting period	2202
	8.2 Uncertain tax positions	2203
	8.3 ‘Prior year adjustments’ of previously presented tax balances andexpense (income)	2203
	8.4 Expected manner of recovery of assets or settlement of liabilities	2203
	8.5 Different tax rates applicable to retained and distributed profits	2213
	8.6 Discounting	2214
	8.7 Unrealised intragroup profits and losses in consolidated financialstatements	2214
	9 UNCERTAIN TAX POSITIONS	2219
	9.1 Considering uncertainty in the recognition of tax assets and liabilities	2220
	9.2 Unit of account	2220
	9.3 Consideration of uncertainty in the measurement of tax assets andliabilities	2221
	9.4 Tax authority practice	2222
	9.5 Detection risk	2222
	9.6 Classification of uncertain tax positions	2223
	9.7 Recognition of an asset for payments on account	2223
	10 ALLOCATION OF TAX CHARGE OR CREDIT	2224
	10.1 Revalued and rebased assets	2225
	10.2 Retrospective restatements or applications	2227
	10.3 Dividends and transaction costs of equity instruments	2228
	10.4 Gains and losses reclassified (‘recycled’) to profit or loss	2230
	10.5 Gain/loss in profit or loss and loss/gain outside profit or loss offset fortax purposes	2231
	10.6 Discontinued operations	2233
	10.7 Defined benefit pension plans	2234
	10.8 Share-based payment transactions	2236
	10.9 Change in tax status of entity or shareholders	2248
	10.10 Previous revaluation of PP&E treated as deemed cost on transition toIFRS	2248
	10.11 Disposal of an interest in a subsidiary that does not result in a loss ofcontrol	2248
	11 CONSOLIDATED TAX RETURNS AND OFFSET OF TAXABLEPROFITS AND LOSSES WITHIN GROUPS	2250
	11.1 Payments for intragroup transfer of tax losses	2250
	12 BUSINESS COMBINATIONS	2251
	12.1 Measurement and recognition of deferred tax in a business combination	2252
	12.2 Tax deductions for replacement share-based payment awards in abusiness combination	2255
	12.3 Apparent immediate impairment of goodwill created by deferred tax	2255
	12.4 Tax deductions for acquisition costs	2256
	13 PRESENTATION	2257
	13.1 Statement of financial position	2257
	13.2 Statement of comprehensive income	2259
	13.3 Statement of cash flows	2259
	14 DISCLOSURE	2260
	14.1 Components of tax expense	2260
	14.2 Other disclosures	2260
	14.3 Reason for recognition of certain tax assets	2263
	14.4 Dividends	2264
	14.5 Example of disclosures	2265
	14.6 Discontinued operations – interaction with IFRS 5	2267
	15 POSSIBLE FUTURE DEVELOPMENTS	2268
	Chapter 31 Share-based payment	2271
	1 INTRODUCTION	2285
	1.1 Background	2285
	1.2 Development of IFRS 2	2286
	1.3 Scope of the chapter and referencing convention	2287
	1.4 Overall approach of IFRS 2	2288
	2 THE OBJECTIVE AND SCOPE OF IFRS 2	2289
	2.1 Objective	2289
	2.2 Scope	2289
	3 GENERAL RECOGNITION PRINCIPLES	2311
	3.1 Vesting conditions	2312
	3.2 Non-vesting conditions (conditions that are neither service conditionsnor performance conditions)	2315
	3.3 Vesting period	2319
	3.4 Vesting and non-vesting conditions: future developments	2320
	4 EQUITY-SETTLED TRANSACTIONS – OVERVIEW	2320
	4.1 Summary of accounting treatment	2320
	4.2 The credit entry	2322
	5 EQUITY-SETTLED TRANSACTIONS – COST OF AWARDS	2322
	5.1 Cost of awards – overview	2322
	5.2 Transactions with employees	2324
	5.3 Grant date	2325
	5.4 Transactions with non-employees	2338
	5.5 Determining the fair value of equity instruments	2339
	6 EQUITY-SETTLED TRANSACTIONS – ALLOCATION OF EXPENSE	2341
	6.1 Overview	2341
	6.2 Vesting conditions other than market conditions	2344
	6.3 Market conditions	2351
	6.4 Non-vesting conditions	2361
	7 EQUITY-SETTLED TRANSACTIONS – MODIFICATION,CANCELLATION AND SETTLEMENT	2362
	7.1 Background	2362
	7.2 Valuation requirements when an award is modified, cancelled or settled	2364
	7.3 Modification	2364
	7.4 Cancellation and settlement	2373
	7.5 Replacement and ex gratia awards on termination of employment	2382
	7.6 Entity’s plans for future modification or replacement of award – impacton estimation process at reporting date	2384
	7.7 Two awards running ‘in parallel’	2385
	7.8 Share splits and consolidations	2386
	8 EQUITY-SETTLED TRANSACTIONS – VALUATION	2387
	8.1 Introduction	2387
	8.2 Options	2388
	8.3 Selection of an option-pricing model	2392
	8.4 Adapting option-pricing models for share-based payment transactions	2400
	8.5 Selecting appropriate assumptions for option-pricing models	2402
	8.6 Capital structure effects and dilution	2412
	8.7 Other awards requiring the use of option valuation models	2413
	8.8 Awards whose fair value cannot be measured reliably	2414
	8.9 Awards with reload features	2417
	8.10 Awards of equity instruments to a fixed monetary value	2418
	9 CASH-SETTLED TRANSACTIONS	2419
	9.1 Scope of requirements	2419
	9.2 What constitutes a cash-settled award?	2420
	9.3 Required accounting	2424
	9.4 Modification of award from equity-settled to cash-settled or from cashsettledto equity-settled	2429
	10 TRANSACTIONS WITH EQUITY AND CASH ALTERNATIVES	2438
	10.1 Transactions where the counterparty has choice of settlement in equityor in cash	2439
	10.2 Transactions where the entity has choice of settlement in equity or in cash	2445
	10.3 Awards requiring cash settlement in specific circumstances (awards withcontingent cash settlement)	2449
	10.4 Cash settlement alternative not based on share price or value	2454
	11 REPLACEMENT SHARE-BASED PAYMENT AWARDS ISSUED IN ABUSINESS COMBINATION	2455
