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International GAAP 2014: Generally Accepted Accounting Principles under International Financial Reporting Standards

Book Description

International GAAP 2014 goes much further than explanation. It provides a comprehensive guide to interpreting and implementing IFRS in a relevant business context and provides insights into how complex practical issues should be resolved in the real world of global financial reporting. This book is an essential tool for anyone applying, auditing and interpreting, regulating, studying or teaching international financial reporting.

Written by financial reporting professionals from the International Financial Reporting Group of EY, this three-volume guide to reporting under IFRS provides a global perspective on the application of IFRS. Complex technical accounting issues are explained clearly and IFRS is set in a practical context with numerous worked examples and hundreds of illustrations from the published financial reports of major listed companies from around the world.

The 2014 edition of International GAAP 2014 has been fully revised and updated in order to:

  • Examine practical issues arising from the adoption of IFRS 10 (Consolidated Financial Statements), IFRS 11 (Joint Arrangements), IFRS 12 (Disclosure of Interests in Other Entities), IFRS 13 (Fair Value Measurement) and IAS 19 Revised (Employee Benefits).

  • Address amended standards and new interpretations issued since the preparation of the 2013 edition.

  • Include a completely new chapter on the expected changes in hedge accounting under IFRS 9 (Financial Instruments).

  • Explain the many initiatives that are currently being discussed by the IASB and by the IFRS Interpretations Committee and the potential consequential changes to accounting requirements. In particular, projects on revenue recognition, financial instruments, insurance contracts, leases and the conceptual framework for financial reporting may all result in significant changes to current accounting practices.

  • Provide insight on the many issues relating to the practical application of IFRS, based on the extensive experience of the book's authors in dealing with recent day-to-day issues.

