Monthly Archives: December 2011

//December

IAS 23 – Borrowing Costs

List of useful info, resources and documents available on other websites about IAS 23 – Borrowing Costs. Summary of IAS 23 – IASPlus Full Text of the IAS 23 as at 31 December 2010 provided by IASB (You need to register) Other useful … Cont...

By |December 27th, 2011|DOCUMENTS, IAS 23, IAS 23 Borrowing Costs|Comments Off on IAS 23 – Borrowing Costs

IAS 21 – The Effects of Changes in Foreign Exchange Rates

List of useful info, resources and documents available on other websites about IAS 21 – The Effects of Changes in Foreign Exchange Rates. Summary of IAS 21 – IASPlus Full Text of the IAS 21 as at 31 December 2010 provided by … Continue read...

By |December 23rd, 2011|CHANGES IN FOREIGN EXCHANGE RATES, DOCUMENTS, IAS 21, IAS 21 The Effects of Changes in Foreign Exchange Rates|Comments Off on IAS 21 – The Effects of Changes in Foreign Exchange Rates

IAS 20 – Accounting for Government Grants and Disclosure of Government Assistance

List of useful info, resources and documents available on other websites about IAS 20 – Accounting for Government Grants and Disclosure of Government Assistance. Summary of IAS 20 – IASPlus Full Text of the IAS 20 as at 31 December 2010 provided ...

By |December 21st, 2011|DOCUMENTS, GOVERNMENT GRANTS, IAS 20, IAS 20 Accounting for Government Grants and Disclosure of Government Assistance|Comments Off on IAS 20 – Accounting for Government Grants and Disclosure of Government Assistance

IAS 19 – Employee Benefits

List of useful info, resources and documents available on other websites about IAS 19 – Employee Benefits. Summary of IAS 19 – IASPlus Full Text of the IAS 19 as at 31 December 2010 provided by IASB (You need to register) Other useful … Co...

By |December 21st, 2011|DOCUMENTS, EMPLOYEE BENEFITS, IAS 19 Employee Benefits|Comments Off on IAS 19 – Employee Benefits

IAS 18 – Revenue

List of useful info, resources and documents available on other websites about IAS 18 – Revenue. Summary of IAS 18 – IASPlus Full Text of the IAS 18 as at 31 December 2010 provided by IASB (You need to register) Other useful resources … Co...

By |December 20th, 2011|DOCUMENTS, IAS 18, IAS 18 Revenue|Comments Off on IAS 18 – Revenue

IAS17 – Leases

List of useful info, resources and documents available on other websites about IAS 17 – Leases. Summary of IAS 17 – IASPlus Full Text of the IAS 17 as at 31 December 2010 provided by IASB (You need to register) Other useful resources … Con...

By |December 17th, 2011|DOCUMENTS, IAS 17|Comments Off on IAS17 – Leases

IAS 16 – Property, Plant and Equipment

List of useful info, resources and documents available on other websites about IAS 16 – Property, Plant and Equipment. Summary of IAS 16 – IASPlus Full Text of the IAS 16 as at 31 December 2010 provided by IASB (You need to register) … Con...

By |December 17th, 2011|DOCUMENTS, IAS 16, IAS 16 Property, Plant and Equipment, PLANT AND EQUIPMENT, PROPERTY|Comments Off on IAS 16 – Property, Plant and Equipment

IASeminars Course 1010: IFRS Fundamentals – London – 13th March 2012 (4 days)

Course Summary This four-day course provides a detailed overview of the major technical issues encountered when producing IFRS-compliant financial statements. Delegates may also wish to consider Course 1000: IFRS Immersion Workshop (8-day course) whic...

By |December 16th, 2011|DOCUMENTS, EVENTS, IFRS FUNDAMENTALS, UK|Comments Off on IASeminars Course 1010: IFRS Fundamentals – London – 13th March 2012 (4 days)

IAS 12 – Income Tax

List of useful info, resources and documents available on other websites about IAS 12 – Income Tax. Summary of IAS 12 – IASPlus Full Text of the IAS 12 as at 31 December 2010 provided by IASB (You need to register) Other useful … Continue ...