	11.1 Background	2455
	11.2 Replacement awards in business combinations accounted for underIFRS 3	2455
	11.3 Acquiree award not replaced by acquirer	2461
	11.4 Financial statements of the acquired entity	2462
	12 GROUP SHARE SCHEMES	2462
	12.1 Typical features of a group share scheme	2463
	12.2 Accounting treatment of group share schemes – summary	2465
	12.3 Employee benefit trusts (‘EBTs’) and similar arrangements	2471
	12.4 Illustrative example of group share scheme – equity-settled awardsatisfied by market purchase of shares	2478
	12.5 Illustrative example of group share scheme – equity-settled awardsatisfied by fresh issue of shares	2483
	12.6 Illustrative example – cash-settled transaction not settled by the entityreceiving goods or services	2488
	12.7 Employee transferring between group entities	2491
	12.8 Group reorganisations	2491
	12.9 Share-based payments to employees of joint ventures or associates	2492
	13 DISCLOSURES	2495
	13.1 Nature and extent of share-based payment arrangements	2495
	13.2 Valuation of share-based payment arrangements	2497
	13.3 Impact of share-based payment transactions on financial statements	2498
	13.4 Example of IFRS 2 disclosures	2499
	14 TAXES RELATED TO SHARE-BASED PAYMENT TRANSACTIONS	2504
	14.1 Income tax deductions for the entity	2504
	14.2 Employment taxes of the employer	2504
	14.3 Sale of shares by employee to meet employee’s tax liability (‘sell to cover’)	2507
	15 OTHER PRACTICAL ISSUES	2511
	15.1 Matching share awards (including deferred bonuses delivered in shares)	2511
	15.2 Limited recourse and full recourse loans	2517
	15.3 Awards entitled to dividends during the vesting period	2518
	15.4 Awards vesting or exercisable on an exit event or change of control(flotation, trade sale etc.)	2521
	15.5 South African black economic empowerment (‘BEE’) and similar arrangements	2526
	16 FIRST-TIME ADOPTION	2531
	16.1 First-time adoption provisions	2531
	Chapter 32 Employee benefits	2533
	1 INTRODUCTION	2537
	2 OBJECTIVE AND SCOPE OF IAS 19	2537
	2.1 Objective	2537
	2.2 Scope	2538
	3 PENSIONS AND OTHER POST-EMPLOYMENT BENEFITS –DEFINED CONTRIBUTION AND DEFINED BENEFIT PLANS	2539
	3.1 The distinction between defined contribution plans and defined benefitplans	2539
	3.2 Insured benefits	2540
	3.3 Multi-employer plans	2543
	3.4 State plans	2547
	3.5 Plans that would be defined contribution plans but for the existence of aminimum return guarantee	2547
	3.6 Death-in-service benefits	2549
	4 DEFINED CONTRIBUTION PLANS	2552
	4.1 Accounting requirements	2552
	5 DEFINED BENEFIT PLANS – GENERAL	2553
	6 DEFINED BENEFIT PLANS – PLAN ASSETS	2554
	6.1 Definition of plan assets	2554
	6.2 Measurement of plan assets	2555
	6.3 Qualifying insurance policies	2556
	6.4 Reimbursement rights	2556
	6.5 Contributions to defined benefit funds	2556
	6.6 Longevity swaps	2557
	7 DEFINED BENEFIT PLANS – PLAN LIABILITIES	2557
	7.1 Legal and constructive obligations	2557
	7.2 Contributions by employees and third parties	2559
	7.3 Actuarial methodology	2562
	7.4 Attributing benefit to years of service	2563
	7.5 Actuarial assumptions	2566
	7.6 Discount rate	2569
	7.7 Frequency of valuations	2571
	8 DEFINED BENEFIT PLANS – TREATMENT OF THE PLAN SURPLUSOR DEFICIT IN THE STATEMENT OF FINANCIAL POSITION	2572
	8.1 Net defined benefit liability (asset)	2572
	8.2 Restriction of assets to their recoverable amounts	2573
	9 DEFINED BENEFIT PLANS – PRESENTATION OF THE NETDEFINED BENEFIT LIABILITY (ASSET)	2582
	10 DEFINED BENEFIT PLANS – TREATMENT IN PROFIT OR LOSSAND OTHER COMPREHENSIVE INCOME	2582
	10.1 Service cost	2583
	10.2 Net interest on the net defined benefit liability (asset)	2587
	10.3 Remeasurements	2587
	11 DEFINED BENEFIT PLANS – COSTS OF ADMINISTERING EMPLOYEE BENEFIT PLANS	2588
	12 SHORT-TERM EMPLOYEE BENEFITS	2589
	12.1 General recognition criteria for short-term employee benefits	2590
	12.2 Short-term paid absences	2590
	12.3 Profit-sharing and bonus plans	2591
	13 LONG-TERM EMPLOYEE BENEFITS OTHER THAN POSTEMPLOYMENTBENEFITS	2593
	13.1 Meaning of other long-term employee benefits	2593
	13.2 Recognition and measurement	2593
	14 TERMINATION BENEFITS	2595
	14.1 Statutory Termination Indemnities	2596
	14.2 Recognition	2596
	14.3 Measurement	2597
	15 DISCLOSURE REQUIREMENTS	2598
	15.1 Defined contribution plans	2598
	15.2 Defined benefit plans	2598
	15.3 Other employee benefits	2607
	16 POSSIBLE FUTURE DEVELOPMENTS	2607
	16.1 IASB activities	2607
	16.2 Interpretations Committee activities	2608
	Chapter 33 Operating segments	2613
	1 INTRODUCTION	2615
	1.1 Background	2615
	1.2 The main features of IFRS 8	2615
	1.3 Terms used in IFRS 8	2617
	1.4 Transitional provisions	2618
	2 OBJECTIVE AND SCOPE OF IFRS 8	2619
	2.1 Objective	2619
	2.2 Scope of IFRS 8	2619
	3 IDENTIFYING A SINGLE SET OF OPERATING SEGMENTS	2620
	3.1 Definition of an operating segment	2621
	3.2 Identifying externally reportable segments	2626
	4 MEASUREMENT	2635
	5 INFORMATION TO BE DISCLOSED ABOUT REPORTABLESEGMENTS	2636
	5.1 General information about reportable segments	2637
	5.2 A measure of segment profit or loss, total assets and total liabilities	2639
	5.3 Disclosure of other elements of revenue, income and expense	2640
	5.4 Additional disclosures relating to segment assets	2641
	5.5 Explanation of the measurements used in segment reporting	2642
	5.6 Reconciliations	2644
