Module 1: The role & importance of FR
Objective of GPFS Limitations of GPFS
1. Presentation & Disclosures (Module 2)
2. Revenue (Module 3 Part A)
1. Lack of
3.Provisions (Module 3 Part B) 1. Provide financial
familiarity with
information about
4. Contingent assets (Module 3 Part C) new types of
the reporting entity
5. Contingent liabilities (Module 3 Part C) information
6. Tax expense (Module 4 Part A)
2. Useful to
7. Deferred Tax assets (Module 4 Part B) existing & 2. Decision-
8. Deferred Tax liabilities (Module 4 Part B) potential usefulness may
investors, lenders, vary among users
9. Goodwill (Module 5 Part A) & other creditors:
10. Financial assets & liabilities (Module 6 Part B) in making
11. Impairment of assets (Module 7 Part B) decisions about
providing
3. Open to
resources to the
entity interpretations
4. Time & cost
International initiatives to decrease FR complexity Application of
constraints in
C.Framework
preparing GPFSs
1. Reducing differences in reporting stds among countries*
1. Standard
2. Reducing reporting requirements of small & medium-sized setters: To develop
entities* new standards
Assumption for GPFR
3. Catering to the info needs of multiple stakeholders*
2. Preparers: •Accrual Basis
4. Improving the content & structure of the primary financial
Guidance where no Used on the assumption that it provides a better basis for assessing the
statements
IFRS exists entity’s past performance and predicting future performance than relying
5. Clarifying disclosure requirements & improving the usefulness only on financial statements prepared on a cash basis (Conceptual
of disclosures Framework, para. 1.17)
6. Improving understanding of the existing requirements & 3. Auditors: To •Going Concern
helping entities make better materiality judgements help form an Presume that the entity will continue to operate for the foreseeable future,
opinion so this is most accurate
7. Considering how management commentary outside the
financial statements could better complement & support the FS
8. Improving comm. between preparers & users by enabling info
to be delivered in an electronic format. 4. Users: To help
understanding
, Module
Module 1: 1:
TheThe role
role && importance
importance ofof
FRFR (P.3)
Qualitative Chapter Structure of Conceptual Framework for FR
*Fundamental
Characteristics Provides a detailed desciption of the status & purpose of the
Status & Purpose Conceptual Framework
1. Objective Sets out the obj of the GPFS
2. Faithfully
1. Relevant*
represent* 2. Qualitative Provides guidance on the qualitative characteristics of
- Materiality - entity Characteristics userful financial information
- Complete, neutral,
specific
error free
3. FS & the Reporting Describes the objective & scope of GPFS & reporting entity
entity concept
Confirmatory value 4. Elements of FS Provides definitions of the elements of FS
Predictive value
(Feedback & var 5. Recognition &
(Forecast FCF)
analysis) derecognition Sets out the recognition & derecognition criteria
Cost Constraints
Provides guidance on the measurement bases including
Comparable Verifiable Timely Understandable 6. Measurement historical cost
- with other entities, - Direct vs Indirect - Regular intervals: - Clear & concise 7. Presentation & Provides guidance on classification, presentation &
with previous periods - Reliable...consencus half-year & annual - Some things are
disclosures disclosure
- Similarities & (independent obe- financial reports complicated
differences servers) - Reasonable 8. Concepts of capital & Provides guidance on the concepts of capital & capital
knowledge is expected
- Consistency = capital maintenance maintence
of users
method
Applying the Fundamental Qualitat- •A present economic resources controlled by the entity as a result of past events
ive Characteristics Assets •A right to economic benefits, past event, control
1st: Identify an economic event that has the •A present obligation of the entity to transfer an economic
Liabilities •Present obligation, transfer (outflow) of an economic resource, past event
potential to be useful
•The residual interest in the assets of the entity after deducting all its liabilities
Equity
2nd: Identify the type of information that
would be most relevant if it is available & can •Increases in economic benefirs during the accounting period in the form of inflows or enhancements of
be faitjfully represented assets or decreases of liabilities that result in increases in equity, other than those relating to contributions
from equity participants
Income
•An increase in Assets, or A reduction in Liabilities, And an increase in equity, other than owners
contribution
3rd: Is the information available? Can it be
faithfully representated? •Decreases in economic benefits during the accounting period in the form of outflows or depletions of
If so, great. If not, repeat the process with the Expenses assets or incurrences of liabilities that result in decreases in equity, other than those relating to
next most relevant type of information distributions to equity participants
, Module 1: The elements of Financial Statements
Derecognising elements
Measurements of
Elements
Only applicable to recognised assets and liabilities. Cost Value
based based
Recognised = shown in B/S or P&L
Cost/ FV less costs
Amortised Fair Value Current cost Fulfillment Value in use
historical cost of disposal NRV
Assets: normally occurs when the entity loses control of all cost value
or part of the recognised asset
Inclusive of Level 1 Reproduction Replacement cost
transaction Level 2 cost - equiv. productive capacity or
Liabilities: Occurs when the entity no longer has a present costs Level 3 - identical asset service potential
obligation of all or part of the recognised liability.
