preparation and presentation of financial statements ... · preparation and presentation of...
TRANSCRIPT
1
copy 2005-13 Nelson Consulting Limited 1
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠MBA MSc BBA ACA ACS CFA CPA(US) CTA FCCA FCPA FCPA(Aust) FHKIoD FTIHK MHKSI MSCA
copy 2005-13 Nelson Consulting Limited 2
Operating Segments (IFRS 8)
p ( )Non-current Assets Held for Sale and Discontinued Operations (IFRS 5)
Todayrsquos Agenda
Interim Financial Reporting (IAS 34)
Simple but Comprehensive
Recap and key issues
Real Life Cases and Examples
2
copy 2005-13 Nelson Consulting Limited 3
Non-current Assets Held for Sale and Discontinued Operations (IFRS 5)
copy 2005-13 Nelson Consulting Limited 4
Todayrsquos Agenda
1 Objective of IFRS 5
2 Scope of IFRS 5
3 Classification
4 Measurement
5 Presentation
3
copy 2005-13 Nelson Consulting Limited 5
1 Objective of IFRS 5
bull To specify
Classification
Measurement
Presentation
bull The accounting forassets held for sale
bull The presentation and disclosureof discontinued operations
Non-Current Assets
Disposal Groups
PresentationDiscontinued Operations
Disposal Group may be Discontinued Operation if it is an operation
copy 2005-13 Nelson Consulting Limited 6
1 Objective of IFRS 5 (Summary)
bull To specify
bull The accounting forassets held for sale
bull The presentation and disclosureof discontinued operations
bull In particular to requirendash asset that meet the criteria to be
classified as held for sale to bebull measured at
ndash the lower of carrying amount andfair value less costs to sell and
ndash depreciation on such assets to cease andbull presented separately in the statement of
financial position andndash the results of discontinued operations to be
presented separately in the statement of comprehensive income
Classification
Measurement
Presentation
Strict Criteria Imposed
4
copy 2005-13 Nelson Consulting Limited 7
2 Scope of IFRS 5
Classification
Presentation
bull Classification and presentationrequirements of IFRS 5 apply to
ndash all recognised non-current asset
ndash all disposal groups of an entity
Non-Current Assets
Disposal Groups
No non-current assets can be classified as current unless IFRS 5 is fulfilled
Strict Criteria Imposed
copy 2005-13 Nelson Consulting Limited 8
2 Scope of IFRS 5
Classification
Presentation
bull Classification and presentationrequirements of IFRS 5 apply to
ndash all recognised non-current asset
ndash all disposal groups of an entity
No non-current assets can be classified as current unless IFRS 5 is fulfilled
bull What is non-current asset
ndash An asset that does not meet the definition of a current asset
bull What is current asset
5
copy 2005-13 Nelson Consulting Limited 9
2 Scope of IFRS 5
Classification
Presentation
bull Classification and presentationrequirements of IFRS 5 apply to
ndash all recognised non-current asset
ndash all disposal groups of an entity
No non-current assets can be classified as current unless IFRS 5 is fulfilled
bull Current asset is
An asset that satisfies any of the following criteriaa) it is expected to be realised in or is intended for sale or consumption in
the entityrsquos normal operating cycle
b) it is held primarily for the purpose of being traded
c) it is expected to be realised within twelve months after the reporting period or
d) it is cash or a cash equivalent asset
ndash unless it is restricted from being exchanged or used to settle a liabilityfor at least twelve months after the reporting period
copy 2005-13 Nelson Consulting Limited 10
2 Scope of IFRS 5
Classification
Presentation
bull Classification and presentationrequirements of IFRS 5 apply to
ndash all recognised non-current asset
ndash all disposal groups of an entity
bull Assets classified as non-current in accordance with IAS 1 shall not be reclassified as current assetsndash until they meet the criteria to be classified as held for
sale in accordance with IFRS 5
bull Assets of a class that an entity would normally regard as non-current that are acquired exclusively with a view to resale shall not be classified as currentndash unless they meet the criteria to be classified as held
for sale in accordance with IFRS 5
No non-current assets can be classified as current unless IFRS 5 is fulfilled
6
copy 2005-13 Nelson Consulting Limited 11
Is it current
2 Scope of IFRS 5
bull In its 2012 Annual Report HKFRS was adopted and the report set out that
ndash Available-for-sale financial assets are non-derivatives that are either
bull designated in this category or
bull not classified in any other category
ndash They are included in non-current assets
bull unless management intends to dispose of the investment within 12 months of the balance sheet date
Case
copy 2005-13 Nelson Consulting Limited 12
2 Scope of IFRS 5
Can the following be classified as current assets withoutobserving IFRS 51 A property received by a bank as a consideration to
settle the bankrsquos loans receivable from its customers
2 A BMW motor car acquired by a trading company which has disposed of it within 3 months after year end
3 A property purchased by a property developer for refurbishment and resale
4 A subsidiary in hotel business purchased by a holding company which intended to dispose of it within 6 months after year end
Example
No
No
Yes
No
7
copy 2005-13 Nelson Consulting Limited 13
2 Scope of IFRS 5
Classification
Presentation
bull a group of assets to be disposed of by sale or otherwise together as a group in a single transaction and
bull liabilities directly associated with those assets that will be transferred in the transaction
Disposal Group
bull The group includes goodwill acquired in a business combinationndash if the group is a cash-generating unit (CGU)
to which goodwill has been allocated in accordance with the requirements of IAS 36 or
ndash if it is an operation within such a CGU
bull It may be a group of CGU a single CGU or part of a CGU
copy 2005-13 Nelson Consulting Limited 14
2 Scope of IFRS 5
Classification
Presentation
Disposal Group
bull If a non-current asset within the scope of the measurement requirements of IFRS 5 is part of a disposal group
ndash the measurement requirements of IFRS 5 apply to the group as a whole
so that the group is measured at the lower of
bull its carrying amount and
bull fair value less costs to sell (the requirements for measurement to be discussed later)
8
copy 2005-13 Nelson Consulting Limited 15
Items to be reclassifiedProperty $4MLiabilities $2MGoodwill $1MNet $3M
Goodwill $2M
2 Scope of IFRS 5Example
bull Entity A a garment manufacturing company has acquired a property holding company Entity X for HK$6 million
bull At the date of acquisition Entity X holds 2 properties with same fair value at HK$4 million each