	5.7 Restatement of previously reported information	2645
	5.8 Disclosure of commercially sensitive information	2647
	6 ENTITY-WIDE DISCLOSURES FOR ALL ENTITIES	2648
	6.1 Information about products and services	2648
	6.2 Information about geographical areas	2649
	6.3 Information about major customers	2650
	7 RESULTS OF THE POST-IMPLEMENATION REVIEW OF IFRS 8	2652
	Chapter 34 Earnings per share	2655
	1 INTRODUCTION	2659
	1.1 Definitions	2659
	2 OBJECTIVE AND SCOPE OF IAS 33	2659
	2.1 Objective	2659
	2.2 Scope	2660
	3 THE BASIC EPS	2661
	3.1 Earnings	2661
	3.2 Number of shares	2661
	4 CHANGES IN OUTSTANDING ORDINARY SHARES	2664
	4.1 Weighted average number of shares	2664
	4.2 Purchase and redemption of own shares	2665
	4.3 Changes in ordinary shares without corresponding changes in resources	2665
	4.4 Options exercised during the year	2671
	4.5 Post balance sheet changes in capital	2671
	4.6 Issue to acquire another business	2671
	4.7 Adjustments to EPS in historical summaries	2673
	5 MATTERS AFFECTING THE NUMERATOR	2673
	5.1 Earnings	2673
	5.2 Preference dividends	2673
	5.3 Retrospective adjustments	2675
	5.4 Participating equity instruments and two class shares	2675
	5.5 Other bases	2677
	6 DILUTED EARNINGS PER SHARE	2677
	6.1 The need for diluted EPS	2677
	6.2 Calculation of diluted EPS	2678
	6.3 Dilutive potential ordinary shares	2680
	6.4 Particular types of dilutive instruments	2683
	7 PRESENTATION, RESTATEMENT AND DISCLOSURE	2699
	7.1 Presentation	2699
	7.2 Restatement	2700
	7.3 Disclosure	2701
	8 APPENDIX	2702
	Chapter 35 Events after thereporting period	2709
	1 INTRODUCTION	2711
	2 REQUIREMENTS OF IAS 10	2712
	2.1 Objective, scope and definitions	2712
	2.2 The treatment of adjusting events	2719
	2.3 The treatment of non-adjusting events	2721
	2.4 Other disclosure requirements	2724
	3 PRACTICAL ISSUES	2725
	3.1 Valuation of inventory	2725
	3.2 Percentage of completion estimates	2726
	3.3 Insolvency of a debtor	2727
	3.4 Valuation of investment property at fair value and tenant insolvency	2727
	3.5 Discovery of fraud after the reporting period	2727
	Chapter 36 Related party disclosures	2729
	1 INTRODUCTION	2733
	1.1 The related party issue	2733
	1.2 Possible solutions	2734
	2 REQUIREMENTS OF IAS 24	2734
	2.1 Objective and scope	2734
	2.2 Identification of a related party and related party transactions	2736
	2.3 Parties that are not related parties	2747
	2.4 Disclosure of controlling relationships	2748
	2.5 Disclosable transactions	2750
	2.6 Disclosure of key management personnel compensation	2751
	2.7 Disclosure of other related party transactions, including commitments	2755
	2.8 Disclosure of expense incurred with management entity	2762
	2.9 Disclosures with government-related entities	2762
	Chapter 37 Statement of cash flows	2767
	1 INTRODUCTION	2771
	1.1 Terms used in IAS 7	2771
	2 OBJECTIVE AND SCOPE OF IAS 7	2772
	2.1 Objective	2772
	2.2 Scope	2772
	3 CASH AND CASH EQUIVALENTS	2772
	3.1 Policy for determining components of cash equivalents	2773
	3.2 Components of cash and cash equivalents	2774
	3.3 Reconciliation with items in the statement of financial position	2776
	3.4 Restrictions on the use of cash and cash equivalents	2777
	4 CLASSIFICATION IN THE STATEMENT OF CASH FLOWS	2779
	4.1 Cash flows from operating activities	2780
	4.2 Cash flows from investing activities	2784
	4.3 Cash flows from financing activities	2785
	4.4 Allocating items to operating, investing and financing activities	2786
	5. OTHER CASH FLOW PRESENTATION ISSUES	2794
	5.1 Exceptional and other material cash flows	2794
	5.2 Gross or net presentation of cash flows	2794
	5.3 Foreign currency cash flows	2795
	5.4 Non-cash transactions and transactions on deferred terms	2797
	5.5 Voluntary disclosures	2798
	6 ADDITIONAL IAS 7 CONSIDERATIONS FOR GROUPS	2800
	6.1 Preparing a consolidated statement of cash flows	2801
	6.2 Transactions with non-controlling interests	2801
	6.3 Acquisitions and disposals	2801
	6.4 Cash flows of subsidiaries, associates and joint ventures	2805
	6.5 Cash flows in separate financial statements	2807
	7 ADDITIONAL IAS 7 CONSIDERATIONS FOR FINANCIALINSTITUTIONS	2808
	7.1 Operating cash flows	2808
	7.2 Reporting cash flows on a net basis	2809
	8 REQUIREMENTS OF OTHER STANDARDS	2809
	8.1 Cash flows of discontinued operations	2809
	8.2 Cash flows arising from insurance contracts	2810
	8.3 Cash flows arising from the exploration of mineral resources	2810
	8.4 Cash flows arising from interests in subsidiaries, joint ventures andassociates	2811
	Chapter 38 Interim financialreporting	2813
	1 INTRODUCTION	2819
	1.1 Definitions	2820
	2 OBJECTIVE AND SCOPE OF IAS 34	2820
	2.1 Objective	2820
	2.2 Scope	2820
	3 COMPONENTS, FORM AND CONTENT OF AN INTERIMFINANCIAL REPORT UNDER IAS 34	2821
	3.1 Complete set of interim financial statements	2822
	3.2 Condensed interim financial statements	2822
	3.3 Requirements for both complete and condensed interim financialinformation	2827
	3.4 Management commentary	2827
	4 DISCLOSURES IN CONDENSED FINANCIAL STATEMENTS	2827
	4.1 Significant events and transactions	2828
	4.2 Other disclosures required by IAS 34	2830
	4.3 Illustrative examples of disclosures	2832
	4.4 Segment information	2848
	4.5 Fair value disclosures for financial instruments	2850
	4.6 Disclosure of compliance with IFRS	2851
	5 PERIODS FOR WHICH INTERIM FINANCIAL STATEMENTS AREREQUIRED TO BE PRESENTED	2852
