The 40 chapters of the handbook, organised in six parts. Sections marked “Free preview” are open to everyone. Switch to French at any time to read the original text.
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IFRS Accounting Standards are not read like a code: they are understood, compared, applied and defended. Between the text of the standard, the Basis for Conclusions that explains its logic, the Committee’s decisions that clarify its application and the concrete situations of a period-end close, there is a long road. This book was born from the need to travel it in a…
The Conceptual Framework for Financial Reporting (“the Framework”) was published in 1989 (under the title “Framework for the Preparation and Presentation of Financial Statements”), partially revised in September 2010 (objective of financial reporting and qualitative characteristics), and then fully revised in March 2018. The project, launched in 2010, comprised a discussion paper (July 2013)…
IAS 1 Presentation of Financial Statements, in force since 1997, left entities a very wide latitude in presenting their statement of profit or loss. The IASB identified three structural problems in the Basis for Conclusions on IFRS 18. The proliferation of alternative performance measures (APMs): EBITDA, current operating profit, adjusted profit — freely defined,…
IAS 7 requires every entity to present, in its financial statements and for each period presented, a statement of cash flows that reports the cash receipts and cash payments of cash and cash equivalents (IAS 7.1 and 4). Used together with the other financial statements, it makes it possible to assess changes in net assets, the financial structure (liquidity and solvency) and…
Correspondence table provided for guidance to help navigate between the two texts; in case of doubt, refer to the official text.
IAS 10 prescribes (IAS 10.1 and 10.2): when an entity adjusts its financial statements for events after the reporting period; the disclosures about the date when the financial statements were authorised for issue and about events after the reporting period. The standard also prohibits preparing financial statements on a going concern basis when…
IAS 33 sets out the principles for determining and presenting earnings per share (EPS), in order to improve performance comparisons between different entities in the same period and for the same entity between periods (IAS 33.1). The standard focuses on the denominator: even though “earnings” depend on the accounting policies chosen, a number of shares determined on a consistent basis improves…
Your company is listed and the board of directors wants figures in July, not in March of the following year. What must be published, and with what rigour? That is exactly the question IAS 34 answers. 1.1.1 Objective IAS 34 prescribes the minimum content of an interim financial report and the recognition and measurement principles applicable to the financial statements,…
IFRS 8 was issued in November 2006 and has applied since annual periods beginning on or after 1 January 2009 (§35). It supersedes IAS 14 Segment Reporting (§37). Its development was part of the short-term convergence project with the FASB, whose equivalent US standard (SFAS 131, now codified as ASC 280) was already based on the same logic.
Item Content Standard in force IAS 24 Related Party Disclosures, revised in November 2009; it supersedes IAS 24 (revised 2003) (IAS 24.29). Application date Annual periods beginning on or after 1 January 2011, retrospective application (IAS 24.28). Subsequent amendments • IFRS 10, 11 and 12 (May 2011): §3, 9, 11(b), 15, 19(b)(e), 25 (IAS 24.28A).<br>• Entities…
Moving from one accounting framework (a national one, for example) to IFRS Accounting Standards is a major undertaking: applying IFRS “as if they had always been applied” would be costly, sometimes impossible, and would expose the financial statements to the use of hindsight. IFRS 1 organises this transition: it replaces SIC-8 First-time Application of IASs as the Primary Basis of Accounting…
The central question in accounting for inventories is determining the amount of cost to be recognised as an asset and deferred until the related revenue is recognised. IAS 2 provides three answers: the determination of the cost of inventories (costs of purchase, costs of conversion, other costs); their subsequent recognition as an expense, including any write-down…
IAS 16 applies to property, plant and equipment, except when another IFRS Standard requires or permits a different treatment (IAS 16.2). It does not apply (IAS 16.3) to: property, plant and equipment classified as held for sale (IFRS 5); biological assets related to agricultural activity, other than bearer plants (IAS 41); the recognition and…
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset: they are included (capitalised). All other borrowing costs are recognised as an expense in the period in which they are incurred (IAS 23.1 and 23.8). Capitalisation is possible only if it is probable that these…
Term Definition Government The State, a local authority, a public body or any similar body, whether local, national or international. Government assistance Action by government designed to provide a specific economic benefit to an entity or a category of entities meeting certain criteria. Government grants Government assistance in the form of a transfer of resources to an…
IAS 40 sets out the accounting treatment of investment property (IP) and the related disclosures (40.1). It applies to any entity, whatever its business: the Board declined to limit the standard to certain entities (real estate companies, for example), because there is no clear boundary between those entities and others (Basis for Conclusions, BC B7 to B9). Excluded are…
Only the standard (including its integral application guidance) and the interpretations are mandatory. The Basis for Conclusions and the illustrative examples accompany the standard without being part of it; they shed light on the IASB’s intent. The Interpretations Committee’s agenda decisions explain how the existing standards apply to a given situation: they are not standards,…
Objective (IAS 36.1). To ensure that assets are not carried at more than their recoverable amount, that is, the amount that will be recovered through use or sale. If the carrying amount exceeds the recoverable amount, the asset is impaired and an impairment loss is recognised. The standard also specifies when an impairment loss is reversed and what disclosures to provide.