bull Entity X has 2 separate outstanding bank loans of HK$2 million each to finance the purchase of its 2 properties and the loan is secured by the properties
bull Entity X has no other assets and liabilitiesbull Entity A intends to dispose of one of the
above propertiesbull If the disposal fulfils the criteria in
IFRS 5 what is the consequence of the reclassification
Cost of acquisition $6M
Total assets $8M
Total liabilities $4M
Cost of property $4M
copy 2005-13 Nelson Consulting Limited 16
2 Scope of IFRS 5
bull Measurement requirements of IFRS 5 also apply to all recognised non-current asset and to all disposal groups except for(either as individual assets or as part of a disposal group)
Classification
Measurement
Presentation
Excluded items Relevant IFRSIAS
Deferred tax assets IAS 12
Assets arising from employee benefits IAS 19
Financial assets within the scope of IAS 39 IAS 39
Non-current assets accounted for in fair value model in IAS 40
IAS 40
Non-current assets measured at fair value less costs to sell under IAS 41
IAS 41
Contractual rights under insurance contracts as defined in IFRS 4
IFRS 4
9
copy 2005-13 Nelson Consulting Limited 17
2 Scope of IFRS 5
bull The classification presentation and measurement requirements in IFRS 5 applicable to a non-current asset (or disposal group) that is classified as held for sale apply also to
ndash a non-current asset (or disposal group) that is classified as held for distribution to owners acting in their capacity as owners (held for distribution to owners) (IFRS 55A)
bull While IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations
ndash disclosures in other IFRSs do not apply to such assets (or disposal groups)unless those IFRSs require
a) specific disclosures in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations or
b) disclosures about measurement of assets and liabilities within a disposal group that are not within the scope of the measurement requirement of IFRS 5 and such disclosure are not already provided in the other notes to the financial statements (IFRS 55B)
copy 2005-13 Nelson Consulting Limited 18
Classification
Measurement
Presentation
For this to be the caseFor this to be the case
3 Classification as Held For Sale
Classification
Measurement
Presentation
bull An entity shall classify a non-current asset (or disposal group) as held for sale if
ndash its carrying amount will be recovered principally
bull through a sale transaction
bull rather than through continuing use
bull the asset (or disposal group) must beavailable for immediate sale
bull its sale must be highly probable
Available for Immediate Sale
Highly Probable
10
copy 2005-13 Nelson Consulting Limited 19
3 Classification as Held For Sale
Available for Immediate Sale
To be classified as held for sale
bull the asset (or disposal group) must be available for immediate sale
ndash in its present condition
ndash subject only to terms that are usual and customary for sales of such assets (or disposal groups)
copy 2005-13 Nelson Consulting Limited 20
3 Classification as Held For SaleCase
The accounting policy on repossessed assets in Annual Report 2012
ndash Non-financial assets acquired in exchange for loans in order to achieve an orderly realisation
bull are reported under ldquoAssets held for salerdquo if ndash the carrying amounts of the assets are
recovered principally through sale
ndash the assets are available for sale in their present condition and
ndash the sale is highly probable
11
copy 2005-13 Nelson Consulting Limited 21
An entity is committed to a plan to sell its headquarters building and has initiated actions to locate a buyer
However the entity has 2 plans and intends to
1 transfer the building to the buyer after it vacates the building or
2 continue to use the building untilconstruction of a new headquartersbuilding is completed
3 Classification as Held For SaleExample
The time necessary to vacate is usual and customary for sale of such asset
The delay in time implies not available for immediate sale
copy 2005-13 Nelson Consulting Limited 22
An entity is committed to a plan to sell a manufacturing facility and has initiated actions to locate a buyerAt the plan commitment date there is a backlog of uncompleted customer orders
The entity has 2 plans and intends to1 sell the facility with its operations
Any uncompleted customer orders at the sale date will be transferred to the buyer
2 sell the facility but without its operations The entity does not intend to transfer the facility to a buyer until after it ceases all operations of the facility and eliminates the backlog of uncompleted customer orders
3 Classification as Held For SaleExample
It will not affect the timing of the transfer
The delay in the timing of the transfer of the facility imposed by the entity (seller) demonstrates that the facility is not available for immediate sale
12
copy 2005-13 Nelson Consulting Limited 23
3 Classification as Held For Sale
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 24
3 Classification as Held For Sale
Annual Report 2012bull Non-current assets and disposal groups classified as
held for salendash Non-current assets or disposal groups are classified as
held for salebull if their carrying amount will be principally recovered
through a sale transaction rather than through continuing use
ndash This requires that bull the asset or disposal group must be available for
immediate sale in its present condition and bull its sale must be highly probable
ndash The appropriate level of management must be committed to a plan to sell the asset or disposal group and the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification
Case
13
copy 2005-13 Nelson Consulting Limited 25
3 Classification as Held For Sale
Can the following situations fulfill the criteria to be classified as held for sale
a) Entity A a commercial leasing and finance company is holding for sale or lease equipment thatbull has recently ceased to be leased
andbull the ultimate form of a future
transaction (sale or lease) has not yet been determined
b) Entity B is committed to a plan to lsquosellrsquo a property that is in use and the transfer of the property will be accounted for as ldquoa sale and finance leasebackrdquo
Example
Not yet committed to plan to sell
Committed but not a completed sale within one year
copy 2005-13 Nelson Consulting Limited 26
3 Classification as Held For Sale
bull IFRS 5 also specifies that
ndash An entity that is committed to a sale planinvolving loss of control of a subsidiary shall
bull classify all the assets and liabilities of that subsidiary as held for sale
ndash when the criteria set out in IFRS 5 6 to 8 (ie available for immediate sale and highly probable) are met regardless of whether the entity will retain a non-controlling interest in its former subsidiary after the sale (IFRS 58A)