	5.1 Other comparative information	2856
	5.2 Length of interim reporting period	2857
	5.3 Change in financial year-end	2858
	5.4 Comparatives following a financial period longer than a year	2858
	5.5 When the comparative period is shorter than the current period	2860
	6 MATERIALITY	2860
	7 DISCLOSURE IN ANNUAL FINANCIAL STATEMENTS	2860
	8 RECOGNITION AND MEASUREMENT	2861
	8.1 Same accounting policies as in annual financial statements	2861
	8.2 Seasonal businesses	2868
	9 EXAMPLES OF THE RECOGNITION AND MEASUREMENTPRINCIPLES	2869
	9.1 Property, plant and equipment and intangible assets	2870
	9.2 Reversal of impairment losses recognised in a previous interimperiod (IFRIC 10)	2871
	9.3 Employee benefits	2872
	9.4 Inventories and cost of sales	2875
	9.5 Taxation	2876
	9.6 Foreign currency translation	2885
	9.7 Provisions, contingencies and accruals for other costs	2887
	9.8 Earnings per share	2892
	10 USE OF ESTIMATES	2893
	11 RESTATEMENT OF PREVIOUSLY REPORTED INTERIM PERIODS	2894
	12 EFFECTIVE DATES AND TRANSITIONAL RULES	2895
	12.1 First-time presentation of interim reports complying with IAS 34	2895
	12.2 Consequential amendments to IFRIC 10 when first adopting IFRS 9	2896
	12.3 Consequential amendments to IFRS 7 when first adopting IFRS 9	2897
	12.4 Consequential amendments to IAS 34 when first adopting IFRS 15	2897
	Chapter 39 Agriculture	2899
	1 INTRODUCTION	2903
	2 OBJECTIVE, DEFINITIONS AND SCOPE	2904
	2.1 Objective	2904
	2.2 Definitions	2905
	2.3 Scope	2908
	3 RECOGNITION AND MEASUREMENT PRINCIPLES	2911
	3.1 Recognition	2911
	3.2 Measurement	2912
	3.3 Government grants	2922
	4 MEASURING FAIR VALUE LESS COSTS TO SELL	2922
	4.1 The interaction between IAS 41 and IFRS 13	2922
	4.2 Establishing what to measure	2923
	4.3 When to measure fair value	2923
	4.4 Determining costs to sell	2924
	4.5 Measuring fair value: IAS 41-specific requirements	2924
	4.6 Measuring fair value: overview of IFRS 13’s requirements	2926
	4.7 The problem of measuring fair value for part-grown biological assets	2934
	5 DISCLOSURE	2936
	5.1 General	2936
	5.2 Fair value measurement disclosures	2946
	5.3 Additional disclosures if fair value cannot be measured reliably	2948
	5.4 Government grants	2948
	6 TRANSITION AND EFFECTIVE DATE	2949
	6.1 Transition and effective date for the bearer plants amendments	2949
	Chapter 40 Extractive industries	2951
	1 INTRODUCTION AND BACKGROUND	2959
	1.1 Defining extractive industries	2959
	1.2 The development of IFRS 6 – Exploration for and Evaluation of MineralResources	2962
	1.3 April 2010 Discussion Paper: Extractive Activities	2963
	1.4 Status of the Statement of Recommended Practice, UK Oil IndustryAccounting Committee, June 2001 (OIAC SORP)	2966
	1.5 Guidance under national accounting standards	2967
	1.6 Upstream versus downstream activities	2967
	2 MINERAL RESERVES AND RESOURCES	2969
	2.1 International harmonisation of reserve reporting	2971
	2.2 Petroleum reserve estimation and reporting	2972
	2.3 Mining resource and reserve reporting	2975
	2.4 Disclosure of mineral reserves and resources	2979
	3 IFRS 6 – EXPLORATION FOR AND EVALUATION OF MINERALRESOURCES	2983
	3.1 Objective and scope	2983
	3.2 Recognition of exploration and evaluation assets	2984
	3.3 Measurement of exploration and evaluation assets	2990
	3.4 Presentation and classification	2994
	3.5 Impairment	2995
	3.6 Disclosure	2998
	4 UNIT OF ACCOUNT	3000
	4.1 Unit of account in the extractive industries	3001
	5 LEGAL RIGHTS TO EXPLORE FOR, DEVELOP AND PRODUCEMINERAL PROPERTIES	3003
	5.1 How does a mineral lease work?	3005
	5.2 Concessionary agreements (concessions)	3006
	5.3 Traditional production sharing contracts	3006
	5.4 Pure-service contracts	3010
	5.5 Evolving contractual arrangements	3010
	5.6 Joint operating agreements	3012
	5.7 Different types of royalty interests	3012
	6 RISK-SHARING ARRANGEMENTS	3014
	6.1 Carried interests	3014
	6.2 Farm-ins and farm-outs	3020
	6.3 Asset swaps	3025
	7 INVESTMENTS IN THE EXTRACTIVE INDUSTRIES	3026
	7.1 Joint arrangements	3026
	7.2 Undivided interests	3034
	8 ACQUISITIONS	3035
	8.1 Business combinations versus asset acquisitions	3035
	8.2 Business combinations	3037
	8.3 Acquisition of an interest in a joint operation that is a business	3041
	8.4 Asset acquisitions	3042
	9 FUNCTIONAL CURRENCY	3045
	9.1 Determining functional currency	3045
	9.2 Changes in functional currency	3048
	10 DECOMMISSIONING AND RESTORATION/REHABILITATION	3050
	10.1 Recognition and measurement issues	3050
	10.2 Accounting for changes in decommissioning and restoration costs	3052
	10.3 Treatment of foreign exchange differences	3052
	10.4 Deferred tax on decommissioning obligations	3053
	10.5 Indefinite life assets	3053
	11 IMPAIRMENT OF ASSETS	3054
	11.1 Impairment indicators	3054
	11.2 Identifying cash-generating units (CGUs)	3056
	11.3 Basis of Recoverable amount – value-in-use or fair value less costs ofdisposal	3058
	11.4 Calculation of VIU	3058
	11.5 Calculation of FVLCD	3064
	11.6 Low mine or field profitability near end of life	3065
	12 REVENUE RECOGNITION	3067
	12.1 Revenue in the development phase	3067
	12.2 Sale of product with delayed shipment	3071
	12.3 Exchanges of inventories	3071
	12.4 Overlift and underlift (oil and gas)	3072
	12.5 Forward-selling contracts to finance development	3075
	12.6 Trading activities	3077
	13 FINANCIAL INSTRUMENTS	3078
	13.1 Normal purchase and sales exemption	3078