By |December 14th, 2011|DOCUMENTS, IAS 12, IAS 12 Income Taxes, INCOME TAX|Comments Off on IAS 12 – Income Tax

Comment on Revaluation of Leasehold land by nkmssusa

IAS 17.14-1 and IAS 40.33-1 - Accounting for land-use rights Issue How should long-term land-use rights (leases of land) be accounted for? Fact Pattern On 1 January 2004 Entity A acquires a long-term land-use right for an amount of CU 100. The lease term is 50 years. An independent valuer assesses the fair value of the long-term land-use right as CU 105 as at 31 December 2004. Scenario 1:The land-use right is acquired with the intention of holding it to earn rentals and for capital appreciation. Scenario 2:The land-use right is acquired with the intention of constructing a building on the land for own use. Conclusion Scenario 1: Under scenario 1 the accounting treatments depends on whether: • Entity A chooses to apply the cost model • Entity A chooses to apply the fair value model under IAS 40 Investment Property. If the entity chooses to apply the cost model, the payments made on entering into or acquiring the land-use right represent prepaid lease payments that are amortised over the lease term in accordance with the expected pattern of consumption of the economic benefits embodied in the land-use right. In this example, on 1 January 2004 CU 100 would be recognised as a prepaid operating lease expense to be classified as a non-current asset under a separate heading such as “prepaid lease expenses” and thereafter amortised over 50 years. Subsequent to initial recognition such prepaid lease payments are not revalued. If an entity applies the fair value model under IAS 40 (IAS 40 and IAS 17 Leases explicitly allow a property interest held under an operating lease to be classified as an investment property subject to specific requirements), the payments made on entering into or acquiring a land-use right are capitalised as part of the cost of the investment property and the land-use right is subsequently measured at fair value. In this example, on 1 January 2004 Entity A recognises an asset under investment properties at CU 100. At 31 December 2004 the value of this asset has increased by CU 5, resulting in a gain of CU 5 to be recognised in profit or loss for 2004. Scenario 2: Under scenario 2 the land-use right would be scoped out of IAS 40. Accordingly, the payments made on entering into or acquiring the land-use right represent prepaid lease payments that are amortised over the lease term in accordance with the expected pattern of consumption of the economic benefits embodied in the land-use right. In this example, on 1 January 2004 CU 100 would be recognised as a prepaid operating lease expense to be classified as a non-current asset under a separate heading such as “prepaid lease expenses” and thereafter amortised over 50 years. Reasons for Conclusion Scenario 1: An entity applies the cost model Long-term land-use rights are leases under paragraph 4 of IAS 17. If the long-term land-use right does not provide for the transfer of title by the end of the end of its term, the lessee normally does not receive substantially all of the risks and rewards incidental to ownership and therefore the contract is deemed to be an operating lease as set out in paragraph 14 of IAS 17. Paragraph 6 of IAS 40 allows a property interest held by a lessee under an operating lease to be classified and accounted for as investment property if, and only if, the property would otherwise meet the definition of an investment property and the lessee uses the fair value model, i.e. where a property interest held by a lessee under an operating lease is classified as investment property the application of the fair model is mandatory (paragraph 34 of IAS 40). As the fair value model is not applied, the accounting treatment set out in IAS 17 has to be followed. Paragraph 33 of IAS 17 states that: "Lease payments under an operating lease shall be recognised as an expense on a straight-line basis over the lease term unless another systematic basis is more representative of the time pattern of the user's benefit." If certain costs arise at the inception of the lease that are necessary to consummate the agreement and enable a lessee to exercise its rights under the lease agreement, these costs are incurred as a direct result of the land-use right (lease). Therefore, it is appropriate to consider these as lease-related costs that should be subject to the same accounting treatment as prepaid lease payments. A premium paid for a leasehold represents pre-paid lease payments that are amortised over the lease term in accordance with the pattern of benefits obtained. As paragraph 14 of IAS 17 states that “a payment made on entering into or acquiring a leasehold that is accounted for as an operating lease represents prepaid lease payments […]” it is appropriate to classify the land-use right as a non-current asset under a separate heading such as “prepaid lease expenses”. This accounting treatment is supported by paragraph 57 of IAS 1 Presentation of Financial Statements (which rules that all assets which are not realised within twelve months after the balance sheet date shall be classified as non-current). Some might argue that a land-use right meets the definition of an intangible asset as defined in paragraph 8 of IAS 38 Intangible Assets (“an identifiable non-monetary asset without physical substance”) and should therefore be classified as such in the balance sheet. However, in our view this accounting treatment is not appropriate as leases are scoped out of IAS 38 (paragraph 3 c). Some argue that a land-use right can be considered as a separate item of property, plant & equipment and should therefore be classified as such in the balance sheet. However, in our view this accounting treatment is not appropriate as a land-use right is not a tangible asset and does therefore not meet the definition of an item of property, plant and equipment as defined in paragraph 6 of IAS 16 Property, Plant and Equipment. An entity applies the fair value model under IAS 40 The lessee is able to classify and account for the operating lease as investment property as permitted by paragraph 6 of IAS 40 since the property would otherwise meet the definition of an investment property and the lessee uses the fair value model. On initial recognition the investment property is recognised at cost (paragraph 20 of IAS 40). Fair value measurement after initial recognition is discussed in paragraph 33 ff. of IAS 40. Scenario 2: A land-use-right for own use does not meet the definition of an investment property and is scoped out of IAS 40 (see paragraph 9 (c) of IAS 40). Hence, the accounting treatment set out in IAS 17 as discussed above in relation to the application of the cost model in scenario 1 has to be followed.