Table of Contents

  1. Cover
  2. Title Page
  3. Copyright
  4. About this book
  5. Preface
  6. TOC
  7. Abbreviations
  8. Authoritative Literature
  9. Volume 1: Chapters 1 to 20
    1. Chapter 1: International GAAP
      1. 1 Why International Financial Reporting Standards Matter
      2. 2 The IFRS Foundation and the IASB
      3. 3 The IASB’s Technical Agenda and Global Convergence
      4. 4 The Adoption of IFRS Around the World
      5. 5 Consistency in Application of IFRS
      6. 6 Summary
    2. Chapter 2: The IASB’s Conceptual Framework
      1. 1 Introduction
      2. 2 The IASB’s conceptual framework
      3. 3 Possible future developments
      4. 4 Conclusion
    3. Chapter 3: Presentation of financial statements and accounting policies
      1. 1 Introduction
      2. 2 The purpose and composition of financial statements
      3. 3 The structure of financial statements
      4. 4 Accounting policies
      5. 5 Disclosure requirements
      6. 6 Future developments
    4. Chapter 4: Non-current assets held for sale and discontinued operations
      1. 1 Objective and Scope of IFRS 5
      2. 2 Non-Current Assets (and Disposal Groups) Held for Sale
      3. 3 Discontinued Operations
      4. 4 Comparative Information
      5. 5 Disclosure Requirements
      6. 6 Future Developments
    5. Chapter 5: First-time adoption
      1. 1 Introduction
      2. 2 Who is a First-Time Adopter?
      3. 3 Opening IFRS Statement of Financial Position
      4. 4 Exceptions to Retrospective Application of other IFRSs
      5. 5 Optional Exemptions from the Requirements of Certain IFRSs
      6. 6 Presentation and Disclosure
      7. 7 Accounting Policies and Practical Application Issues
      8. 8 Regulatory Issues
    6. Chapter 6: Consolidated financial statements
      1. 1 Introduction
      2. 2 Effective date, objective and scope of IFRS 10
      3. 3 Control
      4. 4 Power over an investee
      5. 5 Exposure to variable returns
      6. 6 Link between power and returns: principal-agency situations
      7. 7 Related parties and de facto agents
      8. 8 Control of specified assets
      9. 9 Continuous assessment
      10. 10 Investment entities
      11. 11 Consolidation procedures
      12. 12 Disclosure requirements
      13. 13 Transitional arrangements
      14. 14 Future developments
    7. Chapter 7: Consolidation procedures and non-controlling interests
      1. 1 Introduction
      2. 2 Consolidation Procedures
      3. 3 Changes in Ownership Interests
      4. 4 Non-Controlling Interests
      5. 5 Call and Put Options Over Non-Controlling Interests
      6. 6 Transitional Arrangements on Applying IFRS 10
      7. 7 Future Developments
    8. Chapter 8: Separate and individual financial statements
      1. 1 Separate and individual financial statements
      2. 2 Requirements of separate financial statements
      3. 3 Disclosure
      4. 4 Common control or group transactions in individual financial statements
    9. Chapter 9: Business combinations
      1. 1 Introduction
      2. 2 Scope of Ifrs 3
      3. 3 Identifying a business combination
      4. 4 Acquisition method of accounting
      5. 5 Recognition and measurement of assets acquired, liabilities assumed and non-controlling interests
      6. 6 Recognising and measuring goodwill or a gain in a bargain purchase
      7. 7 Consideration transferred
      8. 8 Recognising and measuring non-controlling interests
      9. 9 Business combinations achieved in stages (‘step acquisitions’)
      10. 10 Bargain purchase transactions
      11. 11 Assessing what is part of the exchange for the acquiree
      12. 12 Measurement period
      13. 13 Subsequent measurement and accounting
      14. 14 Reverse acquisitions
      15. 15 Push down accounting
      16. 16 Disclosures
    10. Chapter 10: Common control business combinations
      1. 1 Introduction
      2. 2 The IFRS 3 Exemption
      3. 3 Accounting for Business Combinations Involving Entities or Businesses Under Common Control
      4. 4 Group Reorganisations
    11. Chapter 11: Investments in associates and joint ventures
      1. 1 Introduction
      2. 2 Effective Date, Objective and Scope of IAS 28
      3. 3 Definitions
      4. 4 Significant Influence
      5. 5 Exemptions from Applying the Equity Method
      6. 6 Classification as Held for Sale (IFRS 5)