Criteria for recognising Differences IAS 17 IFRS 16 Impact
elements Uncl ea r. Res ulte d i n Cl ea r & precis e: i nvol ves Some a rra nge ments ma y now be
confus i on 'conveyi ng control ' to the cl a s s i fi ed a s l ea s es , whi l e s ome
Lease definition
l es s ee of a n 'i denti fi a bl e exi s ti ng arrangements ma y no l onger be
Recognised = shown in B/S or P&L
a s s et' for a peri od of ti me cl a s s i fi ed a s l ea s es per I FRS 16 – i mpact
Carrying Amt = monetary amount the item is recognised at
Identi fi es fi na nce l ea s es El i mi na tes the cl a s s i fi ca ti on on accounti
Si gni ng tre atment.
fi ca nt accounti ng impa ct for the
& opera ti ng l ea s es for of l ea s es a s ei ther opera ting meas urement of opera ti ng l ea s es .
1. An asset or liability is recognised only if its of any l es s ees or fi na nce l ea s es for a l es s ee.
resulting income, expenses or changes in equity provides Lease classification
Al l l ea s es a re treated s i mil a r
users of financial statements with info that is useful to fi na nce l ea s es per IAS 17.
2. If existence is uncertain, or if the probability of an
Recogni s ed off-ba l a nce Recogni s e on ba l ance s heet Ba l ance s heet a nd i ncome s ta te ment
inflow/outflow -> Notes
s hee t, a nd expens ed on a the ‘ri ght –ofus e’ as s et a nd a ffected
s tra i ght-l ine ba s i s ove r fi na nci a l l i a bi l i ty for the by the recogni ti on a nd a morti s a ti on of
3. If measurement is uncertain -> Notes Operating leases the l eas e term. obl i gati on to ma ke l ea s e the
pa yments . ri ght-of-us e a s s et a nd l ea s e l i a bi l i ty.
KPIs wi l l
a l s o be i mpacted by thi s cha nge .
4. Cost vs Benefits -> Notes Opera ti ng l ea s es Deta i l ed new a nd modi fi ed Need to ma i nta i n a nd tra ck more
Disclosure requi red bas i c di s cl os ure s i nforma ti on
requirements di s cl os ures requi red for l ea s es from contra cts to s a ti s fy requi reme nts .
IFRS 16 Leases IAS 19 Employee IAS 40 Investment
IFRS 2 Share-based
Benefits Property
(replace IAS17) payment
, Module 1: Application of Measurement Principles
IFRS 16 Leases IAS 19 Employee IAS 40 Investment
IFRS 2 Share-based
Benefits Property
(replace IAS17) payment
IAS19 Employee
Benefits Recognise only
Non Accumulating
when it occurs
Absence entitlement
Recognise as
Vesting
services rendered
Accumulating
Recognise only
Non-vesting
probable liability
IAS 40 Investment
Property
Initial Recognition Cost
IAS 40
Depreciate as per
Cost Model
IAS16
Subsequent
Recognition
Gains/losses taken
FV Model
to P&L
Measure at FV of
IFRS 2 Share based
Yes goods & services
payment
rendered
Can the FV of goods &
Equity settled services received be
measured reliably?