bull disclose the information required in IFRS 533 to 36 (ie presenting as discontinued operation)
ndash when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
Measurement may not be the
same
Affect presentation
only
14
copy 2005-13 Nelson Consulting Limited 27
3 Classification as Held For Sale
Extension to Complete Beyond 1 year
Highly Probable
Extension to complete sale beyond one year
bull Events or circumstances may extend the period to complete the sale beyond one year
bull Not preclude an asset from being classified as held for sale if
1 the delay is caused by events or circumstances beyond the entityrsquos control and
2 there is sufficient evidence that the entity remains committed to its plan to sell the asset (or disposal group)
Beyond Control
Remain Committed
1 Year
copy 2005-13 Nelson Consulting Limited 28
3 Classification as Held For SaleCase
bull On September 20 2012 the Group announced that it has reached an agreement with Kleinwort Benson Group a wholly owned subsidiary of RHJ International on the sale of BHF-BANK AG
ndash The transaction is subject to regulatory approvals ndash Closing is not expected to occur before the publication
of this interim report ndash Given the uncertainty created by outstanding
substantive approvals the Group bull does not consider held for sale classification
appropriate as of March 31 2013 andbull will not reclassify the disposal group as held for
sale until such approvals are given
Deutsche BankInterim Report as of March 31 2013
15
copy 2005-13 Nelson Consulting Limited 29
Sale transactions includendash exchanges of non-current assets for other non-current assets
when the exchange has commercial substance in accordance with IAS 16 Property Plant and Equipment
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
Non-current asset (or disposal group) acquired exclusively with a view to its subsequent disposalshall be classified as held for sale at the acquisition date only ifndash the one-year requirement is met and
ndash it is highly probable that any other criteria that are not met at that date will be met within a short periodfollowing the acquisition (usually within 3 months)
copy 2005-13 Nelson Consulting Limited 30
Events after the Reporting Period
bull If the criteria to be classified as asset held for sale are met after the reporting period(for example the criteria have been met on 2 Jan 2012 for the year ended 31 Dec 2011)ndash an entity shall not classify a non-current asset (or
disposal group) as held for sale in those financial statements when issued
bull When those criteria are met after the reporting period but before the authorisation of the financial statements for issue ndash the entity shall disclose the information specified
in IFRS 541(a) (b) and (d) in the notes (to be discussed as ldquoAdditional Disclosuresrdquo later)
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
16
copy 2005-13 Nelson Consulting Limited 31
3 Classification as Held For Distribution
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 32
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull A non-current asset (or disposal group) is classified as held for distribution to owners ndash when the entity is committed to distribute the asset (or disposal group) to
the owners
bull For this to be the case ndash the assets must be available for immediate
distribution in their present condition and
ndash the distribution must be highly probable
Available for Immediate Distribution
Highly Probable
17
copy 2005-13 Nelson Consulting Limited 33
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull For the distribution to be highly probable
The entity is committed to distribute the asset (or disposal group) to the owners
Actions to complete the distribution must have been initiated and should be expected to be completed within one year from the date of classification
Actions required to complete the distribution should indicate that it is unlikelybullthat significant changes to the distribution will be made or bullthat the distribution will be withdrawn
The probability of shareholdersrsquo approval (if required in the jurisdiction) should be considered as part of the assessment of whether the distribution is highly probable
Available for Immediate Distribution
Highly Probable
copy 2005-13 Nelson Consulting Limited 34
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull If such disposal group meets the criteria as an operation (what is ldquoan operationrdquo discussed later)
ndash the entity shall still present the results and cash flows of the disposal group as
bull discontinued operations at the date on which it ceases to be used
bull Shall not classify them as held for sale
bull Because its carrying amount will be
ndash recovered principally through continuing use
ndash not recovered principally through a sale transaction
18
copy 2005-13 Nelson Consulting Limited 35
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull Non-current assets (or disposal groups) to be abandoned include
ndash non-current assets (disposal group)
bull used to the end of their economic life
bull closed rather than sold
bull An entity shall not account for a non-current asset thathas been temporarily taken out of use as if it had been abandoned
Not within IFRS 5
copy 2005-13 Nelson Consulting Limited 36
4 Measurement
bull An entity shall measure non-current asset (or disposal group) classified as held for sale at the lower of itsbull Carrying amount and
bull Fair value less costs to sell (IFRS 515)
bull When the sale is expected to occur beyond one year
ndash the entity shall measure the costs to sell at their present value
bull Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost
Classification
Measurement
Presentation
Classification
Measurement
Presentation
Any implication on
ndash newly acquired assets
ndash assets acquired under business combination
bull An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of itsbull Carrying amount and
bull Fair value less costs to distribute (IFRS 515A)
19
copy 2005-13 Nelson Consulting Limited 37
4 Measurement
bull An entity shall not depreciate (or amortise) a non-current asset while
ndash it is classified as held for sale or
ndash while it is part of a disposal group classified as held for sale
bull Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
ndash shall continue to be recognised
copy 2005-13 Nelson Consulting Limited 38
4 Measurement
Annual Report 2012 ndash Notes to financial statements Assets acquired in exchange for loansndash Non-financial assets acquired in exchange for loans as part of an orderly