      7. 7 Application of the Equity Method
      8. 8 Impairment Losses
      9. 9 Separate Financial Statements
      10. 10 Presentation and Disclosures
      11. 11 Transitional Issues
      12. 12 Future Developments
    12. Chapter 12: Joint arrangements
      1. 1 Introduction
      2. 2 Effective date, objective and scope of IFRS 11
      3. 3 Joint arrangement
      4. 4 Joint control
      5. 5 Classification of a joint arrangement: joint operations and joint ventures
      6. 6 Accounting for joint operations
      7. 7 Accounting for joint ventures
      8. 8 Continuous assessment
      9. 9 Disclosures
      10. 10 Transition
    13. Chapter 13: Disclosure of interests in other entities
      1. 1 Introduction
      2. 2 Objective, Scope and Effective Date of IFRS 12
      3. 3 Disclosure of Significant Estimates and Judgements
      4. 4 Disclosure of Interests in Subsidiaries
      5. 5 Disclosure of Interests in Joint Arrangements and Associates
      6. 6 Disclosure of Interests in Unconsolidated Structured Entities
    14. Chapter 14: Fair value measurement
      1. 1 Introduction and Background
      2. 2 Scope
      3. 3 Definitions
      4. 4 The Fair Value Framework
      5. 5 The Asset or Liability
      6. 6 The Principal (or Most Advantageous) Market
      7. 7 Market Participants
      8. 8 The Transaction
      9. 9 The Price
      10. 10 Application to Non-Financial Assets
      11. 11 Application to Liabilities and an Entity's Own Equity
      12. 12 Financial Assets and Liabilities with Offsetting Positions
      13. 13 Fair Value at Initial Recognition
      14. 14 Valuation Techniques
      15. 15 Inputs to Valuation Techniques
      16. 16 The Fair Value Hierarchy
      17. 17 Level 1 Inputs
      18. 18 Level 2 Inputs
      19. 19 Level 3 Inputs
      20. 20 Disclosures
      21. 21 Application Guidance – Present Value Techniques
      22. 22 Effective Date and Transition
      23. 23 Convergence with US GAAP
    15. Chapter 15: Foreign exchange
      1. 1 Introduction
      2. 2 IAS 21: Objective, Scope and Definitions
      3. 3 Summary of the Approach Required by IAS 21
      4. 4 Determination of an Entity’s Functional Currency
      5. 5 Reporting Foreign Currency Transactions in the Functional Currency of an Entity
      6. 6 Use of a Presentation Currency other than the Functional Currency
      7. 7 Change of Presentation Currency
      8. 8 Introduction of the Euro
      9. 9 Tax Effects of all Exchange Differences
      10. 10 Disclosure Requirements
      11. 11 Future Developments
    16. Chapter 16: Hyperinflation
      1. 1 Introduction
      2. 2 The Requirements of IAS 29
      3. 3 Selection of a General Price Index
      4. 4 Analysis and Restatement of the Statement of Financial Position
      5. 5 Restatement of the Statement of Changes in Equity
      6. 6 Restatement of the Statement of Comprehensive Income and Income Statement
      7. 7 Restatement of the Statement of Cash Flows
      8. 8 Restatement of Comparative Figures
      9. 9 Interim Reporting
      10. 10 Transition
      11. 11 Translation to a Different Presentation Currency
      12. 12 Disclosures
    17. Chapter 17: Intangible assets
      1. 1 Introduction
      2. 2 Objective and Scope of IAS 38
      3. 3 Recognition and Measurement
      4. 4 Separate Acquisition
      5. 5 Acquisition as Part of a Business Combination
      6. 6 Internally Generated Intangible Assets
      7. 7 Recognition of an Expense
      8. 8 Measurement after initial recognition
      9. 9 Amortisation of Intangible Assets
      10. 10 Disclosure
      11. 11 Specific Issues Regarding Intangible Assets
    18. Chapter 18: Property, plant and equipment
      1. 1 Introduction
      2. 2 The Requirements of IAS 16
      3. 3 Recognition
      4. 4 Measurement at Recognition
      5. 5 Measurement after Recognition: Cost Model
      6. 6 Measurement after Recognition: Revaluation Model
      7. 7 DERECOGNITION AND DISPOSAL
      8. 8 IAS 16 DISCLOSURE REQUIREMENTS
    19. Chapter 19: Investment property
      1. 1 Introduction
      2. 2 Definitions and scope
      3. 3 Recognition
      4. 4 Initial measurement
      5. 5 Measurement after initial recognition
      6. 6 The fair value model
      7. 7 The cost model
      8. 8 IFRS 5 and investment property