	13.2 Embedded derivatives	3081
	13.3 Volume flexibility in supply contracts	3087
	13.4 Hedging sales of metal concentrate (mining)	3088
	14 INVENTORIES	3089
	14.1 Recognition of work in progress	3089
	14.2 Sale of by-products and joint products	3092
	14.3 Core inventories	3094
	14.4 Carried at fair value	3096
	14.5 Stockpiles of low grade ore (mining)	3097
	14.6 Heap leaching (mining)	3099
	15 PROPERTY, PLANT AND EQUIPMENT	3101
	15.1 Major maintenance and turnarounds / renewals and reconditioning costs	3101
	15.2 Well workovers and recompletions (oil and gas)	3103
	15.3 Care and maintenance	3103
	15.4 Unitisations and redeterminations	3104
	15.5 Stripping costs in the production phase of a surface mine (mining)	3111
	16 DEPRECIATION, DEPLETION AND AMORTISATION (DD&A)	3121
	16.1 Requirements under IAS 16 and IAS 38	3121
	16.2 Block caving – depreciation, depletion and amortisation (mining)	3134
	17 LONG-TERM CONTRACTS AND LEASES	3135
	17.1 Embedded leases	3135
	17.2 Take-or-pay contracts	3137
	18 TOLLING ARRANGEMENTS	3139
	19 TAXATION	3140
	19.1 Excise duties, production taxes and severance taxes	3141
	19.2 Grossing up of notional quantities withheld	3144
	20 TRANSPARENCY DISCLOSURES	3145
	20.1 Extractive Industries Transparency Initiative	3146
	20.2 US Dodd-Frank Act	3146
	20.3 European Union Accounting Directive and the European UnionTransparency Directive	3146
	20.4 Canada Extractive Sector Transparency Measures Act	3147
	20.5 Developments in Australia	3147
	20.6 OECD Base Erosion and Profit Shifting	3147
	21 EVENTS AFTER THE REPORTING PERIOD	3148
	21.1 Reserves proven after the reporting period	3148
	21.2 Business combinations – application of the acquisition method	3148
	21.3 Completion of E&E activity after the reporting period	3150
	22 GLOSSARY	3150
	Chapter 41 Financial instruments:Introduction	3157
	1 STANDARDS APPLYING TO FINANCIAL INSTRUMENTS	3159
	1.1 IAS 32	3159
	1.2 IAS 39	3160
	1.3 IFRS 7	3161
	1.4 IFRS 9	3161
	1.5 Structure and objectives of the standards	3163
	2 ADOPTION OF IFRS IN THE EUROPEAN UNION	3163
	3 HOW FINANCIAL INSTRUMENTS ARE DEALT WITH INCHAPTERS 41 TO 53	3164
	Chapter 42 Financial instruments:Definitions and scope	3167
	1 INTRODUCTION	3169
	2 WHAT IS A FINANCIAL INSTRUMENT?	3170
	2.1 Definitions	3170
	2.2 Applying the definitions	3171
	3 SCOPE	3178
	3.1 Subsidiaries, associates, joint ventures and similar investments	3178
	3.2 Leases	3180
	3.3 Insurance contracts	3180
	3.4 Financial guarantee contracts	3181
	3.5 Loan commitments	3186
	3.6 Equity instruments	3188
	3.7 Business combinations	3189
	3.8 Contingent pricing of property, plant and equipment and intangibleassets	3191
	3.9 Employee benefit plans and share-based payment	3192
	3.10 Reimbursement rights in respect of provisions	3192
	3.11 Disposal groups classified as held for sale and discontinued operations	3192
	3.12 Indemnification assets	3193
	4 CONTRACTS TO BUY OR SELL COMMODITIES AND OTHERNON-FINANCIAL ITEMS	3193
	4.1 Contracts that may be settled net	3194
	4.2 Normal sales and purchases (or own use contracts)	3195
	Chapter 43 Financial instruments:Derivatives and embedded derivatives	3203
	1 INTRODUCTION	3207
	2 DEFINITION OF A DERIVATIVE	3208
	2.1 Changes in value in response to changes in underlying	3208
	2.2 Initial net investment	3213
	2.3 Future settlement	3215
	3 EXAMPLES OF DERIVATIVES	3216
	3.1 Common derivatives	3216
	3.2 In-substance derivatives	3216
	3.3 Regular way contracts	3217
	4 EMBEDDED DERIVATIVES	3217
	5 EMBEDDED DERIVATIVES: THE MEANING OF ‘CLOSELYRELATED’	3219
	5.1 Financial instrument hosts	3219
	5.2 Contracts for the sale of goods or services	3229
	5.3 Leases	3236
	5.4 Insurance contracts	3236
	6 IDENTIFYING THE TERMS OF EMBEDDED DERIVATIVES AND HOST CONTRACTS	3237
	6.1 Embedded non-option derivatives	3237
	6.2 Embedded option-based derivative	3238
	6.3 Nature of a financial instrument host	3239
	6.4 Multiple embedded derivatives	3241
	7 REASSESSMENT OF EMBEDDED DERIVATIVES	3242
	7.1 IFRIC 9	3242
	7.2 Acquisition of contracts	3243
	7.3 Business combinations	3244
	7.4 Remeasurement issues arising from reassessment	3244
	8 LINKED AND SEPARATE TRANSACTIONS AND ‘SYNTHETIC’INSTRUMENTS	3245
	Chapter 44 Financial instruments:Financial liabilitiesand equity	3249
	1 INTRODUCTION	3255
	1.1 Background	3255
	1.2 Development of IFRS on classification of liabilities and equity	3256
	2 OBJECTIVE AND SCOPE	3257
	2.1 Objective	3257
	2.2 Scope	3257
	3 DEFINITIONS	3257
	4 CLASSIFICATION OF INSTRUMENTS	3260
	4.1 Definition of equity instrument	3260
	4.2 Contractual obligation to deliver cash or other financial assets	3261
	4.3 Contingent settlement provisions	3264
	4.4 Examples of equity instruments	3268
	4.5 Preference shares and similar instruments	3269
	4.6 Puttable instruments and instruments repayable only on liquidation	3277
	4.7 Perpetual debt	3287
	4.8 Differences of classification between consolidated and single entityfinancial statements	3287
	4.9 Reclassification of instruments	3289
	5 CONTRACTS SETTLED BY DELIVERY OF THE ENTITY’S OWNEQUITY INSTRUMENTS	3293
	5.1 Contracts accounted for as equity instruments	3295
	5.2 Contracts accounted for as financial assets or financial liabilities	3299
	5.3 Liabilities arising from gross-settled contracts for the purchase of theentity’s own equity instruments	3303
	5.4 Gross-settled contracts for the sale or issue of the entity’s own equityinstruments	3306