realisation are recorded as assets held for sale and reported in lsquoOther assetsrsquo if bull the carrying amounts of the assets are recovered principally through sale bull the assets are available for sale in their present condition and bull their sale is highly probable
ndash The asset acquired is recorded at the lower ofbull its fair value less costs to sell and bull the carrying amount of the loan (net of impairment allowance) at the date of
exchange ndash No depreciation is charged in respect of assets held for sale ndash Any subsequent write-down of the acquired asset to fair value less costs to sell
is recognised in the income statement in lsquoOther operating incomersquondash Any subsequent increase in the fair value less costs to sell to the extent this
does not exceed the cumulative write-down is also recognised in lsquoOther operating incomersquo together with any realised gains or losses on disposal
Case
20
copy 2005-13 Nelson Consulting Limited 39
4 Measurement ndash Change
Changes to a plan of sale
If the criteria to be classified as held for saleare no longer metndash the entity shall cease to classify the asset as held for sale
ndash then an entity shall measure such non-current asset that ceases to be classified as held for sale at the lower of
bull its carrying amount before the asset was classified as held for sale
ndash adjusted for any depreciation amortisation or revaluations that would have been recognised had the asset not been classified as held for sale and
bull its recoverable amount at the date of the subsequent decision not to sell
ndash Any consequential adjustment shall be included
bull in income from continuing operations in the period in which the criteria on asset to be classified as held for sale are no longer met
bull unless revaluation under IAS 1638 is adopted before classification as held for sale
copy 2005-13 Nelson Consulting Limited 40
bull At beginning of Year 1 Entity A acquired a motor vehicle with an estimated useful of 10 years at $800000 (with no residual value)
bull After the receipt of the vehicle 5 days later Entity A decided to sell it
4 Measurement ndash ChangeExample
Vehicle is carried at $800000 and classified as non-current asset held for sale
Cease to classify it as held for salebull had the asset not been classified
as held for sale the carrying amount would be $720000 (depreciated over 10 years)
bull A year later Entity A decided to withdraw the sale and use the vehicle for its own travelling purpose
bull At that date Entity A estimates that the recoverable amount may be
1) $750000 or
2) $600000
bull Calculate the necessary adjustments
bull The planned disposal fulfilled the criteria under IFRS 5 and the fair value less estimated costs to sell is same as cost
Vehicle carried at $720K and adjustment to PL is $80K
Vehicle carried at $600K and adjustment to PL is $200K
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
2
copy 2005-13 Nelson Consulting Limited 3
Non-current Assets Held for Sale and Discontinued Operations (IFRS 5)
copy 2005-13 Nelson Consulting Limited 4
Todayrsquos Agenda
1 Objective of IFRS 5
2 Scope of IFRS 5
3 Classification
4 Measurement
5 Presentation
3
copy 2005-13 Nelson Consulting Limited 5
1 Objective of IFRS 5
bull To specify
Classification
Measurement
Presentation
bull The accounting forassets held for sale
bull The presentation and disclosureof discontinued operations
Non-Current Assets
Disposal Groups
PresentationDiscontinued Operations
Disposal Group may be Discontinued Operation if it is an operation
copy 2005-13 Nelson Consulting Limited 6
1 Objective of IFRS 5 (Summary)
bull To specify
bull The accounting forassets held for sale
bull The presentation and disclosureof discontinued operations
bull In particular to requirendash asset that meet the criteria to be
classified as held for sale to bebull measured at
ndash the lower of carrying amount andfair value less costs to sell and
ndash depreciation on such assets to cease andbull presented separately in the statement of
financial position andndash the results of discontinued operations to be
presented separately in the statement of comprehensive income
Classification
Measurement
Presentation
Strict Criteria Imposed
4
copy 2005-13 Nelson Consulting Limited 7
2 Scope of IFRS 5
Classification
Presentation
bull Classification and presentationrequirements of IFRS 5 apply to
ndash all recognised non-current asset
ndash all disposal groups of an entity
Non-Current Assets
Disposal Groups
No non-current assets can be classified as current unless IFRS 5 is fulfilled
Strict Criteria Imposed
copy 2005-13 Nelson Consulting Limited 8
2 Scope of IFRS 5
Classification
Presentation
bull Classification and presentationrequirements of IFRS 5 apply to
ndash all recognised non-current asset
ndash all disposal groups of an entity
No non-current assets can be classified as current unless IFRS 5 is fulfilled
bull What is non-current asset
ndash An asset that does not meet the definition of a current asset
bull What is current asset
5
copy 2005-13 Nelson Consulting Limited 9
2 Scope of IFRS 5
Classification
Presentation
bull Classification and presentationrequirements of IFRS 5 apply to
ndash all recognised non-current asset
ndash all disposal groups of an entity
No non-current assets can be classified as current unless IFRS 5 is fulfilled
bull Current asset is
An asset that satisfies any of the following criteriaa) it is expected to be realised in or is intended for sale or consumption in
the entityrsquos normal operating cycle
b) it is held primarily for the purpose of being traded
c) it is expected to be realised within twelve months after the reporting period or
d) it is cash or a cash equivalent asset
ndash unless it is restricted from being exchanged or used to settle a liabilityfor at least twelve months after the reporting period
copy 2005-13 Nelson Consulting Limited 10
2 Scope of IFRS 5
Classification
Presentation
bull Classification and presentationrequirements of IFRS 5 apply to
ndash all recognised non-current asset
ndash all disposal groups of an entity
bull Assets classified as non-current in accordance with IAS 1 shall not be reclassified as current assetsndash until they meet the criteria to be classified as held for
sale in accordance with IFRS 5
bull Assets of a class that an entity would normally regard as non-current that are acquired exclusively with a view to resale shall not be classified as currentndash unless they meet the criteria to be classified as held
for sale in accordance with IFRS 5
No non-current assets can be classified as current unless IFRS 5 is fulfilled
6
copy 2005-13 Nelson Consulting Limited 11
Is it current
2 Scope of IFRS 5
bull In its 2012 Annual Report HKFRS was adopted and the report set out that
ndash Available-for-sale financial assets are non-derivatives that are either
bull designated in this category or