      9. 9 Transfer of assets into or from investment property
      10. 10 Disposal of investment property
      11. 11 Interim reporting and IAS 40
      12. 12 The disclosure requirements of IAS 40
      13. 13 Future developments
    20. Chapter 20: Impairment of fixed assets and goodwill
      1. 1 Introduction
      2. 2 The Requirements of IAS 36
      3. 3 Fair Value Less Costs of Disposal
      4. 4 Determining Value in Use (VIU)
      5. 5 Impairment of Goodwill
      6. 6 Recognising and Reversing Impairment Losses
      7. 7 Disclosures Required by IAS 36
      8. 8 Testing for Impairment: Group Issues
  10. Volume 2: Chapters 21 to 39
    1. Chapter 21: Capitalisation of borrowing costs
      1. 1 Introduction
      2. 2 The requirements of Ias 23
      3. 3 Qualifying assets
      4. 4 Definition of borrowing costs
      5. 5 Borrowing costs eligible for capitalisation
      6. 6 Commencement, suspension and cessation of capitalisation
      7. 7 Disclosure requirements
    2. Chapter 22: Inventories
      1. 1 Introduction
      2. 2 The Scope of IAS 2
      3. 3 Measurement
      4. 4 Real Estate Inventory
      5. 5 Recognition in Profit or Loss
      6. 6 Disclosure Requirements of IAS 2
    3. Chapter 23: Construction contracts
      1. 1 Introduction
      2. 2 Combination and segmentation of contracts
      3. 3 Contract revenue, costs and expenses
      4. 4 Disclosure requirements of IAS 11
    4. Chapter 24: Leases
      1. 1 Introduction
      2. 2 What is a Lease?
      3. 3 Scope and Definitions of IAS 17
      4. 4 Accounting for Finance Leases
      5. 5 Accounting for Operating Leases
      6. 6 Modifying the Terms of Leases
      7. 7 Sale and Leaseback Transactions
      8. 8 Sub-Leases and Back-to-Back Leases
      9. 9 Disclosures Required by IAS 17
      10. 10 Updating Lease Accounting: Exposure Draft – Leases
    5. Chapter 25: Government grants
      1. 1 Introduction
      2. 2 Scope of IAS 20
      3. 3 Recognition and Measurement
      4. 4 Presentation of Grants
      5. 5 Government Grants Related to Biological Assets
      6. 6 Disclosures
    6. Chapter 26: Service concession arrangements
      1. 1 Introduction
      2. 2 Scope of IFRIC 12
      3. 3 The Control Model
      4. 4 Accounting by the Concession Operator: The Financial Asset and Intangible Asset Models
      5. 5 Revenue and Expenditure during the Operations Phase of the Concession Agreement
      6. 6 Disclosure Requirements: SIC-29
    7. Chapter 27: Provisions, contingent liabilities and contingent assets
      1. 1 Introduction
      2. 2 Objective and Scope of IAS 37
      3. 3 Recognition
      4. 4 Measurement
      5. 5 Cases in which no Provision Should be Recognised
      6. 6 Specific Examples of Provisions and Contingencies
      7. 7 Disclosure Requirements
    8. Chapter 28: Revenue recognition
      1. 1 The Nature of Revenue
      2. 2 The Timing of Revenue Recognition
      3. 3 The Requirements of IAS 18
      4. 4 Revenue Recognition under US GAAP
      5. 5 Practical Issues
      6. 6 Revenue from Contracts with Customers
    9. Chapter 29: Income taxes
      1. 1 Introduction
      2. 2 Objective and scope of IAS 12
      3. 3 Definitions
      4. 4 Scope
      5. 5 Current tax
      6. 6 Deferred tax – tax bases and temporary differences
      7. 7 Deferred tax – recognition
      8. 8 Deferred tax – measurement
      9. 9 Uncertain tax positions
      10. 10 Allocation of tax charge or credit
      11. 11 Consolidated tax returns and offset of taxable profits and losses within groups
      12. 12 Business combinations
      13. 13 Presentation
      14. 14 Disclosure
      15. 15 Possible future developments
    10. Chapter 30: Share-based payment
      1. 1 Introduction
      2. 2 The objective and scope of Ifrs 2
      3. 3 General Recognition Principles
      4. 4 Equity-settled transactions – overview
      5. 5 Equity-settled transactions – cost of awards
      6. 6 Equity-settled transactions – allocation of expense
      7. 7 Equity-settled transactions – modification, cancellation and settlement
      8. 8 Equity-settled transactions – valuation
      9. 9 Cash-settled transactions
      10. 10 Transactions with equity and cash alternatives
      11. 11 Replacement share-based payment awards issued in a business combination
      12. 12 Group share schemes
      13. 13 Disclosures