	6 COMPOUND FINANCIAL INSTRUMENTS	3307
	6.1 Background	3307
	6.2 Initial recognition – ‘split accounting’	3308
	6.3 Conversion, early repurchase and modification	3312
	6.4 The components of a compound instrument	3317
	6.5 Other issues	3321
	6.6 Common forms of convertible bonds	3321
	7 SETTLEMENT OF FINANCIAL LIABILITY WITH EQUITYINSTRUMENT	3329
	7.1 Scope and effective date of IFRIC 19	3329
	7.2 Requirements of IFRIC 19	3330
	7.3 Debt for equity swaps with shareholders	3330
	8 INTEREST, DIVIDENDS, GAINS AND LOSSES	3331
	8.1 Transaction costs of equity transactions	3332
	8.2 Tax effects of equity transactions	3333
	9 TREASURY SHARES	3334
	9.1 Transactions in own shares not at fair value	3335
	10 ‘HEDGING’ OF INSTRUMENTS CLASSIFIED AS EQUITY	3336
	11 DERIVATIVES OVER OWN EQUITY INSTRUMENTS	3336
	11.1 Forward contracts	3337
	11.2 Call options	3343
	11.3 Put options	3347
	12 POSSIBLE FUTURE DEVELOPMENTS	3353
	Chapter 45 Financial instruments:Classification (IAS 39)	3355
	1 INTRODUCTION	3357
	2 ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT ORLOSS	3358
	2.1 Assets and liabilities held for trading	3358
	2.2 Instruments designated at fair value through profit or loss	3360
	3 HELD-TO-MATURITY INVESTMENTS	3367
	3.1 Instruments that may or may not be classified as held-to-maturity	3367
	3.2 Positive intention and ability to hold to maturity	3369
	3.3 The tainting provisions	3370
	4 LOANS AND RECEIVABLES	3373
	5 AVAILABLE-FOR-SALE ASSETS	3375
	6 RECLASSIFICATIONS	3375
	6.1 Reclassifications to or from fair value through profit or loss	3375
	6.2 Reclassifications between available-for-sale financial assets and loansand receivables	3378
	6.3 Reclassifications between held-to-maturity investments and available forsale financial assets	3379
	6.4 Prohibited reclassifications	3379
	7 CLASSIFICATION OF FINANCIAL INSTRUMENTS IN A BUSINESSCOMBINATION	3380
	8 FUTURE DEVELOPMENTS	3380
	Chapter 46 Financial instruments:Classification (IFRS 9)	3381
	1 INTRODUCTION	3385
	2 CLASSIFYING FINANCIAL ASSETS: AN OVERVIEW	3385
	2.1 Debt instruments	3387
	2.2 Equity instruments and derivatives	3388
	3 CLASSIFYING FINANCIAL LIABILITIES	3389
	4 FINANCIAL ASSETS AND FINANCIAL LIABILITIES HELD FORTRADING	3390
	5 FINANCIAL ASSETS: THE ‘BUSINESS MODEL’ ASSESSMENT	3391
	5.1 The level at which the business model assessment is applied	3392
	5.2 Hold to collect contractual cash flows	3393
	5.3 Hold to collect contractual cash flows and selling financial assets	3396
	5.4 Other business models	3397
	5.5 Applying the business model test in practice	3398
	6 CHARACTERISTICS OF THE CONTRACTUAL CASH FLOWS OFTHE INSTRUMENT	3403
	6.1 The meaning of ‘principal’	3404
	6.2 The meaning of ‘interest’	3405
	6.3 Contractual features that normally pass the test	3406
	6.4 Contractual features that may affect the classification	3409
	6.5 Contractually linked instruments	3422
	7 DESIGNATION AT FAIR VALUE THROUGH PROFIT OR LOSS	3427
	7.1 Designation eliminates or significantly reduces a measurement or recognition inconsistency (accounting mismatch) that would otherwise arise	3428
	7.2 A group of financial liabilities or financial assets and financial liabilitiesis managed and its performance is evaluated on a fair value basis	3430
	7.3 Hybrid contracts with a host that is not a financial asset within the scopeof IFRS 9	3431
	8 DESIGNATION OF NON-DERIVATIVE EQUITY INVESTMENTS ATFAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME	3432
	9 RECLASSIFICATION OF FINANCIAL ASSETS	3433
	10 EFFECTIVE DATE AND TRANSITION	3436
	10.1 Effective date	3436
	10.2 Transition provisions	3436
	Chapter 47 Financial instruments:Recognition and initial measurement	3443
	1 INTRODUCTION	3445
	2 RECOGNITION (IAS 39 AND IFRS 9)	3445
	2.1 General requirements	3445
	2.2 ‘Regular way’ transactions	3447
	3 INITIAL MEASUREMENT (IAS 39 AND IFRS 9)	3455
	3.1 General requirements	3455
	3.2 Initial fair value and ‘day 1’ profits	3455
	3.3 Transaction costs	3458
	3.4 Embedded derivatives and financial instrument hosts	3459
	3.5 Regular way transactions	3460
	3.6 Assets and liabilities arising from loan commitments	3460
	Chapter 48 Financial instruments:Subsequent measurement (IAS 39)	3463
	1 INTRODUCTION	3467
	2 SUBSEQUENT MEASUREMENT AND RECOGNITION OF GAINSAND LOSSES	3467
	2.1 Financial assets and financial liabilities at fair value through profit orloss	3468
	2.2 Held-to-maturity investments	3469
	2.3 Loans and receivables	3469
	2.4 Available-for-sale assets	3469
	2.5 Other financial liabilities	3471
	2.6 Unquoted equity instruments and related derivatives	3472
	2.7 Reclassifications of financial assets	3473
	2.8 Financial guarantees and commitments to provide a loan at a belowmarketinterest rate	3474
	2.9 Exceptions to the general principles	3475
	3 AMORTISED COST AND THE EFFECTIVE INTEREST METHOD	3476
	3.1 Fixed interest, fixed term instruments	3477
	3.2 Prepayment, call and similar options	3478
	3.3 Floating rate instruments	3482
	3.4 Perpetual debt instruments	3484
	3.5 Acquisition of credit impaired debt instruments	3484
	3.6 Inflation-linked debt	3485
	3.7 Other, more complex, instruments	3487
	4 IMPAIRMENT	3488
	4.1 Impairment reviews	3489
	4.2 Financial assets carried at amortised cost	3493
	4.3 Available-for-sale assets measured at fair value	3500
	4.4 Financial assets carried at cost in accordance with IAS 39	3504