By |December 13th, 2011|DOCUMENTS|Comments Off on Comment on Revaluation of Leasehold land by nkmssusa

Reclassification of Financial Instruments: Is the current European financial crisis considered a rare circumstance?

As many of you already know,  IAS 39 states as follow “An entity shall not reclassify any financial instrument into the fair value through profit or loss category after initial recognition. 50B A financial asset to which paragraph 50(c) applie...

By |December 11th, 2011|DOCUMENTS, FINANCIAL INSTRUMENTS, IAS 39|0 Comments

IAS 11 – Construction Contracts

List of useful info, resources and documents available on other websites about IAS 11 – Construction Contracts. Summary of IAS 11 – IASPlus Full Text of the IAS 11 as at 31 December 2010 provided by IASB (You need to register) Other useful &#823...

By |December 11th, 2011|CONSTRUCTION CONTRACTS, DOCUMENTS, IAS 11, IAS 11 Construction Contracts|Comments Off on IAS 11 – Construction Contracts

IAS 10 – Events After the Reporting Period

List of useful info, resources and documents available on other websites about IAS 10 – Events After the Reporting Period. Summary of IAS 10 – IASPlus Full Text of the IAS 10 as at 31 December 2010 provided by IASB (You need to … Continue ...

By |December 9th, 2011|DOCUMENTS, EVENTS AFTER THE REPORTING PERIOD, IAS 10 Events After the Reporting Period, IAS10|Comments Off on IAS 10 – Events After the Reporting Period

IAS 2 – Inventory

List of useful info, resources and documents available on other websites about IAS 2 – Inventory. Summary of IAS 2 – IASPlus Full Text of the IAS 2 as at 31 December 2010 provided by IASB (You need to register) Other useful resources … Con...

By |December 8th, 2011|DOCUMENTS, IAS 2, IAS 2 Inventories|Comments Off on IAS 2 – Inventory

IAS 1 – Presentation of Financial Statements

List of useful info, resources and documents available on other websites about IAS 1 – Presentation of Financial Statements. Summary of IAS 1 – IASPlus Full Text of the IAS 1 as at 31 December 2010 provided by IASB (You need to register) …...

By |December 8th, 2011|DOCUMENTS, IAS 1 Presentation of Financial Statements, PRESENTATION OF FINANCIAL STATEMENTS|Comments Off on IAS 1 – Presentation of Financial Statements

Accounting for Share Discount

under IFRS how does one treat discounts which are extended to shreholders who decide to pay their shares ealier than the scheduled date. For example they wee to pay out their share subscription in five installments over five years but decide to pay it all in the first year and as result they are given [...]

By |December 6th, 2011|IFRS 2 Share-based Payment|0 Comments

IFRS 9 – Financial Instruments

List of useful info, resources and documents available on other websites about IFRS 8 – Operating Segments. Effective date: 1 January 2013 (early application permitted) Summary of IFRS 9 – IASPlus Full Text of the IFRS 9 as at 31 December 2010 &#...

By |December 2nd, 2011|DOCUMENTS, IFRS 9, IFRS 9 Financial Instruments|Comments Off on IFRS 9 – Financial Instruments

IFRS 8 – Operating Segments

List of useful info, resources and documents available on other websites about IFRS 8 – Operating Segments. Summary of IFRS 8 – IASPlus A guide to IFRS 8 (PWC September 2008) A Practical Guide to Segment Reporting Full Text of the IFRS 8 …...

By |December 1st, 2011|DOCUMENTS, IFRS 8 Operating Segments|Comments Off on IFRS 8 – Operating Segments

IFRS 7 – Financial Instruments: Disclosures

List of useful info, resources and documents available on other websites about IFRS 7 – Financial Instruments: Disclosures. Summary of IFRS 7 – IASPlus A guide to IFRS 7 (PWC April 2010) A Practical guide to IFRS 7 Full Text of the IFRS … ...

By |December 1st, 2011|DOCUMENTS, IFRS 7, IFRS 7 Financial Instruments: Disclosures|Comments Off on IFRS 7 – Financial Instruments: Disclosures

IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations

List of useful info, resources and documents available on other websites about IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations. Summary of IFRS 5 – IASPlus A guide to IFRS 5 (Deloitte March 2008) Asset Held for sale and &#82...

By |December 1st, 2011|DOCUMENTS, IFRS 5 Non-current Assets Held for Sale and Discontinued Operations|Comments Off on IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations