Other Disclosures required by IAS 1

7.7.3 Other Disclosures required by IAS 1

7.7.3.1 An entity shall disclose in the notes (a) Amount of dividends proposed or declared before the financial statements were authorized

for issue but not recognized as a distribution to equity holders during the period, and the related amount per share

(b) The amount of cumulative preference dividends not recognized

7.7.3.2 Furthermore, an entity should disclose the following items, if not disclosed elsewhere in information published with the financial statements:

(a) The domicile and legal form of the entity, its country of incorporation, and the address of its registered office (or principal place of business, if different from the registered office) (b) A description of the nature of the entity’s operations and its principal activities (c) The name of the parent and the ultimate parent of the group

7.7.3.3 “Capital Disclosures” (amendment to IAS 1, effective January 1, 2007)

7.7.3.3.1 As part of its project to develop IFRS 7, Financial Instruments: Disclosures, the IASB also amended IAS 1 to add requirements for disclosures of

• The entity’s objectives, policies and processes for managing “capital”; • Quantitative data about what the entity regards as “capital”; • Whether the entity has complied with any capital requirements and if it has not complied, the

consequences of such noncompliance. These disclosure requirements apply to all entities, effective for annual periods beginning on or

after January 1, 2007, with earlier application encouraged. 7.7.3.3.2 IFRS does not define the term “capital” and therefore with this new disclosure

requirement any ambiguity or controversy with respect to the interpretation of such an important aspect of the financial position of an entity should be put to rest. For example, in certain jurisdictions, it is a common practice to show as part of “equity,” subordinated loans from owners that are in the nature of “equity” and have distinct features of “equity” (i.e., they are noninterest- bearing and have no repayment terms specified and thus are long-term in nature) and thus could be considered “residual interest.” In such jurisdictions, usually companies do not infuse huge amounts of share capital, instead, manage the business using long and term loans from their owners/shareholders that are in the nature of “equity.” Financial institutions therefore treat such owner/shareholder loans on par with share capital for the purpose of satisfying their lending norms and thus provide funds and other banking facilities to such companies in these jurisdictions on the strength of both share capital and such loans from the owners/shareholders. In such circumstances it is therefore obvious that these entities intend to treat as “capital” both “share capital” and even such owner/shareholder loans as their “true” capital. With such practices prevalent in many jurisdictions around the world, IAS 1 makes it incumbent upon an entity to clearly define and disclose what the entity regards as “capital” for the purposes of running its business and for obtaining financing. In other words, IAS 1 requires disclosure of what an entity’s objectives, policies and processes are for managing “capital” and quantitative data about what the entity regards as “capital.”

7.7.3.3.3 Furthermore, in case there are any capital requirements that an entity has to comply with (say, “minimum capital” as per the corporate law governing the jurisdiction where the entity is incorporated), then IAS 1 also requires disclosure of the whether the entity has in fact complied with those capital requirements. In the event the entity has not complied with such capital requirements, IAS 1 further requires disclosures of consequences of such noncompliance.