	4.5 Interest income after impairment recognition	3504
	5 FOREIGN CURRENCIES	3504
	5.1 Foreign currency instruments	3504
	5.2 Foreign entities	3507
	Chapter 49 Financial instruments:Subsequent measurement (IFRS 9)	3509
	1 INTRODUCTION	3515
	2 SUBSEQUENT MEASUREMENT AND RECOGNITION OF GAINSAND LOSSES	3516
	2.1 Financial assets and financial liabilities measured at fair value throughprofit or loss	3517
	2.2 Investments in equity investments designated at fair value through othercomprehensive income	3521
	2.3 Debt instruments measured at fair value through other comprehensiveincome	3522
	2.4 Financial assets measured at amortised cost	3523
	2.5 Financial liabilities measured at amortised cost	3523
	2.6 Unquoted equity instruments and related derivatives	3523
	2.7 Reclassifications of financial assets	3524
	2.8 Financial guarantees and commitments to provide a loan at a belowmarketinterest rate	3524
	2.9 Exceptions to the general principles	3525
	3 AMORTISED COST AND THE EFFECTIVE INTEREST METHOD	3526
	3.1 Fixed interest, fixed term instruments	3529
	3.2 Prepayment, call and similar options	3530
	3.3 Floating rate instruments	3534
	3.4 Perpetual debt instruments	3536
	3.5 Inflation-linked debt	3536
	3.6 More complex financial liabilities	3538
	4 FOREIGN CURRENCIES	3540
	4.1 Foreign currency instruments	3540
	4.2 Foreign entities	3541
	5 IMPAIRMENT	3541
	5.1 Introduction	3541
	5.2 Scope	3554
	5.3 Approaches	3554
	5.4 Measurement of expected credit losses	3560
	5.5 General approach: determining significant increases in credit risk	3582
	5.6 Other matters and issues in relation to the IFRS 9 impairmentrequirements	3612
	5.7 Modified financial assets	3617
	5.8 Financial assets measured at fair value through other comprehensive income	3621
	5.9 Trade receivables, contract assets and lease receivables	3629
	5.10 Loan commitments and financial guarantee contracts	3630
	5.11 Revolving credit facilities	3633
	5.12 Presentation of expected credit losses in the statement of financialposition	3638
	5.13 Disclosures	3642
	6 EFFECTIVE DATE AND TRANSITION	3644
	6.1 Effective date	3644
	6.2 Transition	3644
	Chapter 50 Financial instruments:Derecognition	3651
	1 INTRODUCTION	3657
	1.1 Off-balance sheet finance	3657
	2 DEVELOPMENT OF IFRS	3659
	2.1 Definitions	3659
	3 DERECOGNITION – FINANCIAL ASSETS	3661
	3.1 Background	3661
	3.2 Decision tree	3662
	3.3 Derecognition principles, parts of assets and groups of assets	3664
	3.4 Have the contractual rights to cash flows from the asset expired?	3671
	3.5 Has the entity ‘transferred’ the asset?	3675
	3.6 Securitisations	3680
	3.7 Client money	3685
	3.8 Has the entity transferred or retained substantially all the risks andrewards of ownership?	3686
	3.9 Has the entity retained control of the asset?	3691
	4 PRACTICAL APPLICATION OF THE DERECOGNITION CRITERIA	3692
	4.1 Repurchase agreements (‘repos’) and securities lending	3692
	4.2 Transfers subject to put and call options	3694
	4.3 Subordinated retained interests and credit guarantees	3699
	4.4 Transfers by way of swaps	3700
	4.5 Factoring of trade receivables	3701
	5 ACCOUNTING TREATMENT	3701
	5.1 Transfers that qualify for derecognition	3701
	5.2 Transfers that do not qualify for derecognition through retention of risksand rewards	3706
	5.3 Transfers with continuing involvement – summary	3711
	5.4 Transfers with continuing involvement – accounting examples	3713
	5.5 Miscellaneous provisions	3724
	5.6 Reassessing derecognition	3726
	6 DERECOGNITION – FINANCIAL LIABILITIES	3726
	6.1 Extinguishment of debt	3727
	6.2 Exchange or modification of debt by original lender	3730
	6.3 Gains and losses on extinguishment of debt	3737
	6.4 Derivatives that can be financial assets or financial liabilities	3738
	6.5 Supply-chain finance	3738
	7 FUTURE DEVELOPMENTS	3740
	Chapter 51 Financial instruments:Hedge accounting(IAS 39)	3745
	1 INTRODUCTION	3751
	1.1 Background	3751
	1.2 What is hedge accounting?	3752
	1.3 Development of hedge accounting standards	3753
	2 HEDGING INSTRUMENTS AND HEDGED ITEMS	3754
	2.1 Hedging instruments	3754
	2.2 Hedged items	3766
	2.3 Internal hedges and other group accounting issues	3780
	3 TYPES OF HEDGING RELATIONSHIPS	3795
	3.1 Fair value hedges	3795
	3.2 Cash flow hedges	3796
	3.3 Hedges of net investments in foreign operations	3798
	4 ACCOUNTING FOR EFFECTIVE HEDGES	3803
	4.1 Fair value hedges	3803
	4.2 Cash flow hedges	3809
	4.3 Accounting for hedges of a net investment in a foreign operation	3818
	4.4 Hedges of a firm commitment to acquire a business	3819
	5 QUALIFYING CONDITIONS FOR HEDGE ACCOUNTING	3820
	5.1 Documentation and designation	3820
	5.2 Forecast transactions	3822
	5.3 Assessing hedge effectiveness	3824
	6 PORTFOLIO (OR MACRO) HEDGING	3857
	Chapter 52 Financial instruments:Hedge accounting(IFRS 9)	3861
	1 INTRODUCTION	3867
	1.1 Background	3867
	1.2 The main changes in the IFRS 9 hedge accounting requirements	3868
	2 RISK MANAGEMENT	3870
	2.1 Objective of hedge accounting	3870
	2.2 Risk management strategy versus risk management objective	3871
	3 HEDGED ITEMS	3872
	3.1 General requirements	3872
	3.2 Hedges of exposures affecting other comprehensive income	3873
	3.3 Aggregated exposures	3873
	3.4 Risk components	3881
	3.5 Components of a nominal amount	3887
	3.6 Groups of items	3890
	4 HEDGING INSTRUMENTS	3899
	4.1 General requirements	3899
	4.2 Non-derivative financial instruments	3900