      14. 14 Taxes related to share-based payment transactions
      15. 15 Other practical issues
      16. 16 First-time adoption and transitional provisions
    11. Chapter 31: Employee benefits
      1. 1 Introduction
      2. 2 Objective and Scope of IAS 19
      3. 3 Pensions and other Post-Employment Benefits – Defined Contribution and Defined Benefit Plans
      4. 4 Defined Contribution Plans
      5. 5 Defined Benefit Plans
      6. 6 Other Employee Benefits
      7. 7 Disclosure Requirements
      8. 8 Effective Date and Transitional Provisions
      9. 9 Possible Future Developments
      10. 10 Principal Differences between the Current Standard and its Predecessor
    12. Chapter 32: Operating segments
      1. 1 Introduction
      2. 2 Objective and Scope of IFRS 8
      3. 3 Identifying a Single Set of Operating Segments
      4. 4 Measurement
      5. 5 Information to be Disclosed about Reportable Segments
      6. 6 Entity-Wide Disclosures for all Entities
      7. 7 Future Developments
    13. Chapter 33: Earnings per share
      1. 1 Introduction
      2. 2 Objective and Scope of IAS 33
      3. 3 The Basic EPS
      4. 4 Changes in Outstanding Ordinary Shares
      5. 5 Matters Affecting the Numerator
      6. 6 Diluted Earnings Per Share
      7. 7 Presentation, Restatement and Disclosure
      8. 8 Future Developments
      9. 9 Appendix
    14. Chapter 34: Events after the reporting period
      1. 1 Introduction
      2. 2 Requirements of IAS 10
      3. 3 Practical Issues
    15. Chapter 35: Related party disclosures
      1. 1 Introduction
      2. 2 Requirements of IAS 24
      3. 3 Future Developments
    16. Chapter 36: Statement of cash flows
      1. 1 Introduction
      2. 2 Objective and scope of IAS 7
      3. 3 Cash and cash equivalents
      4. 4 Presentation of the statement of cash flows
      5. 5 Additional IAS 7 considerations for groups
      6. 6 Additional IAS 7 considerations for financial institutions
    17. Chapter 37: Interim financial reporting
      1. 1 Introduction
      2. 2 Objective and Scope of IAS 34
      3. 3 Components, Form and Content of an Interim Financial Report under IAS 34
      4. 4 Disclosures in Condensed Financial Statements
      5. 5 Periods for which Interim Financial Statements are Required to be Presented
      6. 6 Materiality
      7. 7 Disclosure in Annual Financial Statements
      8. 8 Recognition and Measurement
      9. 9 Examples of the Recognition and Measurement Principles
      10. 10 Use of Estimates
      11. 11 Restatement of Previously Reported Interim Periods
      12. 12 Effective Dates and Transitional Rules
    18. Chapter 38: Agriculture
      1. 1 Introduction
      2. 2 Objective, Definitions and Scope
      3. 3 Recognition and Measurement Principles
      4. 4 Measuring Fair Value Less Costs to Sell
      5. 5 Disclosure
      6. 6 Possible Future Developments
    19. Chapter 39: Extractive industries
      1. 1 Introduction
      2. 2 Mineral Reserves and Resources
      3. 3 IFRS 6 – Exploration for and Evaluation of Mineral Resources
      4. 4 Practical Issues in the Extractive Industries
      5. 5 Practical Issues in the Oil and Gas Sector
      6. 6 Practical Issues in the Mining Sector
      7. 7 Glossary
  11. Volume 3: Chapters 40 to 51
    1. Chapter 40: Financial instruments: Introduction
      1. 1 Standards Applying to Financial Instruments
      2. 2 Key Influences on the Financial Instrument Standards
    2. Chapter 41: Financial instruments: Definitions and scope
      1. 1 Introduction
      2. 2 What is a financial instrument?
      3. 3 Scope
      4. 4 Contracts to buy or sell commodities and other non-financial items
    3. Chapter 42: Financial instruments: Derivatives and embedded derivatives
      1. 1 Introduction
      2. 2 Definition of a derivative
      3. 3 Examples of derivatives
      4. 4 Embedded derivatives
      5. 5 Embedded derivatives: the meaning of ‘closely related’
      6. 6 Identifying the terms of embedded derivatives and host contracts
      7. 7 Reassessment of embedded derivatives
      8. 8 Linked and separate transactions and ‘synthetic’ instruments
    4. Chapter 43: Financial instruments: Financial liabilities and equity
      1. 1 Introduction
      2. 2 Objective and Scope
      3. 3 Definitions
      4. 4 Classification of Instruments