bull not classified in any other category
ndash They are included in non-current assets
bull unless management intends to dispose of the investment within 12 months of the balance sheet date
Case
copy 2005-13 Nelson Consulting Limited 12
2 Scope of IFRS 5
Can the following be classified as current assets withoutobserving IFRS 51 A property received by a bank as a consideration to
settle the bankrsquos loans receivable from its customers
2 A BMW motor car acquired by a trading company which has disposed of it within 3 months after year end
3 A property purchased by a property developer for refurbishment and resale
4 A subsidiary in hotel business purchased by a holding company which intended to dispose of it within 6 months after year end
Example
No
No
Yes
No
7
copy 2005-13 Nelson Consulting Limited 13
2 Scope of IFRS 5
Classification
Presentation
bull a group of assets to be disposed of by sale or otherwise together as a group in a single transaction and
bull liabilities directly associated with those assets that will be transferred in the transaction
Disposal Group
bull The group includes goodwill acquired in a business combinationndash if the group is a cash-generating unit (CGU)
to which goodwill has been allocated in accordance with the requirements of IAS 36 or
ndash if it is an operation within such a CGU
bull It may be a group of CGU a single CGU or part of a CGU
copy 2005-13 Nelson Consulting Limited 14
2 Scope of IFRS 5
Classification
Presentation
Disposal Group
bull If a non-current asset within the scope of the measurement requirements of IFRS 5 is part of a disposal group
ndash the measurement requirements of IFRS 5 apply to the group as a whole
so that the group is measured at the lower of
bull its carrying amount and
bull fair value less costs to sell (the requirements for measurement to be discussed later)
8
copy 2005-13 Nelson Consulting Limited 15
Items to be reclassifiedProperty $4MLiabilities $2MGoodwill $1MNet $3M
Goodwill $2M
2 Scope of IFRS 5Example
bull Entity A a garment manufacturing company has acquired a property holding company Entity X for HK$6 million
bull At the date of acquisition Entity X holds 2 properties with same fair value at HK$4 million each
bull Entity X has 2 separate outstanding bank loans of HK$2 million each to finance the purchase of its 2 properties and the loan is secured by the properties
bull Entity X has no other assets and liabilitiesbull Entity A intends to dispose of one of the
above propertiesbull If the disposal fulfils the criteria in
IFRS 5 what is the consequence of the reclassification
Cost of acquisition $6M
Total assets $8M
Total liabilities $4M
Cost of property $4M
copy 2005-13 Nelson Consulting Limited 16
2 Scope of IFRS 5
bull Measurement requirements of IFRS 5 also apply to all recognised non-current asset and to all disposal groups except for(either as individual assets or as part of a disposal group)
Classification
Measurement
Presentation
Excluded items Relevant IFRSIAS
Deferred tax assets IAS 12
Assets arising from employee benefits IAS 19
Financial assets within the scope of IAS 39 IAS 39
Non-current assets accounted for in fair value model in IAS 40
IAS 40
Non-current assets measured at fair value less costs to sell under IAS 41
IAS 41
Contractual rights under insurance contracts as defined in IFRS 4
IFRS 4
9
copy 2005-13 Nelson Consulting Limited 17
2 Scope of IFRS 5
bull The classification presentation and measurement requirements in IFRS 5 applicable to a non-current asset (or disposal group) that is classified as held for sale apply also to
ndash a non-current asset (or disposal group) that is classified as held for distribution to owners acting in their capacity as owners (held for distribution to owners) (IFRS 55A)
bull While IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations
ndash disclosures in other IFRSs do not apply to such assets (or disposal groups)unless those IFRSs require
a) specific disclosures in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations or
b) disclosures about measurement of assets and liabilities within a disposal group that are not within the scope of the measurement requirement of IFRS 5 and such disclosure are not already provided in the other notes to the financial statements (IFRS 55B)
copy 2005-13 Nelson Consulting Limited 18
Classification
Measurement
Presentation
For this to be the caseFor this to be the case
3 Classification as Held For Sale
Classification
Measurement
Presentation
bull An entity shall classify a non-current asset (or disposal group) as held for sale if
ndash its carrying amount will be recovered principally
bull through a sale transaction
bull rather than through continuing use
bull the asset (or disposal group) must beavailable for immediate sale
bull its sale must be highly probable
Available for Immediate Sale
Highly Probable
10
copy 2005-13 Nelson Consulting Limited 19
3 Classification as Held For Sale
Available for Immediate Sale
To be classified as held for sale
bull the asset (or disposal group) must be available for immediate sale
ndash in its present condition
ndash subject only to terms that are usual and customary for sales of such assets (or disposal groups)
copy 2005-13 Nelson Consulting Limited 20
3 Classification as Held For SaleCase
The accounting policy on repossessed assets in Annual Report 2012
ndash Non-financial assets acquired in exchange for loans in order to achieve an orderly realisation
bull are reported under ldquoAssets held for salerdquo if ndash the carrying amounts of the assets are
recovered principally through sale
ndash the assets are available for sale in their present condition and
ndash the sale is highly probable
11
copy 2005-13 Nelson Consulting Limited 21
An entity is committed to a plan to sell its headquarters building and has initiated actions to locate a buyer
However the entity has 2 plans and intends to
1 transfer the building to the buyer after it vacates the building or
2 continue to use the building untilconstruction of a new headquartersbuilding is completed
3 Classification as Held For SaleExample
The time necessary to vacate is usual and customary for sale of such asset
The delay in time implies not available for immediate sale
copy 2005-13 Nelson Consulting Limited 22
An entity is committed to a plan to sell a manufacturing facility and has initiated actions to locate a buyerAt the plan commitment date there is a backlog of uncompleted customer orders
The entity has 2 plans and intends to1 sell the facility with its operations
Any uncompleted customer orders at the sale date will be transferred to the buyer
2 sell the facility but without its operations The entity does not intend to transfer the facility to a buyer until after it ceases all operations of the facility and eliminates the backlog of uncompleted customer orders