	4.3 Hedges of a portion of a time period	3901
	4.4 Hedges of foreign currency risk	3901
	4.5 Time value of money, forward element and currency basis spread	3901
	5 QUALIFYING CRITERIA	3902
	5.1 General requirements	3902
	5.2 Economic relationship	3903
	5.3 Impact of credit risk	3905
	5.4 Setting the hedge ratio	3909
	5.5 Designating ‘proxy hedges’	3910
	6 SUBSEQUENT ASSESSMENT OF EFFECTIVENESS, REBALANCING AND DISCONTINUATION	3911
	6.1 Assessment of effectiveness	3911
	6.2 Rebalancing	3913
	6.3 Discontinuation	3917
	6.4 Measuring ineffectiveness	3921
	7 ACCOUNTING FOR THE COSTS OF HEDGING	3925
	7.1 Time value of options	3925
	7.2 Forward element of forward contracts and foreign currency basis spreadof financial instruments	3930
	8 PRESENTATION	3932
	8.1 Cash flow hedges	3932
	8.2 Fair value hedges	3933
	8.3 Hedges of groups of items	3934
	9 DISCLOSURES	3935
	9.1 Background and general requirements	3935
	9.2 Risk management strategy	3936
	9.3 The amount, timing and uncertainty of future cash flows	3937
	9.4 The effects of hedge accounting on the financial position andperformance	3938
	10 ALTERNATIVES TO HEDGE ACCOUNTING	3940
	10.1 Credit risk exposures	3940
	10.2 Own use contracts	3942
	11 EFFECTIVE DATE AND TRANSITION	3943
	11.1 Effective date	3943
	11.2 Prospective application in general	3944
	11.3 Limited retrospective application	3944
	Chapter 53 Financial instruments:Presentation anddisclosure	3949
	1 INTRODUCTION	3955
	1.1 IAS 32	3955
	1.2 IFRS 7	3955
	2 SCOPE OF IFRS 7	3956
	2.1 Entities required to comply with IFRS 7	3956
	2.2 Financial instruments within the scope of IFRS 7	3956
	2.3 Interim reports	3957
	3 STRUCTURING THE DISCLOSURES	3958
	3.1 Level of detail	3958
	3.2 Materiality	3958
	3.3 Classes of financial instrument	3959
	4 SIGNIFICANCE OF FINANCIAL INSTRUMENTS FOR AN ENTITY’S FINANCIAL POSITION AND PERFORMANCE	3960
	4.1 Accounting policies	3960
	4.2 Income, expenses, gains and losses	3961
	4.3 Hedge accounting	3964
	4.4 Statement of financial position	3974
	4.5 Fair values	3985
	4.6 Business combinations	3988
	5 NATURE AND EXTENT OF RISKS ARISING FROM FINANCIAL INSTRUMENTS	3989
	5.1 Qualitative disclosures	3992
	5.2 Quantitative disclosures	3995
	6 TRANSFERS OF FINANCIAL ASSETS	4040
	6.1 The meaning of ‘transfer’	4040
	6.2 Transferred financial assets that are not derecognised in their entirety	4040
	6.3 Transferred financial assets that are derecognised in their entirety	4043
	7 PRESENTATION ON THE FACE OF THE FINANCIAL STATEMENTS AND RELATED DISCLOSURES	4048
	7.1 Gains and losses recognised in profit or loss	4048
	7.2 Gains and losses recognised in other comprehensive income	4055
	7.3 Statement of changes in equity	4056
	7.4 Statement of financial position	4057
	7.5 Statement of cash flows	4081
	8 EFFECTIVE DATES AND TRANSITIONAL PROVISIONS	4081
	8.1 Adoption of IFRS 9: effective date and transitional provisions	4081
	8.2 Adoption of IFRS 9: disclosure requirements	4081
	8.3 Other amendments to IFRS 7	4083
	9 FUTURE DEVELOPMENTS	4083
	9.1 General developments	4083
	9.2 Enhanced Disclosure Task Force	4084
	Chapter 54 Insurance contracts	4087
	1 INTRODUCTION	4093
	1.1 The history of the IASB’s insurance project	4093
	1.2 The development of IFRS 4	4094
	1.3 Existing accounting practices for insurance contracts	4095
	2 THE OBJECTIVES AND SCOPE OF IFRS 4	4097
	2.1 The objectives of IFRS 4	4097
	2.2 The scope of IFRS 4	4097
	3 THE DEFINITION OF AN INSURANCE CONTRACT	4103
	3.1 The definition	4103
	3.2 Significant insurance risk	4104
	3.3 Changes in the level of insurance risk	4109
	3.4 Uncertain future events	4110
	3.5 Payments in kind	4110
	3.6 The distinction between insurance risk and financial risk	4111
	3.7 Adverse effect on the policyholder	4113
	3.8 Accounting differences between insurance and non insurance contracts	4114
	3.9 Examples of insurance and non-insurance contracts	4115
	4 EMBEDDED DERIVATIVES	4120
	4.1 Unit-linked features	4124
	5 UNBUNDLING OF DEPOSIT COMPONENTS	4124
	5.1 The unbundling requirements	4125
	5.2 Unbundling illustration	4126
	5.3 Practical difficulties	4128
	6 DISCRETIONARY PARTICIPATION FEATURES	4129
	6.1 Discretionary participation features in insurance contracts	4133
	6.2 Discretionary participation features in financial instruments	4135
	6.3 Practical issues	4137
	7 SELECTION OF ACCOUNTING POLICIES	4138
	7.1 The hierarchy exemption	4139
	7.2 Limits on the hierarchy exemption	4140
	8 CHANGES IN ACCOUNTING POLICIES	4152
	8.1 Criteria for accounting policy changes	4153
	8.2 Specific issues	4154
	8.3 Shadow accounting	4159
	8.4 Redesignation of financial assets	4162
	8.5 Practical issues	4163
	9 INSURANCE CONTRACTS ACQUIRED IN BUSINESS COMBINATIONS AND PORTFOLIO TRANSFERS	4164
	9.1 Expanded presentation of insurance contracts	4164
	9.2 Customer lists and relationships not connected to contractual insurance rights and obligations	4168
	10 DISCLOSURE	4168
	10.1 Explanation of recognised amounts	4170
	10.2 Nature and extent of risks arising from insurance contracts	4192
	11 FUTURE DEVELOPMENTS IN INSURANCE CONTRACT ACCOUNTING	4222
	11.1 The Phase II discussion paper	4222
	11.2 The Phase II Exposure Draft	4222
	11.3 The revised Phase II Exposure Draft	4225
	11.4 Mitigating the impact on insurers of applying IFRS 9 before IFRS 4Phase II	4230
	11.5 The road ahead	4231
	Index of extracts fromfinancial statements	4233
	Index of standards	4240
	Index	4324
	EULA	4399