IFRS 5 specifies the accounting for assets held for sale, and the presentation and disclosure of discontinued operations. It requires: that assets meeting the criteria to be classified as held for sale be measured at the lower of their carrying amount and fair value less costs to sell, and that their depreciation…
IFRS 16 (issued in January 2016, applicable to annual periods beginning on or after 1 January 2019) replaced four texts (IFRS 16.C21), which are therefore withdrawn and must no longer be applied: Withdrawn text Subject Where is the subject covered in IFRS 16? IAS 17 Leases Classification of contracts by the lessee as operating lease / finance lease Lessee: single on-balance-sheet model…
Before 2018, revenue was dealt with by IAS 18 Revenue (sale of goods, services, interest, royalties, dividends) and IAS 11 Construction Contracts, supplemented by four interpretations (IFRIC 13, IFRIC 15, IFRIC 18 and SIC-31). The IASB and the FASB considered that this body of literature had three weaknesses (BC2 to BC15): inconsistent principles from one industry to another:…
The objective of IAS 37 is to ensure that appropriate recognition criteria and measurement bases are applied to provisions, contingent liabilities and contingent assets, and that sufficient information is disclosed in the notes to enable users to understand their nature, timing and amount (IAS 37, Objective). The standard applies to all entities in accounting for…
IAS 12 explains how to account for income taxes, that is, the tax for the year (current tax) and the future tax consequences of transactions already recognised (deferred taxes) (IAS 12.1). Income taxes include (IAS 12.2): all domestic and foreign taxes based on taxable profits; distribution taxes, such as withholding…
IAS 19 prescribes the accounting treatment of employee benefits and the related disclosures. Employee benefits are all forms of consideration given by an entity in exchange for service rendered by its employees or for the termination of their employment. The standard requires the entity to recognise: a liability when an employee has provided…
IFRS 2 was issued in February 2004 and applies to annual periods beginning on or after 1 January 2005 (IFRS 2.60). Since then, the basic principles have not changed; the standard has been supplemented by targeted amendments, summarised below. Text Application date (IFRS 2) Main contribution Vesting conditions and cancellations (Jan. 2008) Annual periods beginning on or after 1 Jan. 2009 (§62) Notion of…
Four IASB pronouncements organise the accounting for financial instruments. Each answers a different question: Standard Question it answers Main content IAS 32 How should the instrument be presented: liability or equity? Definitions, liability / equity distinction, compound instruments, treasury shares, offsetting, presentation of interest,…
IFRS 13 Fair Value Measurement was issued by the IASB in May 2011. It applies to annual periods beginning on or after 1 January 2013 (IFRS 13.C1), prospectively (IFRS 13.C2). Its objectives are (IFRS 13.1): to define fair value in a single way (simplifying and harmonising definitions previously scattered across many standards); to integrate in a…
An entity may carry on foreign activities in two ways: by entering into transactions in foreign currencies, or by having foreign operations. It may also present its financial statements in a foreign currency. IAS 21 prescribes: how to include foreign currency transactions and foreign operations in the financial statements; how to translate…
By the end of this chapter, the student should be able to: state when IAS 29 applies and how hyperinflation is identified, with no mechanical threshold; distinguish monetary, index-linked and non-monetary items, and choose the index and the starting date of the restatement; restate a statement of financial position, a statement of comprehensive income and a statement of cash flows at historical cost…
IFRS 10 was issued in May 2011 together with IFRS 11, IFRS 12 and the revised versions of IAS 27 (separate financial statements) and IAS 28. It applies to annual periods beginning on or after 1 January 2013 (C1). It replaces the requirements of IAS 27 relating to consolidated financial statements and the interpretation SIC-12 Consolidation — Special Purpose Entities (C8 and C9). WHY? — Basis for Conclusions — BC29…
When one company buys another, two accounting questions arise immediately: what was actually bought is really worth (each asset, each liability), and what is left over, once all that has been measured, that was paid in addition (the goodwill)? IFRS 3 answers both questions by imposing a single method, the acquisition method. The objective of the standard (IFRS 3.1) is…
IFRS 11 requires a joint arrangement to be accounted for according to the rights and obligations of the parties, and not according to its legal form. All amounts in this course are expressed in currency units (CU).