3 Classification as Held For SaleExample
It will not affect the timing of the transfer
The delay in the timing of the transfer of the facility imposed by the entity (seller) demonstrates that the facility is not available for immediate sale
12
copy 2005-13 Nelson Consulting Limited 23
3 Classification as Held For Sale
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 24
3 Classification as Held For Sale
Annual Report 2012bull Non-current assets and disposal groups classified as
held for salendash Non-current assets or disposal groups are classified as
held for salebull if their carrying amount will be principally recovered
through a sale transaction rather than through continuing use
ndash This requires that bull the asset or disposal group must be available for
immediate sale in its present condition and bull its sale must be highly probable
ndash The appropriate level of management must be committed to a plan to sell the asset or disposal group and the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification
Case
13
copy 2005-13 Nelson Consulting Limited 25
3 Classification as Held For Sale
Can the following situations fulfill the criteria to be classified as held for sale
a) Entity A a commercial leasing and finance company is holding for sale or lease equipment thatbull has recently ceased to be leased
andbull the ultimate form of a future
transaction (sale or lease) has not yet been determined
b) Entity B is committed to a plan to lsquosellrsquo a property that is in use and the transfer of the property will be accounted for as ldquoa sale and finance leasebackrdquo
Example
Not yet committed to plan to sell
Committed but not a completed sale within one year
copy 2005-13 Nelson Consulting Limited 26
3 Classification as Held For Sale
bull IFRS 5 also specifies that
ndash An entity that is committed to a sale planinvolving loss of control of a subsidiary shall
bull classify all the assets and liabilities of that subsidiary as held for sale
ndash when the criteria set out in IFRS 5 6 to 8 (ie available for immediate sale and highly probable) are met regardless of whether the entity will retain a non-controlling interest in its former subsidiary after the sale (IFRS 58A)
bull disclose the information required in IFRS 533 to 36 (ie presenting as discontinued operation)
ndash when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
Measurement may not be the
same
Affect presentation
only
14
copy 2005-13 Nelson Consulting Limited 27
3 Classification as Held For Sale
Extension to Complete Beyond 1 year
Highly Probable
Extension to complete sale beyond one year
bull Events or circumstances may extend the period to complete the sale beyond one year
bull Not preclude an asset from being classified as held for sale if
1 the delay is caused by events or circumstances beyond the entityrsquos control and
2 there is sufficient evidence that the entity remains committed to its plan to sell the asset (or disposal group)
Beyond Control
Remain Committed
1 Year
copy 2005-13 Nelson Consulting Limited 28
3 Classification as Held For SaleCase
bull On September 20 2012 the Group announced that it has reached an agreement with Kleinwort Benson Group a wholly owned subsidiary of RHJ International on the sale of BHF-BANK AG
ndash The transaction is subject to regulatory approvals ndash Closing is not expected to occur before the publication
of this interim report ndash Given the uncertainty created by outstanding
substantive approvals the Group bull does not consider held for sale classification
appropriate as of March 31 2013 andbull will not reclassify the disposal group as held for
sale until such approvals are given
Deutsche BankInterim Report as of March 31 2013
15
copy 2005-13 Nelson Consulting Limited 29
Sale transactions includendash exchanges of non-current assets for other non-current assets
when the exchange has commercial substance in accordance with IAS 16 Property Plant and Equipment
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
Non-current asset (or disposal group) acquired exclusively with a view to its subsequent disposalshall be classified as held for sale at the acquisition date only ifndash the one-year requirement is met and
ndash it is highly probable that any other criteria that are not met at that date will be met within a short periodfollowing the acquisition (usually within 3 months)
copy 2005-13 Nelson Consulting Limited 30
Events after the Reporting Period
bull If the criteria to be classified as asset held for sale are met after the reporting period(for example the criteria have been met on 2 Jan 2012 for the year ended 31 Dec 2011)ndash an entity shall not classify a non-current asset (or
disposal group) as held for sale in those financial statements when issued
bull When those criteria are met after the reporting period but before the authorisation of the financial statements for issue ndash the entity shall disclose the information specified
in IFRS 541(a) (b) and (d) in the notes (to be discussed as ldquoAdditional Disclosuresrdquo later)
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
16
copy 2005-13 Nelson Consulting Limited 31
3 Classification as Held For Distribution
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 32
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull A non-current asset (or disposal group) is classified as held for distribution to owners ndash when the entity is committed to distribute the asset (or disposal group) to
the owners
bull For this to be the case ndash the assets must be available for immediate
distribution in their present condition and
ndash the distribution must be highly probable
Available for Immediate Distribution
Highly Probable
17
copy 2005-13 Nelson Consulting Limited 33
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull For the distribution to be highly probable
The entity is committed to distribute the asset (or disposal group) to the owners
Actions to complete the distribution must have been initiated and should be expected to be completed within one year from the date of classification
Actions required to complete the distribution should indicate that it is unlikelybullthat significant changes to the distribution will be made or bullthat the distribution will be withdrawn
The probability of shareholdersrsquo approval (if required in the jurisdiction) should be considered as part of the assessment of whether the distribution is highly probable
Available for Immediate Distribution
Highly Probable
copy 2005-13 Nelson Consulting Limited 34
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull If such disposal group meets the criteria as an operation (what is ldquoan operationrdquo discussed later)