Measure at FV of
IFRS 2 No equity instruments
granded
Measure at FV of
Cash settled
liability
Objective of GPFS Limitations of GPFS
1. Presentation & Disclosures (Module 2)
2. Revenue (Module 3 Part A)
1. Lack of
3.Provisions (Module 3 Part B) 1. Provide financial
familiarity with
information about
4. Contingent assets (Module 3 Part C) new types of
the reporting entity
5. Contingent liabilities (Module 3 Part C) information
6. Tax expense (Module 4 Part A)
2. Useful to
7. Deferred Tax assets (Module 4 Part B) existing & 2. Decision-
8. Deferred Tax liabilities (Module 4 Part B) potential usefulness may
investors, lenders, vary among users
9. Goodwill (Module 5 Part A) & other creditors:
10. Financial assets & liabilities (Module 6 Part B) in making
11. Impairment of assets (Module 7 Part B) decisions about
providing
3. Open to
resources to the
entity interpretations
4. Time & cost
International initiatives to decrease FR complexity Application of
constraints in
C.Framework
preparing GPFSs
1. Reducing differences in reporting stds among countries*
1. Standard
2. Reducing reporting requirements of small & medium-sized setters: To develop
entities* new standards
Assumption for GPFR
3. Catering to the info needs of multiple stakeholders*
2. Preparers: •Accrual Basis
4. Improving the content & structure of the primary financial
Guidance where no Used on the assumption that it provides a better basis for assessing the
statements
IFRS exists entity’s past performance and predicting future performance than relying
5. Clarifying disclosure requirements & improving the usefulness only on financial statements prepared on a cash basis (Conceptual
of disclosures Framework, para. 1.17)
6. Improving understanding of the existing requirements & 3. Auditors: To •Going Concern
helping entities make better materiality judgements help form an Presume that the entity will continue to operate for the foreseeable future,
opinion so this is most accurate
7. Considering how management commentary outside the
financial statements could better complement & support the FS
8. Improving comm. between preparers & users by enabling info
to be delivered in an electronic format. 4. Users: To help
understanding
, Module
Module 1: 1:
TheThe role
role && importance
importance ofof
FRFR (P.3)
Qualitative Chapter Structure of Conceptual Framework for FR
*Fundamental
Characteristics Provides a detailed desciption of the status & purpose of the
Status & Purpose Conceptual Framework
1. Objective Sets out the obj of the GPFS
2. Faithfully
1. Relevant*
represent* 2. Qualitative Provides guidance on the qualitative characteristics of
- Materiality - entity Characteristics userful financial information
- Complete, neutral,
specific
error free
3. FS & the Reporting Describes the objective & scope of GPFS & reporting entity
entity concept
Confirmatory value 4. Elements of FS Provides definitions of the elements of FS
Predictive value
(Feedback & var 5. Recognition &
(Forecast FCF)
analysis) derecognition Sets out the recognition & derecognition criteria
Cost Constraints
Provides guidance on the measurement bases including
Comparable Verifiable Timely Understandable 6. Measurement historical cost
- with other entities, - Direct vs Indirect - Regular intervals: - Clear & concise 7. Presentation & Provides guidance on classification, presentation &
with previous periods - Reliable...consencus half-year & annual - Some things are
disclosures disclosure
- Similarities & (independent obe- financial reports complicated
differences servers) - Reasonable 8. Concepts of capital & Provides guidance on the concepts of capital & capital
knowledge is expected
- Consistency = capital maintenance maintence
of users
method
Applying the Fundamental Qualitat- •A present economic resources controlled by the entity as a result of past events
ive Characteristics Assets •A right to economic benefits, past event, control
1st: Identify an economic event that has the •A present obligation of the entity to transfer an economic
Liabilities •Present obligation, transfer (outflow) of an economic resource, past event
potential to be useful
•The residual interest in the assets of the entity after deducting all its liabilities
Equity
2nd: Identify the type of information that
would be most relevant if it is available & can •Increases in economic benefirs during the accounting period in the form of inflows or enhancements of
be faitjfully represented assets or decreases of liabilities that result in increases in equity, other than those relating to contributions
from equity participants
Income
•An increase in Assets, or A reduction in Liabilities, And an increase in equity, other than owners
contribution
3rd: Is the information available? Can it be
faithfully representated? •Decreases in economic benefits during the accounting period in the form of outflows or depletions of
If so, great. If not, repeat the process with the Expenses assets or incurrences of liabilities that result in decreases in equity, other than those relating to
next most relevant type of information distributions to equity participants
, Module 1: The elements of Financial Statements
Derecognising elements
Measurements of
Elements
Only applicable to recognised assets and liabilities. Cost Value
based based
Recognised = shown in B/S or P&L
Cost/ FV less costs
Amortised Fair Value Current cost Fulfillment Value in use
historical cost of disposal NRV
Assets: normally occurs when the entity loses control of all cost value
or part of the recognised asset
Inclusive of Level 1 Reproduction Replacement cost
transaction Level 2 cost - equiv. productive capacity or
Liabilities: Occurs when the entity no longer has a present costs Level 3 - identical asset service potential
obligation of all or part of the recognised liability.
