PAS 1

Current and non-current classification

An entity must normally present a classified statement of financial position, separating current and non-current assets
and liabilities, unless presentation based on liquidity provides information that is reliable. [PAS 1.60] In either case, if an
asset (liability) category combines amounts that will be received (settled) after 12 months with assets (liabilities) that
will be received (settled) within 12 months, note disclosure is required that separates the longer-term amounts from the
12-month amounts. [PAS 1.61]

 Current assets are assets that are: [PAS 1.66]

 expected to be realised in the entity's normal operating cycle
 held primarily for the purpose of trading
 expected to be realised within 12 months after the reporting period
 cash and cash equivalents (unless restricted).
 All other assets are non-current. [PAS 1.66]

Current liabilities are those: [PAS 1.69]

 expected to be settled within the entity's normal operating cycle  

 held for purpose of trading  

 due to be settled within 12 months  

 for which the entity does not have an unconditional right to defer settlement beyond 12 months (settlement by
the issue of equity instruments does not impact classification).

Other liabilities are non -current.

When a long-term debt is expected to be refinanced under an existing loan facility, and the entity has the discretion to
do so, the debt is classified as non-current, even if the liability would otherwise be due within 12 months. [PAS 1.73]

If a liability has become payable on demand because an entity has breached an undertaking under a long-term loan
agreement on or before the reporting date, the liability is current, even if the lender has agreed, after the reporting date
and before the authorisation of the financial statements for issue, not to demand payment as a consequence of the
breach. [PAS 1.74] However, the liability is classified as non-current if the lender agreed by the reporting date to provide
a period of grace ending at least 12 months after the end of the reporting period, within which the entity can rectify the
breach and during which the lender cannot demand immediate repayment. [PAS 1.75]

Format of statement

PAS 1 does not prescribe the format of the statement of financial position. Assets can be presented current then non-
current, or vice versa, and liabilities and equity can be presented current then non-current then equity, or vice versa. A
net asset presentation (assets minus liabilities) is allowed. The long-term financing approach used in UK and elsewhere –
fixed assets + current assets - short term payables = long-term debt plus equity – is also acceptable.

Share capital and reserves

Regarding issued share capital and reserves, the following disclosures are required: [PAS 1.79]

 numbers of shares authorised, issued and fully paid, and issued but not fully paid  

 par value (or that shares do not have a par value)  

 a reconciliation of the number of shares outstanding at the beginning and the end of the period  
  description of rights, preferences, and restrictions  

 treasury shares, including shares held by subsidiaries and associates  

 shares reserved for issuance under options and contracts  

 a description of the nature and purpose of each reserve within equity.

Additional disclosures are required in respect of entities without share capital and where an entity has reclassified
puttable financial instruments.  [PAS 1.80-80A]

Statement of profit or loss and other comprehensive income

Concepts of profit or loss and comprehensive income

Profit or loss is defined as "the total of income less expenses, excluding the components of other comprehensive
income".  Other comprehensive income is defined as comprising "items of income and expense (including
reclassification adjustments) that are not recognised in profit or loss as required or permitted by other IFRSs".  Total
comprehensive income is defined as "the change in equity during a period resulting from transactions and other events,
other than those changes resulting from transactions with owners in their capacity as owners". [PAS 1.7]

COMPREHENSIVE INCOME FOR THE PERIOD = PROFITOR LOSS + OTHER COMPREHENSIVE INCOME

All items of income and expense recognized in a period must be included in profit or loss unless a Standard or an
Interpretation requires otherwise. [IAS 1.88] Some IFRSs require or permit that some components to be excluded from
profit or loss and instead to be included in other comprehensive income.

PAS 12

PAS 12 — Income Taxes

Overview

PAS 12 Income Taxes implements a so-called 'comprehensive balance sheet method' of accounting for income taxes
which recognizes both the current tax consequences of transactions and events and the future tax consequences of the
future recovery or settlement of the carrying amount of an entity's assets and liabilities. Differences between the
carrying amount and tax base of assets and liabilities, and carried forward tax losses and credits, are recognized, with
limited exceptions, as deferred tax liabilities or deferred tax assets, with the latter also being subject to a 'probable
profits' test.

Objective of PAS 12

The objective of PAS 12 (1996) is to prescribe the accounting treatment for income taxes.

In meeting this objective, PAS 12 notes the following:

 It is inherent in the recognition of an asset or liability that that asset or liability will be recovered or settled, and
this recovery or settlement may give rise to future tax consequences which should be recognized at the same
time as the asset or liability 
 An entity should account for the tax consequences of transactions and other events in the same way it accounts
for the transactions or other events themselves.

