The Impact of IFRS on Industry. Lavi Mohan R.

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СКАЧАТЬ conclude from the above discussion that, irrespective of the basis on which accounting standards have been developed, they will have an impact on specific industries. During the course of writing this book, I found to my pleasant surprise that the industry most impacted by IFRS was the airline industry. They have different types of leases, componentisation of PPE, borrowing costs, impairment, intangible assets such as airport landing rights, revenue recognition dilemmas (customer loyalty programmes) and financial instruments. It would probably not be an exaggeration to state that apart from the industry specific Standards such as IFRS 4 Insurance Contracts and IFRS 6 Exploration for and Evaluation of Mineral Resources most of the other Standards would apply in some way or the other to the airline industry. This conclusion sets the tone for the remaining chapters of the book.

      Chapter 2

      Summary of Disclosures Under IFRS Standards

      To many, IFRS is all about disclosures. The insertion of the words “financial reporting” in place of “accounting” in the erstwhile International Accounting Standards was intended to send out a message that accounting is passé, financial reporting is in. Financial reporting in essence means disclosures. The disclosure requirements in IFRS are, to say the least, intense. Apart from the disclosure requirements mentioned in most Standards, IFRS has Standards exclusively for disclosures: IAS 24 Related Party Transactions, IFRS 7 Financial Instruments: Disclosures, IFRS 8 Operating Segments and IFRS 11 Disclosure of Interests in Other Entities are examples. However, it has to be mentioned that the disclosure requirements in other Standards are equally intense: IAS 36 requires extensive disclosures to be made when an asset tests positive for impairment. In stark contrast, the disclosure requirements required by IAS 23 Borrowing Costs are mentioned only in about four paragraphs. The mantra for an entity moving over to an IFRS world will be “just disclose it.”

      A summary of the disclosure requirements in major IFRS Standards is provided here. A disclaimer has to be made here – the list is by no means exhaustive since some paragraphs in IFRS Standards draw references to other IFRS Standards. An entity doing IFRS for the first time would do well do develop a detailed checklist for disclosures. There are quite a few available online but it would be ideal to get one done internally because it just seems like the right thing to do.

      2.1 IFRS 3 Business Combinations

      The acquirer shall disclose information that enables users of its financial statements to evaluate the nature and financial effect of a business combination that occurs either:

      a. during the current reporting period; or

      b. after the end of the reporting period but before the financial statements are authorised for issue.

      The acquirer shall disclose information that enables users of its financial statements to evaluate the financial effects of adjustments recognised in the current reporting period that relate to business combinations that occurred in the period or previous reporting periods.

      2.2 IFRS 4 Insurance Contracts

      An entity need not apply the disclosure requirements in this IFRS to comparative information that relates to annual periods beginning before 1 January 2005, except for the disclosures about accounting policies, and recognised assets, liabilities, income and expense (and cash flows if the direct method is used).

      If it is impracticable to apply a particular requirement to comparative information that relates to annual periods beginning before 1 January 2005, an entity shall disclose that fact. Applying the liability adequacy test to such comparative information might sometimes be impracticable, but it is highly unlikely to be impracticable to apply other requirements to such comparative information. IAS 8 explains the term “impracticable.”

      An entity need not disclose information about claims development that occurred earlier than five years before the end of the first financial year in which it applies this IFRS. Furthermore, if it is impracticable, when an entity first applies this IFRS, to prepare information about claims development that occurred before the beginning of the earliest period for which an entity presents full comparative information that complies with this IFRS, the entity shall disclose that fact.

      2.3 IFRS 5 Non-Current Assets Held for Sale

      An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or sold:

      a. a description of the non-current asset (or disposal group);

      b. a description of the facts and circumstances of the sale, or leading to the expected disposal, and the expected manner and timing of that disposal;

      c. the gain or loss recognised and, if not separately presented in the statement of comprehensive income, the caption in the statement of comprehensive income that includes that gain or loss;

      d. if applicable, the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments.

      If applicable, an entity shall disclose, in the period of the decision to change the plan to sell the non-current asset (or disposal group), a description of the facts and circumstances leading to the decision and the effect of the decision on the results of operations for the period and any prior periods presented.

      2.4 IFRS 6 Evaluation and Exploration of Mineral Resources

      An entity shall disclose information that identifies and explains the amounts recognised in its financial statements arising from the exploration for and evaluation of mineral resources.

      An entity shall disclose:

      a. its accounting policies for exploration and evaluation expenditures including the recognition of exploration and evaluation assets;

      b. the amounts of assets, liabilities, income and expense and operating and investing cash flows arising from the exploration for and evaluation of mineral resources.

      An entity shall treat exploration and evaluation assets as a separate class of assets and make the disclosures required by either IAS 16 or IAS 38 consistent with how the assets are classified.

      2.5 IFRS 7 Financial Instruments: Disclosures

      The two main categories of disclosures required by IFRS 7 are:

      1. information about the significance of financial instruments; and

      2. information about the nature and extent of risks arising from financial instruments.

2.5.1 Information About the Significance of Financial Instruments2.5.1.1 Statement of Financial Position

      Disclose the significance of financial instruments for an entity's financial position and performance. This includes disclosures for each of the following categories:

      ● financial assets measured at fair value through profit and loss, showing separately those held for trading and those designated at initial recognition;

      ● held-to-maturity investments;

      ● loans and receivables;

      ● available-for-sale assets;

      ● financial liabilities at fair value through profit and loss, showing separately those held for trading and those designated at initial recognition; СКАЧАТЬ