      5. 5 Contracts Settled by Delivery of the Entity’s Own Equity Instruments
      6. 6 Compound Financial Instruments
      7. 7 Settlement of Financial Liability with Equity Instrument
      8. 8 Interest, Dividends, Gains and Losses
      9. 9 Treasury Shares
      10. 10 ‘Hedging’ of Instruments Classified as Equity
      11. 11 Derivatives Over Own Equity Instruments
      12. 12 Possible Future Developments
    5. Chapter 44: Financial instruments: Classification (IAS 39)
      1. 1 Introduction
      2. 2 Assets and Liabilities at Fair Value through Profit or Loss
      3. 3 Held-to-Maturity Investments
      4. 4 Loans and Receivables
      5. 5 Available-for-Sale Assets
      6. 6 Reclassifications
      7. 7 Classification of Financial Instruments in a Business Combination
      8. 8 Future Developments
    6. Chapter 45: Financial instruments: Classification (IFRS 9)
      1. 1 Introduction
      2. 2 Classifying financial assets: an overview
      3. 3 Classifying financial liabilities
      4. 4 Financial assets and financial liabilities held for trading
      5. 5 Financial assets: the ‘business model’ test
      6. 6 Financial assets: the ‘contractual characteristics’ test
      7. 7 Designation at fair value through profit or loss
      8. 8 Designation of non-derivative equity investments at fair value through other comprehensive income
      9. 9 Reclassification of financial assets
      10. 10 Effective date and transition
      11. 11 IASB's limited scope review of IFRS 9
    7. Chapter 46: Financial instruments: Recognition and measurement
      1. 1 Introduction
      2. 2 Recognition (IAS 39 and IFRS 9)
      3. 3 Initial Measurement (IAS 39 and IFRS 9)
      4. 4 Subsequent Measurement and Recognition of Gains and Losses (IAS 39)
      5. 5 Subsequent Measurement and Recognition of Gains and Losses (IFRS 9)
      6. 6 Amortised Cost and the Effective Interest Method
      7. 7 Impairment
      8. 8 Foreign Currencies
      9. 9 Effective Dates and Transitional Provisions
      10. 10 Future Developments
    8. Chapter 47: Financial instruments: Derecognition
      1. 1 Introduction
      2. 2 Development of IFRS
      3. 3 Derecognition – Financial Assets
      4. 4 Practical Application of the Derecognition Criteria
      5. 5 Accounting Treatment
      6. 6 Derecognition – Financial Liabilities
      7. 7 Future Developments
    9. Chapter 48: Financial instruments: Hedge accounting (IAS 39)
      1. 1 Introduction
      2. 2 Hedging Instruments and Hedged Items
      3. 3 Types of Hedging Relationships
      4. 4 Accounting for Effective Hedges
      5. 5 Qualifying Conditions for Hedge Accounting
      6. 6 Portfolio (or Macro) Hedging
      7. 7 Effective Date and Transitional Provisions
    10. Chapter 49: Financial instruments: Hedge accounting (IFRS 9)
      1. 1 Introduction
      2. 2 Risk Management
      3. 3 Hedged Items
      4. 4 Hedging Instruments
      5. 5 Qualifying Criteria
      6. 6 Subsequent Assessment of Effectiveness, Rebalancing and Discontinuation
      7. 7 Other Changes
      8. 8 Presentation
      9. 9 Disclosures
      10. 10 Effective Date and Transition
    11. Chapter 50: Financial instruments: Presentation and disclosure
      1. 1 Introduction
      2. 2 Scope of IFRS 7
      3. 3 Structuring the Disclosures
      4. 4 Significance of Financial Instruments for an Entity’s Financial Position and Performance
      5. 5 Nature and Extent of Risks Arising from Financial Instruments
      6. 6 Transfers of Financial Assets
      7. 7 Presentation on the Face of the Financial Statements and Related Disclosures
      8. 8 Effective Dates and Transitional Provisions
      9. 9 Future Developments
    12. Chapter 51: Insurance contracts
      1. 1 Introduction
      2. 2 The Objectives and Scope of IFRS 4
      3. 3 The Definition of an Insurance Contract
      4. 4 Embedded Derivatives
      5. 5 Unbundling of Deposit Components
      6. 6 Discretionary Participation Features
      7. 7 Selection of Accounting Policies
      8. 8 Changes in Accounting Policies
      9. 9 Insurance Contracts Acquired in Business Combinations and Portfolio Transfers
      10. 10 Disclosure
      11. 11 Future Developments in Insurance Contract Accounting
  12. Index of extracts from financial statements
  13. Index of standards
  14. Index