Key definitions

[IAS 12.5]
Tax base- The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes

Temporary differences- Differences between the carrying amount of an asset or liability in the statement of financial
position and its tax bases

Taxable temporary differences- Temporary differences that will result in taxable amounts in determining taxable profit
(tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled

Deductible temporary differences- Temporary differences that will result in amounts that are deductible in determining
taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled

Deferred tax liabilities- The amounts of income taxes payable in future periods in respect of taxable temporary
differences

Deferred tax assets- The amounts of income taxes recoverable in future periods in respect of:

1. deductible temporary differences

2. the carryforward of unused tax losses, and

3. the carryforward of unused tax credits

Current tax

Current tax for the current and prior periods is recognized as a liability to the extent that it has not yet been settled, and
as an asset to the extent that the amounts already paid exceeds the amount due. [PAS 12.12] The benefit of a tax loss
which can be carried back to recover current tax of a prior period is recognized as an asset. [PAS 12.13]

Current tax assets and liabilities are measured at the amount expected to be paid to (recovered from) taxation
authorities, using the rates/laws that have been enacted or substantively enacted by the balance sheet date. [PAS 12.46]

Calculation of deferred taxes

Formulae

Deferred tax assets and deferred tax liabilities can be calculated using the following formulae:

Temporary difference = Carrying amount - Tax base

Deferred tax asset or liability = Temporary difference x Tax rate

The following formula can be used in the calculation of deferred taxes arising from unused tax losses or unused tax
credits:

Deferred tax asset = Unused tax loss or unused tax credits x Tax rate

Tax bases

The tax base of an item is crucial in determining the amount of any temporary difference, and effectively represents the
amount at which the asset or liability would be recorded in a tax-based balance sheet. PAS 12 provides the following
guidance on determining tax bases:
  Assets. The tax base of an asset is the amount that will be deductible against taxable economic benefits from
recovering the carrying amount of the asset. Where recovery of an asset will have no tax consequences, the tax
base is equal to the carrying amount. [PAS 12.7] 
 Revenue received in advance. The tax base of the recognized liability is its carrying amount, less revenue that
will not be taxable in future periods [PAS 12.8] 
 Other liabilities. The tax base of a liability is its carrying amount, less any amount that will be deductible for tax
purposes in respect of that liability in future periods [PAS 12.8] 
 Unrecognized items. If items have a tax base but are not recognized in the statement of financial position, the
carrying amount is nil [PAS 12.9] 
 Tax bases not immediately apparent. If the tax base of an item is not immediately apparent, the tax base should
effectively be determined in such as manner to ensure the future tax consequences of recovery or settlement of
the item is recognized as a deferred tax amount [PAS 12.10] 
 Consolidated financial statements. In consolidated financial statements, the carrying amounts in the
consolidated financial statements are used, and the tax bases determined by reference to any consolidated tax
return (or otherwise from the tax returns of each entity in the group). [PAS 12.11]

Examples

The determination of the tax base will depend on the applicable tax laws and the entity's expectations as to recovery
and settlement of its assets and liabilities. The following are some basic examples:

 Property, plant and equipment. The tax base of property, plant and equipment that is depreciable for tax
purposes that is used in the entity's operations is the unclaimed tax depreciation permitted as deduction in
future periods 
 Receivables. If receiving payment of the receivable has no tax consequences, its tax base is equal to its carrying
amount 
 Goodwill. If goodwill is not recognized for tax purposes, its tax base is nil (no deductions are available) 
 Revenue in advance. If the revenue is taxed on receipt but deferred for accounting purposes, the tax base of the
liability is equal to its carrying amount (as there are no future taxable amounts). Conversely, if the revenue is
recognized for tax purposes when the goods or services are received, the tax base will be equal to nil 
 Loans. If there are no tax consequences from repayment of the loan, the tax base of the loan is equal to its
carrying amount. If the repayment has tax consequences (e.g. taxable amounts or deductions on repayments of
foreign currency loans recognized for tax purposes at the exchange rate on the date the loan was drawn down),
the tax consequence of repayment at carrying amount is adjusted against the carrying amount to determine the
tax base (which in the case of the aforementioned foreign currency loan would result in the tax base of the loan
being determined by reference to the exchange rate on the draw down date).

Recognition and measurement of deferred taxes

Recognition of deferred tax liabilities

The general principle in IAS 12 is that a deferred tax liability is recognized for all taxable temporary differences. There
are three exceptions to the requirement to recognize a deferred tax liability, as follows:

 liabilities arising from initial recognition of goodwill [PAS 12.15(a)] 

 liabilities arising from the initial recognition of an asset/liability other than in a business combination which, at
the time of the transaction, does not affect either the accounting or the taxable profit [PAS 12.15(b)] 
 liabilities arising from temporary differences associated with investments in subsidiaries, branches, and
associates, and interests in joint arrangements, but only to the extent that the entity is able to control the timing
 of the reversal of the differences and it is probable that the reversal will not occur in the foreseeable future.
[PAS 12.39]

Recognition of deferred tax assets

A deferred tax asset is recognized for deductible temporary differences, unused tax losses and unused tax credits to the
extent that it is probable that taxable profit will be available against which the deductible temporary differences can be
utilized, unless the deferred tax asset arises from: [PAS 12.24]

 the initial recognition of an asset or liability other than in a business combination which, at the time of the
transaction, does not affect accounting profit or taxable profit.