ndash the entity shall still present the results and cash flows of the disposal group as
bull discontinued operations at the date on which it ceases to be used
bull Shall not classify them as held for sale
bull Because its carrying amount will be
ndash recovered principally through continuing use
ndash not recovered principally through a sale transaction
18
copy 2005-13 Nelson Consulting Limited 35
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull Non-current assets (or disposal groups) to be abandoned include
ndash non-current assets (disposal group)
bull used to the end of their economic life
bull closed rather than sold
bull An entity shall not account for a non-current asset thathas been temporarily taken out of use as if it had been abandoned
Not within IFRS 5
copy 2005-13 Nelson Consulting Limited 36
4 Measurement
bull An entity shall measure non-current asset (or disposal group) classified as held for sale at the lower of itsbull Carrying amount and
bull Fair value less costs to sell (IFRS 515)
bull When the sale is expected to occur beyond one year
ndash the entity shall measure the costs to sell at their present value
bull Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost
Classification
Measurement
Presentation
Classification
Measurement
Presentation
Any implication on
ndash newly acquired assets
ndash assets acquired under business combination
bull An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of itsbull Carrying amount and
bull Fair value less costs to distribute (IFRS 515A)
19
copy 2005-13 Nelson Consulting Limited 37
4 Measurement
bull An entity shall not depreciate (or amortise) a non-current asset while
ndash it is classified as held for sale or
ndash while it is part of a disposal group classified as held for sale
bull Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
ndash shall continue to be recognised
copy 2005-13 Nelson Consulting Limited 38
4 Measurement
Annual Report 2012 ndash Notes to financial statements Assets acquired in exchange for loansndash Non-financial assets acquired in exchange for loans as part of an orderly
realisation are recorded as assets held for sale and reported in lsquoOther assetsrsquo if bull the carrying amounts of the assets are recovered principally through sale bull the assets are available for sale in their present condition and bull their sale is highly probable
ndash The asset acquired is recorded at the lower ofbull its fair value less costs to sell and bull the carrying amount of the loan (net of impairment allowance) at the date of
exchange ndash No depreciation is charged in respect of assets held for sale ndash Any subsequent write-down of the acquired asset to fair value less costs to sell
is recognised in the income statement in lsquoOther operating incomersquondash Any subsequent increase in the fair value less costs to sell to the extent this
does not exceed the cumulative write-down is also recognised in lsquoOther operating incomersquo together with any realised gains or losses on disposal
Case
20
copy 2005-13 Nelson Consulting Limited 39
4 Measurement ndash Change
Changes to a plan of sale
If the criteria to be classified as held for saleare no longer metndash the entity shall cease to classify the asset as held for sale
ndash then an entity shall measure such non-current asset that ceases to be classified as held for sale at the lower of
bull its carrying amount before the asset was classified as held for sale
ndash adjusted for any depreciation amortisation or revaluations that would have been recognised had the asset not been classified as held for sale and
bull its recoverable amount at the date of the subsequent decision not to sell
ndash Any consequential adjustment shall be included
bull in income from continuing operations in the period in which the criteria on asset to be classified as held for sale are no longer met
bull unless revaluation under IAS 1638 is adopted before classification as held for sale
copy 2005-13 Nelson Consulting Limited 40
bull At beginning of Year 1 Entity A acquired a motor vehicle with an estimated useful of 10 years at $800000 (with no residual value)
bull After the receipt of the vehicle 5 days later Entity A decided to sell it
4 Measurement ndash ChangeExample
Vehicle is carried at $800000 and classified as non-current asset held for sale
Cease to classify it as held for salebull had the asset not been classified
as held for sale the carrying amount would be $720000 (depreciated over 10 years)
bull A year later Entity A decided to withdraw the sale and use the vehicle for its own travelling purpose
bull At that date Entity A estimates that the recoverable amount may be
1) $750000 or
2) $600000
bull Calculate the necessary adjustments
bull The planned disposal fulfilled the criteria under IFRS 5 and the fair value less estimated costs to sell is same as cost
Vehicle carried at $720K and adjustment to PL is $80K
Vehicle carried at $600K and adjustment to PL is $200K
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
3
copy 2005-13 Nelson Consulting Limited 5
1 Objective of IFRS 5
bull To specify
Classification
Measurement
Presentation
bull The accounting forassets held for sale
bull The presentation and disclosureof discontinued operations
Non-Current Assets
Disposal Groups
PresentationDiscontinued Operations
Disposal Group may be Discontinued Operation if it is an operation
copy 2005-13 Nelson Consulting Limited 6
1 Objective of IFRS 5 (Summary)
bull To specify
bull The accounting forassets held for sale
bull The presentation and disclosureof discontinued operations
bull In particular to requirendash asset that meet the criteria to be
classified as held for sale to bebull measured at
ndash the lower of carrying amount andfair value less costs to sell and
ndash depreciation on such assets to cease andbull presented separately in the statement of
financial position andndash the results of discontinued operations to be
presented separately in the statement of comprehensive income
Classification
Measurement
Presentation
Strict Criteria Imposed
4
copy 2005-13 Nelson Consulting Limited 7
2 Scope of IFRS 5
Classification
Presentation
bull Classification and presentationrequirements of IFRS 5 apply to
ndash all recognised non-current asset
ndash all disposal groups of an entity
Non-Current Assets
Disposal Groups
No non-current assets can be classified as current unless IFRS 5 is fulfilled
Strict Criteria Imposed
copy 2005-13 Nelson Consulting Limited 8
2 Scope of IFRS 5
Classification
Presentation
bull Classification and presentationrequirements of IFRS 5 apply to
ndash all recognised non-current asset
ndash all disposal groups of an entity
No non-current assets can be classified as current unless IFRS 5 is fulfilled