Criteria for recognising Differences IAS 17 IFRS 16 Impact
elements Uncl ea r. Res ulte d i n Cl ea r & precis e: i nvol ves Some a rra nge ments ma y now be
confus i on 'conveyi ng control ' to the cl a s s i fi ed a s l ea s es , whi l e s ome
Lease definition
l es s ee of a n 'i denti fi a bl e exi s ti ng arrangements ma y no l onger be
Recognised = shown in B/S or P&L
a s s et' for a peri od of ti me cl a s s i fi ed a s l ea s es per I FRS 16 – i mpact
Carrying Amt = monetary amount the item is recognised at
Identi fi es fi na nce l ea s es El i mi na tes the cl a s s i fi ca ti on on accounti
Si gni ng tre atment.
fi ca nt accounti ng impa ct for the
& opera ti ng l ea s es for of l ea s es a s ei ther opera ting meas urement of opera ti ng l ea s es .
1. An asset or liability is recognised only if its of any l es s ees or fi na nce l ea s es for a l es s ee.
resulting income, expenses or changes in equity provides Lease classification
Al l l ea s es a re treated s i mil a r
users of financial statements with info that is useful to fi na nce l ea s es per IAS 17.
2. If existence is uncertain, or if the probability of an
Recogni s ed off-ba l a nce Recogni s e on ba l ance s heet Ba l ance s heet a nd i ncome s ta te ment
inflow/outflow -> Notes
s hee t, a nd expens ed on a the ‘ri ght –ofus e’ as s et a nd a ffected
s tra i ght-l ine ba s i s ove r fi na nci a l l i a bi l i ty for the by the recogni ti on a nd a morti s a ti on of
3. If measurement is uncertain -> Notes Operating leases the l eas e term. obl i gati on to ma ke l ea s e the
pa yments . ri ght-of-us e a s s et a nd l ea s e l i a bi l i ty.
KPIs wi l l
a l s o be i mpacted by thi s cha nge .
4. Cost vs Benefits -> Notes Opera ti ng l ea s es Deta i l ed new a nd modi fi ed Need to ma i nta i n a nd tra ck more
Disclosure requi red bas i c di s cl os ure s i nforma ti on
requirements di s cl os ures requi red for l ea s es from contra cts to s a ti s fy requi reme nts .
IFRS 16 Leases IAS 19 Employee IAS 40 Investment
IFRS 2 Share-based
Benefits Property
(replace IAS17) payment
, Module 1: Application of Measurement Principles
IFRS 16 Leases IAS 19 Employee IAS 40 Investment
IFRS 2 Share-based
Benefits Property
(replace IAS17) payment
IAS19 Employee
Benefits Recognise only
Non Accumulating
when it occurs
Absence entitlement
Recognise as
Vesting
services rendered
Accumulating
Recognise only
Non-vesting
probable liability
IAS 40 Investment
Property
Initial Recognition Cost
IAS 40
Depreciate as per
Cost Model
IAS16
Subsequent
Recognition
Gains/losses taken
FV Model
to P&L
Measure at FV of
IFRS 2 Share based
Yes goods & services
payment
rendered
Can the FV of goods &
Equity settled services received be
measured reliably?
Measure at FV of
IFRS 2 No equity instruments
granded
Measure at FV of
Cash settled
liability