Deferred tax assets for deductible temporary differences arising from investments in subsidiaries, branches and
associates, and interests in joint arrangements, are only recognized to the extent that it is probable that the temporary
difference will reverse in the foreseeable future and that taxable profit will be available against which the temporary
difference will be utilized. [PAS 12.44]

The carrying amount of deferred tax assets are reviewed at the end of each reporting period and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that
deferred tax asset to be utilized. Any such reduction is subsequently reversed to the extent that it becomes probable
that sufficient taxable profit will be available. [PAS 12.37]

A deferred tax asset is recognized for an unused tax loss carryforward or unused tax credit if, and only if, it is considered
probable that there will be sufficient future taxable profit against which the loss or credit carryforward can be utilized.
[PAS 12.34]

Measurement of deferred tax

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset
is realized or the liability is settled, based on tax rates/laws that have been enacted or substantively enacted by the end
of the reporting period. [PAS 12.47] The measurement reflects the entity's expectations, at the end of the reporting
period, as to the manner in which the carrying amount of its assets and liabilities will be recovered or settled.
[PAS 12.51]

PAS 12 provides the following guidance on measuring deferred taxes:

 Where the tax rate or tax base is impacted by the manner in which the entity recovers its assets or settles its
liabilities (e.g. whether an asset is sold or used), the measurement of deferred taxes is consistent with the way in
which an asset is recovered or liability settled [PAS 12.51A] 
 Where deferred taxes arise from revalued non-depreciable assets (e.g. revalued land), deferred taxes reflect the
tax consequences of selling the asset [PAS 12.51B] 
 Deferred taxes arising from investment property measured at fair value under PAS 40 Investment
Property reflect the rebuttable presumption that the investment property will be recovered through sale [PAS
12.51C-51D] 
 If dividends are paid to shareholders, and this causes income taxes to be payable at a higher or lower rate, or
the entity pays additional taxes or receives a refund, deferred taxes are measured using the tax rate applicable
to undistributed profits [PAS 12.52A]

Deferred tax assets and liabilities cannot be discounted. [IAS 12.53]

Recognition of tax amounts for the period

Amount of income tax to recognize

The following formula summarises the amount of tax to be recognised in an accounting period:

Tax to recognise for the period = Current tax for the period + Movement in deferred tax balances for the period

PAS 12 provides the following additional guidance on the recognition of income tax for the period:

 Where it is difficult to determine the amount of current and deferred tax relating to items recognized outside of
profit or loss (e.g. where there are graduated rates or tax), the amount of income tax recognized outside of
profit or loss is determined on a reasonable pro-rata allocation, or using another more appropriate method [PAS
12.63] 
 In the circumstances where the payment of dividends impacts the tax rate or results in taxable amounts or
refunds, the income tax consequences of dividends are considered to be more directly linked to past
transactions or events and so are recognized in profit or loss unless the past transactions or events were
recognized outside of profit or loss [PAS 12.52B] 
 The impact of business combinations on the recognition of pre-combination deferred tax assets are not included
in the determination of goodwill as part of the business combination, but are separately recognized [AS 12.68] 
 The recognition of acquired deferred tax benefits subsequent to a business combination are treated as
'measurement period' adjustments (see PFRS 3 Business Combinations) if they qualify for that treatment, or
otherwise are recognized in profit or loss [PAS 12.68] 

 Tax benefits of equity settled share based payment transactions that exceed the tax effected cumulative
remuneration expense are considered to relate to an equity item and are recognized directly in equity. [PAS
12.68C]

Presentation

Current tax assets and current tax liabilities can only be offset in the statement of financial position if the entity has the
legal right and the intention to settle on a net basis. [PAS 12.71]

Deferred tax assets and deferred tax liabilities can only be offset in the statement of financial position if the entity has
the legal right to settle current tax amounts on a net basis and the deferred tax amounts are levied by the same taxing
authority on the same entity or different entities that intend to realize the asset and settle the liability at the same time.
[PAS 12.74]

The amount of tax expense (or income) related to profit or loss is required to be presented in the statement(s) of profit
or loss and other comprehensive income. [PAS 12.77]

The tax effects of items included in other comprehensive income can either be shown net for each item, or the items can
be shown before tax effects with an aggregate amount of income tax for groups of items (allocated between items that
will and will not be reclassified to profit or loss in subsequent periods). [PAS 1.91]

Disclosure

PAS 12.80 requires the following disclosures:

  major components of tax expense (tax income) [PAS 12.79] Examples include:
o current tax expense (income) 
o any adjustments of taxes of prior periods 
o amount of deferred tax expense (income) relating to the origination and reversal of temporary
differences 
o amount of deferred tax expense (income) relating to changes in tax rates or the imposition of new taxes 
o amount of the benefit arising from a previously unrecognized tax loss, tax credit or temporary difference
of a prior period 
o write down, or reversal of a previous write down, of a deferred tax asset 
o amount of tax expense (income) relating to changes in accounting policies and corrections of errors.

PAS 12.81 requires the following disclosures:

 aggregate current and deferred tax relating to items recognized directly in equity 
 tax relating to each component of other comprehensive income 
 explanation of the relationship between tax expense (income) and the tax that would be expected by applying
the current tax rate to accounting profit or loss (this can be presented as a reconciliation of amounts of tax or a
reconciliation of the rate of tax) 
 changes in tax rates 
 amounts and other details of deductible temporary differences, unused tax losses, and unused tax credits 
 temporary differences associated with investments in subsidiaries, branches and associates, and interests in
joint arrangements 
 for each type of temporary difference and unused tax loss and credit, the amount of deferred tax assets or
liabilities recognized in the statement of financial position and the amount of deferred tax income or expense
recognized in profit or loss 
 tax relating to discontinued operations 
 tax consequences of dividends declared after the end of the reporting period 
 information about the impacts of business combinations on an acquirer's deferred tax assets 
 recognition of deferred tax assets of an acquires after the acquisition date.

