The Financial Accounting Standards Board FASB
4.4 EU Regulation
EU Accounting Directives were issued to establish a minimum level of harmonisation within Europe for the preparation of financial statements. Following a change in focus the goal posts moved to international harmonisation rather than within Europe alone. As a result, the European Commission published an EU Regulation in June 2002 that required the adoption of IFRS in member states for the preparation of the consolidated financial statements i.e. the group financial statements of listed entities. The Regulation applied to financial periods beginning on or after 1 January 2005 for entities incorporated in a member state and whose securities, debt or equity, were traded on a regulated market in the EU. The significance of this requirement being issued as a Regulation was that it immediately had the force of law in member states. Its adoption was not dependant Chapter 1 – Financial Reporting Context Page 8 on it being incorporated into national legislation, so there was consistency in both timing and application of the requirements. The European Commission made what it described as a “gamble” because the successful implementation of IFRS should lead to reduced costs for multi-national groups with one GAAP applied across the whole group. Lower costs of raising capital, improved access to funding and better opportunities for investors should flow from enhanced comparability of financial statements. Extract from the financial statements of France Telecom 2004 “IMPLEMENTATION OF IFRS WITHIN THE FRANCE TELECOM GROUP ORGANIZATION OF THE CONVERSION PROCESS This project is part of a broader program that aims to enrich management reporting and implement a new consolidation tool and a new set of references common to the entire group. To ensure the homogeneity of the accounting policies and their implementation within the group, the IFRS conversion project is led by a central team that is managing the entire project for the Group and its sub-groups.” Consistent application and enforcement continue to be one of the biggest challenges facing entities within the EU. Unfortunately, consistent application does not necessarily mean “identical” application”. With 27 Member States all having a different starting point, consistent application across the EU was never considered to be a straight-forward exercise. In an attempt to overcome some of the challenges surrounding consistent application the European Commission formed a “Roundtable on Consistent Application of IFRSs” in February 2006. The Roundtable was formed so that “common concerns” of application of IFRS are identified and where necessary referred to the International Financial Reporting Interpretations Committee IFRIC. “Common concerns” are described as where application of standards is divergent, significant and widespread. The Roundtable gathers its views from audit firms, standards setters and other interested bodies in each Member State and met for the first time in May 2006. The Roundtable itself has no authority to issues interpretations, instead it is a vehicle used to identify and discuss differences in interpretation across the EU. While in favour of harmonisation, the European Commission did not wish to delegate unconditionally the process of accounting standard setting to a private sector organisation over which it had little influence and no control. It therefore set up an endorsement mechanism to assess new standards and approve them for use in the EU. The body given responsibility for endorsement is the Accounting Regulatory Committee ARC, which is a statutory body composed of representatives of member states and chaired by a member of the Commission. Technical views are received from EFRAG the European Financial Reporting Advisory Group, a group composed of accounting experts from the private sector, including preparers, users, members of the accounting profession and national standard setters. In addition to its Technical Expert Group, EFRAG also has a Supervisory Board which oversees the work of the Technical Expert Group to guarantee the representation of the full European interest.Parts
» The International Accounting Standards Committee IASC
» The International Organisation of Securities Commissions IOSCO
» The Financial Accounting Standards Board FASB
» The Committee of European Securities Regulators CESR
» The IASB FINANCIAL REPORTING CONTEXT
» The Standards Advisory Council SAC
» The International Financial Reporting Interpretations Committee IFRIC
» The standard-setting process THE IFRS FRAMEWORK
» Preface to International Financial Reporting Standards
» Definition THE IFRS FRAMEWORK
» Financial statements THE IFRS FRAMEWORK
» Economic decisions Users and their information needs
» Accountability of management THE IFRS FRAMEWORK
» Financial position, performance and changes in financial position
» Underlying assumptions THE IFRS FRAMEWORK
» Understandability Qualitative characteristics of financial statements
» Relevance Qualitative characteristics of financial statements
» Reliability Qualitative characteristics of financial statements
» Definitions of elements Elements of financial statements
» Recognition of elements in financial statements Measurement in financial statements
» The statement of financial position
» The statement of comprehensive income
» Currentnon-current distinction PRESENTATION OF FINANCIAL STATEMENTS
» Notes PRESENTATION OF FINANCIAL STATEMENTS
» Fair presentation and compliance with IFRS
» Comparative information Other considerations
» Additional disclosures Other considerations
» ACCOUNTING POLICIES IFRSs) Learning Materials
» Servicing fees included in the price of the product
» Cost of inventories INVENTORIES
» Cost formulae Net realisable value NRV
» Initial recognition and elements of cost
» Self-constructed assets PROPERTY, PLANT AND EQUIPMENT
» Ceasing recognition of costs
» Subsequent expenditure PROPERTY, PLANT AND EQUIPMENT
» Depreciation and revalued assets
» Which costs should be capitalised?
» When should capitalisation of borrowing costs commence?