IFRS 12 requires disclosure of information that enables users to evaluate (a) the nature of, and risks associated with, interests in other entities and (b) the effects of those interests on the financial position, financial performance and cash flows. Two principles govern the whole standard: Adequacy principle (§3): if the information…
IAS 27 is a short standard, but it is at the heart of the architecture of the consolidation standards. Since 2011, it has dealt with only one subject: accounting for investments in subsidiaries, joint ventures and associates in an entity’s separate financial statements. The consolidation rules were transferred to IFRS 10, those relating to…
IAS 28 sets out the accounting for investments in associates and joint ventures, and requires the equity method to be applied by any investor that has significant influence or joint control (§1-2). This material covers the standard, its Basis for Conclusions (BC), the 2017 illustrative example on long-term interests, the agenda decisions of…
IFRS 4 (2004) was an interim standard: it gave the definition of an insurance contract but, with some exceptions, left insurers to measure their technical provisions under national rules. The result was limited international comparability and accounting asymmetries with IFRS 9 (financial assets at fair value, insurance liabilities at historical cost). IFRS 17 was…
IAS 41 prescribes the accounting treatment and disclosures related to agricultural activity, a subject that no other standard covers. It covers the period from the growth of the animal or plant up to harvest. After harvest, IAS 2 Inventories (or another applicable standard) takes over. The choice of fair value less costs to sell is explained by the…
When the IASB took over the IASC’s work on extractive industries, no IFRS Standard dealt directly with this sector. An entity adopting IFRS in 2005 would therefore have had to test its exploration policies against the hierarchy of sources in IAS 8 (§10-12), at the risk of costly and repeated changes (BC2). Issued in December 2004, IFRS 6 was designed as a step…
In several industries (electricity, gas, water, transport, telecommunications), the State or a regulator sets or controls the price the entity may charge its customers. The regulator generally allows the entity to recover its costs and earn a reasonable return, but not necessarily in the period in which it incurs those costs. It may also require it to return later a…
IAS 26 answers a fairly simple question: when a retirement benefit plan prepares financial statements, how must it report on its position? The plan is treated as a stand-alone entity, separate from the employers of its participants (IAS 26.2). Its statements are intended for the participants taken together, as a group. The individual statement of entitlements that each participant receives separately is outside…
IFRS 19 is a disclosure-only standard (§1). An entity that applies it retains all the recognition, measurement and presentation requirements of the other IFRS Accounting Standards; it replaces only their disclosure requirements with those of IFRS 19 (§2). The choice is voluntary. Direct consequences (§3 and §4): the disclosure requirements of the other standards…
The definitions summarise those in the IFRS Accounting Standards; the reference in brackets indicates the standard of origin. Terms are listed in alphabetical order of the French term. French term English Definition Actif biologique Biological asset Living animal or living plant (IAS 41). Actif d’impôt différé Deferred tax asset Income taxes recoverable in future periods in respect of deductible temporary differences, tax losses and tax credits carried forward…