Other required disclosures:

 details of deferred tax assets [PAS 12.82] 

 tax consequences of future dividend payments. [PAS 12.82A]

In addition to the disclosures required by PAS 12, some disclosures relating to income taxes are required by PAS 1
Presentation of Financial Statements, as follows:

 Disclosure on the face of the statement of financial position about current tax assets, current tax liabilities,
deferred tax assets, and deferred tax liabilities [PAS 1.54(n) and (o)]
 Disclosure of tax expense (tax income) in the profit or loss section of the statement of profit or loss and other
comprehensive income (or separate statement if presented). [PAS 1.82(d)]

PFRS 9

Subsequent measurement of financial liabilities

IFRS 9 doesn't change the basic accounting model for financial liabilities under IAS 39. Two measurement categories
continue to exist: FVTPL and amortised cost. Financial liabilities held for trading are measured at FVTPL, and all other
financial liabilities are measured at amortised cost unless the fair value option is applied. [IFRS 9, paragraph 4.2.1]

Fair value option

IFRS 9 contains an option to designate a financial liability as measured at FVTPL if [IFRS 9, paragraph 4.2.2]:

 doing so eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to

as an 'accounting mismatch') that would otherwise arise from measuring assets or liabilities or recognising the
gains and losses on them on different bases, or
 the liability is part or a group of financial liabilities or financial assets and financial liabilities that is managed and
its performance is evaluated on a fair value basis, in accordance with a documented risk management or
investment strategy, and information about the group is provided internally on that basis to the entity's key
management personnel.

Derecognition of financial liabilities

A financial liability should be removed from the balance sheet when, and only when, it is extinguished, that is, when the
obligation specified in the contract is either discharged or cancelled or expires. [IFRS 9, paragraph 3.3.1] Where there
has been an exchange between an existing borrower and lender of debt instruments with substantially different terms,
or there has been a substantial modification of the terms of an existing financial

liability, this transaction is accounted for as an extinguishment of the original financial liability and the recognition of a
new financial liability. A gain or loss from extinguishment of the original financial liability is recognised in profit or loss.
[IFRS 9, paragraphs 3.3.2-3.3.3]

Derivatives

All derivatives in scope of IFRS 9, including those linked to unquoted equity investments, are measured at fair value.
Value changes are recognised in profit or loss unless the entity has elected to apply hedge accounting by designating the
derivative as a hedging instrument in an eligible hedging relationship.

Embedded derivatives

An embedded derivative is a component of a hybrid contract that also includes a non-derivative host, with the effect
that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative. A derivative
that is attached to a financial instrument but is contractually transferable independently of that instrument, or has a
different counterparty, is not an embedded derivative, but a separate financial instrument. [IFRS 9, paragraph 4.3.1]

The embedded derivative concept that existed in IAS 39 has been included in IFRS 9 to apply only to hosts that are not
financial assets within the scope of the Standard. Consequently, embedded derivatives that under IAS 39 would have
been separately accounted for at FVTPL because they were not closely related to the host financial asset will no longer
be separated. Instead, the contractual cash flows of the financial asset are assessed in their entirety, and the asset as a
whole is measured at FVTPL if the contractual cash flow characteristics test is not passed (see above).

The embedded derivative guidance that existed in IAS 39 is included in IFRS 9 to help preparers identify when an
embedded derivative is closely related to a financial liability host contract or a host contract not within the scope of the
Standard (e.g. leasing contracts, insurance contracts, contracts for the purchase or sale of a non-financial items).

Reclassification
For financial assets, reclassification is required between FVTPL, FVTOCI and amortised cost, if and only if the entity's
business model objective for its financial assets changes so its previous model assessment would no longer apply. [IFRS
9, paragraph 4.4.1]

If reclassification is appropriate, it must be done prospectively from the reclassification date which is defined as the first
day of the first reporting period following the change in business model. An entity does not restate any previously
recognised gains, losses, or interest.

IFRS 9 does not allow reclassification:

 for equity investments measured at FVTOCI, or

 where the fair value option has been exercised in any circumstance for a financial assets or financial liability.

PAS 19

Overview

IAS 19 Employee Benefits (amended 2011) outlines the accounting requirements for employee benefits, including short-
term benefits (e.g. wages and salaries, annual leave), post-employment benefits such as retirement benefits, other long-
term benefits (e.g. long service leave) and termination benefits. The standard establishes the principle that the cost of
providing employee benefits should be recognised in the period in which the benefit is earned by the employee, rather
than when it is paid or payable, and outlines how each category of employee benefits are measured, providing detailed
guidance in particular about post-employment benefits.

IAS 19 (2011) was issued in 2011, supersedes IAS 19 Employee Benefits (1998), and is applicable to annual periods
beginning on or after 1 January 2013.

Objective of IAS 19 (2011)

The objective of IAS 19 is to prescribe the accounting and disclosure for employee benefits, requiring an entity to
recognise a liability where an employee has provided service and an expense when the entity consumes the econzomic
benefits of employee service. [IAS 19(2011).2]

Scope

 IAS 19 applies to (among other kinds of employee benefits):

 wages and salaries
 compensated absences (paid vacation and sick leave)
 profit sharing and bonuses
 medical and life insurance benefits during employment
 non-monetary benefits such as houses, cars, and free or subsidised goods or services
 retirement benefits, including pensions and lump sum payments
 Post-employment medical and life insurance benefits
 long-service or sabbatical leave
 'jubilee' benefits
 deferred compensation programmes
 termination benefits.