» Suspension of capitalisation BORROWING COSTS
» Ceasing capitalisation BORROWING COSTS
» Non-monetary government grants GOVERNMENT GRANTS
» Repayment of government grants
» No specific relation to operating activities
» Proposed revision of standard
» Changes of plan NON-CURRENT ASSETS HELD FOR SALE
» Nature of investment properties Scope
» Initial recognition INVESTMENT PROPERTY
» Measurement after recognition INVESTMENT PROPERTY
» Applicable to both the fair value model and the cost model
» The cost model INVESTMENT PROPERTY
» Separately acquired intangible assets
» Exchanges of assets INTANGIBLES
» Intangible assets acquired as part of a business combination
» The research phase INTANGIBLES
» The development phase INTANGIBLES
» The cost of internally generated intangible assets
» Stage 1 – Indicators of impairment
» Stage 2 – Measuring recoverable amount
» Stage 3 – Recognising an impairment loss
» Future operating losses Provisions
» Contingent liabilities and contingent assets
» Best estimate PROVISIONS AND CONTINGENCIES
» Present value PROVISIONS AND CONTINGENCIES
» Other measurement points PROVISIONS AND CONTINGENCIES
» Reimbursements PROVISIONS AND CONTINGENCIES
» Decommissioning, restoration and environmental funds
» Waste management costs PROVISIONS AND CONTINGENCIES
» Carrying amount versus tax base Calculate the temporary difference
» Determining deferred tax TAXATION
» Revaluations Recognition criteria: further issues
» The expected manner of recovery of an asset
» Annual review Recognition criteria: further issues
» Discounting Recognition criteria: further issues
» Temporary differences and investments
» Other related disclosures TAXATION
» Risks and rewards Situations indicating the existence of a finance lease
» Initial recognition Finance lease recognition
» Depreciation Finance charge Finance lease recognition
» Actuarial method Methods of allocating finance charges
» Disclosures for finance leases
» Operating lease incentives Accounting treatment of operating leases
» Disclosures for operating leases
» Disclosure by a lessor for finance lease arrangements
» Disclosure by a lessor for operating lease arrangements
» Operating lease incentives Operating leases
» An overview All short-term benefits
» Short-term compensated absences Profit-sharing and bonus plans
» Recognition and measurement Disclosure
» The discount rate Movements during the period
» Variations in actuarial assumptions
» Past service costs Sundry considerations
» Curtailments and settlements Sundry considerations
» Minimum funding requirements and the limit on a defined benefit asset
» Disclosure and presentation of defined benefit plans
» Share-based payment transactions – cash-settled or equity-settled
» Group and treasury share transactions
» Objectives, scope and definitions of IFRS 2 Disclosure requirements
» EVENTS AFTER THE REPORTING PERIOD
» The functional currency FOREIGN EXCHANGE
» The presentation currency FOREIGN EXCHANGE
» Monetary and non-monetary items
» Summary of the approach of IAS 21
» Initial recognition FOREIGN EXCHANGE
» Reporting at the ends of subsequent reporting periods
» Transactions settled within the period
» Transaction balance is outstanding at the end of the reporting period
» Net Investment in a Foreign Operation
» Change in Functional Currency
» Translation of a foreign operation
» Disposal of a foreign operation
» Settlement options FOREIGN EXCHANGE
» Compound financial instruments FOREIGN EXCHANGE
» Financial assetliability at fair value through profit or loss
» Held-to-maturity investments Loans and receivables
» Available-for-sale financial assets Financial assets
» IFRIC 2 Members’ shares in co-operative entities and similar instruments
» Derecognition in its entirety Continuing involvement after a transfer
» Financial liabilities FOREIGN EXCHANGE
» Qualifying for hedge accounting
» Fair value hedge Cash flow hedge
» Hedge of a net investment in a foreign operation
» Objectives and Scope of IFRS 7
» Fair value Other disclosures
» Statement of comprehensive income Nature and extent of risks
» Objective and scope What is cash?
» The direct method FOREIGN EXCHANGE
» Indirect method FOREIGN EXCHANGE
» Non-cash transactions FOREIGN EXCHANGE
» Additional disclosures FOREIGN EXCHANGE
» Identifying segments FOREIGN EXCHANGE
» Reportable segments FOREIGN EXCHANGE
» Reporting formats FOREIGN EXCHANGE
» Discontinued operations Disclosure Prior periods
» Contents Form FOREIGN EXCHANGE
» Selected explanatory notes FOREIGN EXCHANGE
» Impairment in the interim period
» Calculating earnings FOREIGN EXCHANGE
» Calculating the weighted average number of ordinary shares
» Calculation of earnings Calculation of the weighted average number of shares
» Related parties FOREIGN EXCHANGE
» Contract revenue FOREIGN EXCHANGE
» Contract costs FOREIGN EXCHANGE
» Stage of completion FOREIGN EXCHANGE
» Reliable measurement FOREIGN EXCHANGE
» Loss making contracts FOREIGN EXCHANGE
» Key Concepts FOREIGN EXCHANGE
» Valuation of assets Disclosure
» What is an insurance contract?
» Scope of consolidated financial statements
» Special purpose entities FOREIGN EXCHANGE
» Basic approach FOREIGN EXCHANGE
» Reporting dates and consistent accounting policies
» The statement of financial position The statement of comprehensive income
» Gain or loss on net monetary position
» Introduction Statement of cash flows
» Initial application of IAS 29
» Identifying a business combination
» Acquisition method of accounting
» General principle FOREIGN EXCHANGE
» Specific issues FOREIGN EXCHANGE
» A business combination achieved in stages
» Subsequent accounting for contingent consideration
» Classifying and measuring the identifiable net assets acquired
» Initial recognition and subsequent adjustments
» Subsequent measurement FOREIGN EXCHANGE
» Recognition and measurement of goodwill
» Gain on bargain purchase Adjustments to provisional values
» Impairment losses FOREIGN EXCHANGE
» Jointly controlled operations FOREIGN EXCHANGE
» Proportionate consolidation Equity method
» Jointly controlled assets Investors separate financial statements
» Transactions between a venturer and a joint venture
» Operators of joint ventures Investors of a joint venture
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