Short-term employee benefits

Short-term employee benefits are those expected to be settled wholly before twelve months after the end of the annual
reporting period during which employee services are rendered, but do not include termination benefits.[IAS 19(2011).8]
Examples include wages, salaries, profit-sharing and bonuses and non-monetary benefits paid to current employees.

The undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in an
accounting period is recognised in that period. [IAS 19(2011).11] The expected cost of short-term compensated
absences is recognised as the employees render service that increases their entitlement or, in the case of non-
accumulating absences, when the absences occur, and includes any additional amounts an entity expects to pay as a
result of unused entitlements at the end of the period. [IAS 19(2011).13-16]

Profit-sharing and bonus payments

An entity recognises the expected cost of profit-sharing and bonus payments when, and only when, it has a legal or
constructive obligation to make such payments as a result of past events and a reliable estimate of the expected
obligation can be made. [IAS 19.19]

Types of post-employment benefit plans

Post-employment benefit plans are informal or formal arrangements where an entity provides post-employment
benefits to one or more employees, e.g. retirement benefits (pensions or lump sum payments), life insurance and
medical care.

The accounting treatment for a post-employment benefit plan depends on the economic substance of the plan and
results in the plan being classified as either a defined contribution plan or a defined benefit plan

 Defined contribution plans. Under a defined contribution plan, the entity pays fixed contributions into a fund but
has no legal or constructive obligation to make further payments if the fund does not have sufficient assets to
pay all of the employees' entitlements to post-employment benefits. The entity's obligation is therefore
effectively limited to the amount it agrees to contribute to the fund and effectively place actuarial and
investment risk on the employee
 Defined benefit plans These are post-employment benefit plans other than a defined contribution plans. These
plans create an obligation on the entity to provide agreed benefits to current and past employees and effectively
places actuarial and investment risk on the entity.

PAS 26

Overview

IAS 26 Accounting and Reporting by Retirement Benefit Plans outlines the requirements for the preparation of financial
statements of retirement benefit plans. It outlines the financial statements required and discusses the measurement of
various line items, particularly the actuarial present value of promised retirement benefits for defined benefit plans.

IAS 26 was issued in January 1987 and applies to annual periods beginning on or after 1 January 1988.

Objective of IAS 26

The objective of IAS 26 is to specify measurement and disclosure principles for the reports of retirement benefit plans.
All plans should include in their reports a statement of changes in net assets available for benefits, a summary of
significant accounting policies and a description of the plan and the effect of any changes in the plan during the period.

Key definitions
Retirement benefit plan: An arrangement by which an entity provides benefits (annual income or lump sum) to
employees after they terminate from service. [IAS 26.8]

Defined contribution plan: A retirement benefit plan by which benefits to employees are based on the amount of funds
contributed to the plan plus investment earnings thereon. [IAS 26.8]

Defined benefit plan: A retirement benefit plan by which employees receive benefits based on a formula usually linked
to employee earnings. [IAS 26.8]

Defined contribution plans

The report of a defined contribution plan should contain a statement of net assets available for benefits and a
description of the funding policy. [IAS 26.13]

Defined benefit plans

The report of a defined benefit plan should contain either: [IAS 26.17]

 a statement that shows the net assets available for benefits, the actuarial present value of promised retirement
benefits (distinguishing between vested benefits and non-vested benefits) and the resulting excess or deficit; or
 a statement of net assets available for benefits, including either a note disclosing the actuarial present value of
promised retirement benefits (distinguishing between vested benefits and non-vested benefits) or a reference
to this information in an accompanying actuarial report.

Disclosure

 Statement of net assets available for benefit, showing: [IAS 26.35(a)]

 assets at the end of the period
 basis of valuation
 details of any single investment exceeding 5% of net assets or 5% of any category of investment
 details of investment in the employer
 liabilities other than the actuarial present value of plan benefits
 Statement of changes in net assets available for benefits, showing: [IAS 26.35(b)]
 employee contributions
 investment income
 other income
 benefits paid
 administrative expenses
 other expenses
 income taxes
 profit or loss on disposal of investments
 changes in fair value of investments
 transfers to/from other plans
 Description of funding policy [IAS 26.35(c)]
 Other details about the plan [IAS 26.36]
 Summary of significant accounting policies [IAS 26.34(b)]
 Description of the plan and of the effect of any changes in the plan during the period [IAS 26.34(c)]
 Disclosures for defined benefit plans: [IAS 26.35(d) and (e)]
 actuarial present value of promised benefit obligations
  description of actuarial assumptions
 description of the method used to calculate the actuarial present value of promised benefit obligations

PAS 32

Financial liability: any liability that is:

 a contractual obligation
 to deliver cash or another financial asset to another entity; or
 to exchange financial assets or financial liabilities with another entity under conditions that are potentially
unfavourable to the entity; or:
 a contract that will or may be settled in the entity's own equity instruments and is
 a non-derivative for which the entity is or may be obliged to deliver a variable number of the entity's own equity
instruments or
 a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial
asset for a fixed number of the entity's own equity instruments. For this purpose the entity's own equity
instruments do not include: instruments that are themselves contracts for the future receipt or delivery of the
entity's own equity instruments; puttable instruments classified as equity or certain liabilities arising on
liquidation classified by IAS 32 as equity instruments

Equity instrument: Any contract that evidences a residual interest in the assets of an entity after deducting all of its
liabilities.

Fair value: the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing
parties in an arm's length transaction.

The definition of financial instrument used in IAS 32 is the same as that in IAS 39.

Puttable instrument: a financial instrument that gives the holder the right to put the instrument back to the issuer for
cash or another financial asset or is automatically put back to the issuer on occurrence of an uncertain future event or
the death or retirement of the instrument holder.

Classification as liability or equity

The fundamental principle of IAS 32 is that a financial instrument should be classified as either a financial liability or an
equity instrument according to the substance of the contract, not its legal form, and the definitions of financial liability
and equity instrument. Two exceptions from this principle are certain puttable instruments meeting specific criteria and
certain obligations arising on liquidation (see below). The entity must make the decision at the time the instrument is
initially recognised. The classification is not subsequently changed based on changed circumstances. [IAS 32.15]

A financial instrument is an equity instrument only if (a) the instrument includes no contractual obligation to deliver cash
or another financial asset to another entity and (b) if the instrument will or may be settled in the issuer's own equity
instruments, it is either:

 a non-derivative that includes no contractual obligation for the issuer to deliver a variable number of its own
equity instruments; or
 a derivative that will be settled only by the issuer exchanging a fixed amount of cash or another financial asset
for a fixed number of its own equity instruments. [IAS 32.16]

Contingent settlement provisions

If, as a result of contingent settlement provisions, the issuer does not have an unconditional right to avoid settlement by
delivery of cash or other financial instrument (or otherwise to settle in a way that it would be a financial liability) the
instrument is a financial liability of the issuer, unless:

 the contingent settlement provision is not genuine or

 the issuer can only be required to settle the obligation in the event of the issuer's liquidation or
 the instrument has all the features and meets the conditions of IAS 32.16A and 16B for puttable instruments [IAS
32.25]

Puttable instruments and obligations arising on liquidation

In February 2008, the IASB amended IAS 32 and IAS 1 Presentation of Financial Statements with respect to the balance
sheet classification of puttable financial instruments and obligations arising only on liquidation. As a result of the
amendments, some financial instruments that currently meet the definition of a financial liability will be classified as
equity because they represent the residual interest in the net assets of the entity. [IAS 32.16A-D]

Classifications of rights issues

In October 2009, the IASB issued an amendment to IAS 32 on the classification of rights issues. For rights issues offered
for a fixed amount of foreign currency current practice appears to require such issues to be accounted for as derivative
liabilities. The amendment states that if such rights are issued pro rata to an entity's all existing shareholders in the same
class for a fixed amount of currency, they should be classified as equity regardless of the currency in which the exercise
price is denominated.

Compound financial instruments

Some financial instruments – sometimes called compound instruments – have both a liability and an equity component
from the issuer's perspective. In that case, IAS 32 requires that the component parts be accounted for and presented
separately according to their substance based on the definitions of liability and equity. The split is made at issuance and
not revised for subsequent changes in market interest rates, share prices, or other event that changes the likelihood that
the conversion option will be exercised. [IAS 32.29-30]

Treasury shares

The cost of an entity's own equity instruments that it has reacquired ('treasury shares') is deducted from equity. Gain or
loss is not recognised on the purchase, sale, issue, or cancellation of treasury shares. Treasury shares may be acquired
and held by the entity or by other members of the consolidated group. Consideration paid or received is recognised
directly in equity. [IAS 32.33]

Offsetting

IAS 32 also prescribes rules for the offsetting of financial assets and financial liabilities. It specifies that a financial asset
and a financial liability should be offset and the net amount reported when, and only when, an entity: [IAS 32.42]

 has a legally enforceable right to set off the amounts; and

 intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. [IAS 32.48]

Costs of issuing or reacquiring equity instruments

Costs of issuing or reacquiring equity instruments are accounted for as a deduction from equity, net of any related
income tax benefit. [IAS 32.35]
Disclosures

Financial instruments disclosures are in IFRS 7 Financial Instruments: Disclosures, and no longer in IAS 32.

The disclosures relating to treasury shares are in IAS 1 Presentation of Financial Statements and IAS 24 Related Parties
for share repurchases from related parties. [IAS 32.34 and 39]

PAS 37

Overview

IAS 37 Provisions, Contingent Liabilities and Contingent Assets outlines the accounting for provisions (liabilities of
uncertain timing or amount), together with contingent assets (possible assets) and contingent liabilities (possible
obligations and present obligations that are not probable or not reliably measurable). Provisions are measured at the
best estimate (including risks and uncertainties) of the expenditure required to settle the present obligation, and reflects
the present value of expenditures required to settle the obligation where the time value of money is material.

IAS 37 was issued in September 1998 and is operative for periods beginning on or after 1 July 1999.

Objective

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 the
financial statements to enable users to understand their nature, timing and amount. The key principle established by the
Standard is that a provision should be recognised only when there is a liability i.e. a present obligation resulting from
past events. The Standard thus aims to ensure that only genuine obligations are dealt with in the financial statements –
planned future expenditure, even where authorised by the board of directors or equivalent governing body, is excluded
from recognition.

Scope

 IAS 37 excludes obligations and contingencies arising from: [IAS 37.1-6]

 financial instruments that are in the scope of IAS 39 Financial Instruments: Recognition and Measurement (or
IFRS 9 Financial Instruments)
 non-onerous executory contracts insurance contracts (see IFRS 4 Insurance Contracts), but IAS 37 does apply to
other provisions, contingent liabilities and contingent assets of an insurer
 items covered by another IFRS. For example, IAS 11 Construction Contracts applies to obligations arising under
such contracts; IAS 12 Income Taxes applies to obligations for current or deferred income taxes; IAS 17 Leases
applies to lease obligations; and IAS 19 Employee Benefits applies to pension and other employee benefit
obligations.

Key definitions [IAS 37.10]

Provision: a liability of uncertain timing or amount.

Liability:

 present obligation as a result of past events

 settlement is expected to result in an outflow of resources (payment)
Contingent liability:

 a possible obligation depending on whether some uncertain future event occurs, or

 a present obligation but payment is not probable or the amount cannot be measured reliably

Contingent asset:

 a possible asset that arises from past events, and

 whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future
events not wholly within the control of the entity.

Recognition of a provision

An entity must recognise a provision if, and only if: [IAS 37.14]

 a present obligation (legal or constructive) has arisen as a result of a past event (the obligating event),
 payment is probable ('more likely than not'), and
 the amount can be estimated reliably.

What is the debit entry?

When a provision (liability) is recognised, the debit entry for a provision is not always an expense. Sometimes the
provision may form part of the cost of the asset. Examples: included in the cost of inventories, or an obligation for
environmental cleanup when a new mine is opened or an offshore oil rig is installed. [IAS 37.8]

Use of provisions

Provisions should only be used for the purpose for which they were originally recognised. They should be reviewed at
each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of
resources will be required to settle the obligation, the provision should be reversed. [IAS 37.61]

Contingent liabilities

Since there is common ground as regards liabilities that are uncertain, IAS 37 also deals with contingencies. It requires
that entities should not recognise contingent liabilities – but should disclose them, unless the possibility of an outflow of
economic resources is remote. [IAS 37.86]

Contingent assets

Contingent assets should not be recognised – but should be disclosed where an inflow of economic benefits is probable.
When the realisation of income is virtually certain, then the related asset is not a contingent asset and its recognition is
appropriate. [IAS 37.31-35]

Disclosures

 Reconciliation for each class of provision: [IAS 37.84

 opening balance
 additions
 used (amounts charged against the provision)
 unused amounts reversed
 unwinding of the discount, or changes in discount rate
 closing ba
PFRS 2

Overview

IFRS 2 Share-based Payment requires an entity to recognise share-based payment transactions (such as granted shares,
share options, or share appreciation rights) in its financial statements, including transactions with employees or other
parties to be settled in cash, other assets, or equity instruments of the entity. Specific requirements are included for
equity-settled and cash-settled share-based payment transactions, as well as those where the entity or supplier has a
choice of cash or equity instruments.

IFRS 2 was originally issued in February 2004 and first applied to annual periods beginning on or after 1 January 2005.

Summary of IFRS 2

In June 2007, the Deloitte IFRS Global Office published an updated version of our IAS Plus Guide to IFRS 2 Share-based
Payment 2007 (PDF 748k, 128 pages). The guide not only explains the detailed provisions of IFRS 2 but also deals with its
application in many practical situations. Because of the complexity and variety of share-based payment awards in
practice, it is not always possible to be definitive as to what is the 'right' answer. However, in this guide Deloitte shares
with you our approach to finding solutions that we believe are in accordance with the objective of the Standard.

Definition of share-based payment

A share-based payment is a transaction in which the entity receives goods or services either as consideration for its
equity instruments or by incurring liabilities for amounts based on the price of the entity's shares or other equity
instruments of the entity. The accounting requirements for the share-based payment depend on how the transaction
will be settled, that is, by the issuance of (a) equity, (b) cash, or (c) equity or cash.

Scope

The concept of share-based payments is broader than employee share options. IFRS 2 encompasses the issuance of
shares, or rights to shares, in return for services and goods. Examples of items included in the scope of IFRS 2 are share
appreciation rights, employee share purchase plans, employee share ownership plans, share option plans and plans
where the issuance of shares (or rights to shares) may depend on market or non-market related conditions.

IFRS 2 applies to all entities. There is no exemption for private or smaller entities. Furthermore, subsidiaries using their
parent's or fellow subsidiary's equity as consideration for goods or services are within the scope of the Standard.

There are two exemptions to the general scope principle:

 First, the issuance of shares in a business combination should be accounted for under IFRS 3 Business
Combinations. However, care should be taken to distinguish share-based payments related to the acquisition
from those related to continuing employee services Second, IFRS 2 does not address share-based payments
within the scope of paragraphs 8-10 of IAS 32 Financial Instruments: Presentation, or paragraphs 5-7 of IAS 39
Financial Instruments: Recognition and Measurement. Therefore, IAS 32 and IAS 39 should be applied for
commodity-based derivative contracts that may be settled in shares or rights to shares.

IFRS 2 does not apply to share-based payment transactions other than for the acquisition of goods and services. Share
dividends, the purchase of treasury shares, and the issuance of additional shares are therefore outside its scope.
Recognition and measurement

The issuance of shares or rights to shares requires an increase in a component of equity. IFRS 2 requires the offsetting
debit entry to be expensed when the payment for goods or services does not represent an asset. The expense should be
recognised as the goods or services are consumed. For example, the issuance of shares or rights to shares to purchase
inventory would be presented as an increase in inventory and would be expensed only once the inventory is sold or
impaired.

The issuance of fully vested shares, or rights to shares, is presumed to relate to past service, requiring the full amount of
the grant-date fair value to be expensed immediately. The issuance of shares to employees with, say, a three-year
vesting period is considered to relate to services over the vesting period. Therefore, the fair value of the share-based
payment, determined at the grant date, should be expensed over the vesting period.

As a general principle, the total expense related to equity-settled share-based payments will equal the multiple of the
total instruments that vest and the grant-date fair value of those instruments. In short, there is truing up to reflect what
happens during the vesting period. However, if the equity-settled share-based payment has a market related
performance condition, the expense would still be recognised if all other vesting conditions are met. The following
example provides an illustration of a typical equity-settled share-based payment.

Disclosure

Required disclosures include:

 the nature and extent of share-based payment arrangements that existed during the period
 how the fair value of the goods or services received, or the fair value of the equity instruments granted, during
the period was determined the effect of share-based payment transactions on the entity's profit or loss for the
period and on its financial position.

PFRS 7

IFRS 7 — Financial Instruments: Disclosures

Overview

IFRS 7 Financial Instruments: Disclosures requires disclosure of information about the significance of financial
instruments to an entity, and the nature and extent of risks arising from those financial instruments, both in qualitative
and quantitative terms. Specific disclosures are required in relation to transferred financial assets and a number of other
matters.

IFRS 7 was originally issued in August 2005 and applies to annual periods beginning on or after 1 January 2007.

Summary of IFRS 7

Overview of IFRS 7

 adds certain new disclosures about financial instruments to those previously required by IAS 32 Financial
Instruments: Disclosure and Presentation (as it was then cited)
 replaces the disclosures previously required by IAS 30 Disclosures in the Financial Statements of Banks and
Similar Financial Institutions
 puts all of those financial instruments disclosures together in a new standard on Financial Instruments:
Disclosures. The remaining parts of IAS 32 deal only with financial instruments presentation matters.
Disclosure requirements of IFRS 7

IFRS requires certain disclosures to be presented by category of instrument based on the IAS 39 measurement
categories. Certain other disclosures are required by class of financial instrument. For those disclosures an entity must
group its financial instruments into classes of similar instruments as appropriate to the nature of the information
presented. [IFRS 7.6]

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

 information about the significance of financial instruments.

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

PAR 16

IFRS 16- LEASE

Overview

IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard provides a
single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is
12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance,
with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17.

IFRS 16 was issued in January 2016 and applies to annual reporting periods beginning on or after 1 January 2019.

Summary of IFRS 16

Objective

IFRS 16 establishes principles for the recognition, measurement, presentation and disclosure of leases, with the
objective of ensuring that lessees and lessors provide relevant information that faithfully represents those transactions.
[IFRS 16:1]

Scope

IFRS 16 Leases applies to all leases, including subleases, except for: [IFRS 16:3]

 leases to explore for or use minerals, oil, natural gas and similar non-regenerative resources;
 leases of biological assets held by a lessee (see IAS 41 Agriculture);
 service concession arrangements (see IFRIC 12 Service Concession Arrangements);
 licences of intellectual property granted by a lessor (see IFRS 15 Revenue from Contracts with Customers); and
 rights held by a lessee under licensing agreements for items such as films, videos, plays, manuscripts, patents
and copyrights within the scope of IAS 38 Intangible Assets

A lessee can elect to apply IFRS 16 to leases of intangible assets, other than those items listed above. [IFRS 16:4]

Recognition exemptions

Instead of applying the recognition requirements of IFRS 16 described below, a lessee may elect to account for lease
payments as an expense on a straight-line basis over the lease term or another systematic basis for the following two
types of leases:
i) leases with a lease term of 12 months or less and containing no purchase options – this election is made by class of
underlying asset; and

ii) leases where the underlying asset has a low value when new (such as personal computers or small items of office
furniture) – this election can be made on a lease-by-lease basis.

Key definitions

Interest rate implicit in the lease

The interest rate that yields a present value of (a) the lease payments and (b) the unguaranteed residual value equal to
the sum of (i) the fair value of the underlying asset and (ii) any initial direct costs of the lessor.

Lease term

The non-cancellable period for which a lessee has the right to use an underlying asset, plus:

a) periods covered by an extension option if exercise of that option by the lessee is reasonably certain; and

b) periods covered by a termination option if the lessee is reasonably certain not to exercise that option

Lessee’s incremental borrowing rate

The rate of interest that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds
necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.

Disclosure

The objective of IFRS 16’s disclosures is for information to be provided in the notes that, together with information
provided in the statement of financial position, statement of profit or loss and statement of cash flows, gives a basis for
users to assess the effect that leases have. Paragraphs 52 to 60 of IFRS 16 set out detailed requirements for lessees to
meet this objective and paragraphs 90 to 97 set out the detailed requirements for lessors. [IFRS 16:51, 89]

Effective date and transition

An entity applies IFRS 16 for annual reporting periods beginning on or after 1 January 2019. Earlier application is
permitted if IFRS 15 Revenue from Contracts with Customers has also been applied. [IFRS 16:C1]

As a practical expedient, an entity is not required to reassess whether a contract is, or contains, a lease at the date of
initial application. [IFRS 16:C3]

A lessee shall either apply IFRS 16 with full retrospective effect or alternatively not restate comparative information but
recognise the cumulative effect of initially applying IFRS 16 as an adjustment to opening equity at the date of initial
application. [IFRS 16:C5, C7]