bull What is non-current asset
ndash An asset that does not meet the definition of a current asset
bull What is current asset
5
copy 2005-13 Nelson Consulting Limited 9
2 Scope of IFRS 5
Classification
Presentation
bull Classification and presentationrequirements of IFRS 5 apply to
ndash all recognised non-current asset
ndash all disposal groups of an entity
No non-current assets can be classified as current unless IFRS 5 is fulfilled
bull Current asset is
An asset that satisfies any of the following criteriaa) it is expected to be realised in or is intended for sale or consumption in
the entityrsquos normal operating cycle
b) it is held primarily for the purpose of being traded
c) it is expected to be realised within twelve months after the reporting period or
d) it is cash or a cash equivalent asset
ndash unless it is restricted from being exchanged or used to settle a liabilityfor at least twelve months after the reporting period
copy 2005-13 Nelson Consulting Limited 10
2 Scope of IFRS 5
Classification
Presentation
bull Classification and presentationrequirements of IFRS 5 apply to
ndash all recognised non-current asset
ndash all disposal groups of an entity
bull Assets classified as non-current in accordance with IAS 1 shall not be reclassified as current assetsndash until they meet the criteria to be classified as held for
sale in accordance with IFRS 5
bull Assets of a class that an entity would normally regard as non-current that are acquired exclusively with a view to resale shall not be classified as currentndash unless they meet the criteria to be classified as held
for sale in accordance with IFRS 5
No non-current assets can be classified as current unless IFRS 5 is fulfilled
6
copy 2005-13 Nelson Consulting Limited 11
Is it current
2 Scope of IFRS 5
bull In its 2012 Annual Report HKFRS was adopted and the report set out that
ndash Available-for-sale financial assets are non-derivatives that are either
bull designated in this category or
bull not classified in any other category
ndash They are included in non-current assets
bull unless management intends to dispose of the investment within 12 months of the balance sheet date
Case
copy 2005-13 Nelson Consulting Limited 12
2 Scope of IFRS 5
Can the following be classified as current assets withoutobserving IFRS 51 A property received by a bank as a consideration to
settle the bankrsquos loans receivable from its customers
2 A BMW motor car acquired by a trading company which has disposed of it within 3 months after year end
3 A property purchased by a property developer for refurbishment and resale
4 A subsidiary in hotel business purchased by a holding company which intended to dispose of it within 6 months after year end
Example
No
No
Yes
No
7
copy 2005-13 Nelson Consulting Limited 13
2 Scope of IFRS 5
Classification
Presentation
bull a group of assets to be disposed of by sale or otherwise together as a group in a single transaction and
bull liabilities directly associated with those assets that will be transferred in the transaction
Disposal Group
bull The group includes goodwill acquired in a business combinationndash if the group is a cash-generating unit (CGU)
to which goodwill has been allocated in accordance with the requirements of IAS 36 or
ndash if it is an operation within such a CGU
bull It may be a group of CGU a single CGU or part of a CGU
copy 2005-13 Nelson Consulting Limited 14
2 Scope of IFRS 5
Classification
Presentation
Disposal Group
bull If a non-current asset within the scope of the measurement requirements of IFRS 5 is part of a disposal group
ndash the measurement requirements of IFRS 5 apply to the group as a whole
so that the group is measured at the lower of
bull its carrying amount and
bull fair value less costs to sell (the requirements for measurement to be discussed later)
8
copy 2005-13 Nelson Consulting Limited 15
Items to be reclassifiedProperty $4MLiabilities $2MGoodwill $1MNet $3M
Goodwill $2M
2 Scope of IFRS 5Example
bull Entity A a garment manufacturing company has acquired a property holding company Entity X for HK$6 million
bull At the date of acquisition Entity X holds 2 properties with same fair value at HK$4 million each
bull Entity X has 2 separate outstanding bank loans of HK$2 million each to finance the purchase of its 2 properties and the loan is secured by the properties
bull Entity X has no other assets and liabilitiesbull Entity A intends to dispose of one of the
above propertiesbull If the disposal fulfils the criteria in
IFRS 5 what is the consequence of the reclassification
Cost of acquisition $6M
Total assets $8M
Total liabilities $4M
Cost of property $4M
copy 2005-13 Nelson Consulting Limited 16
2 Scope of IFRS 5
bull Measurement requirements of IFRS 5 also apply to all recognised non-current asset and to all disposal groups except for(either as individual assets or as part of a disposal group)
Classification
Measurement
Presentation
Excluded items Relevant IFRSIAS
Deferred tax assets IAS 12
Assets arising from employee benefits IAS 19
Financial assets within the scope of IAS 39 IAS 39
Non-current assets accounted for in fair value model in IAS 40
IAS 40
Non-current assets measured at fair value less costs to sell under IAS 41
IAS 41
Contractual rights under insurance contracts as defined in IFRS 4
IFRS 4
9
copy 2005-13 Nelson Consulting Limited 17
2 Scope of IFRS 5
bull The classification presentation and measurement requirements in IFRS 5 applicable to a non-current asset (or disposal group) that is classified as held for sale apply also to
ndash a non-current asset (or disposal group) that is classified as held for distribution to owners acting in their capacity as owners (held for distribution to owners) (IFRS 55A)
bull While IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations
ndash disclosures in other IFRSs do not apply to such assets (or disposal groups)unless those IFRSs require
a) specific disclosures in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations or
b) disclosures about measurement of assets and liabilities within a disposal group that are not within the scope of the measurement requirement of IFRS 5 and such disclosure are not already provided in the other notes to the financial statements (IFRS 55B)
copy 2005-13 Nelson Consulting Limited 18
Classification
Measurement
Presentation
For this to be the caseFor this to be the case
3 Classification as Held For Sale
Classification
Measurement
Presentation
bull An entity shall classify a non-current asset (or disposal group) as held for sale if
ndash its carrying amount will be recovered principally
bull through a sale transaction
bull rather than through continuing use
bull the asset (or disposal group) must beavailable for immediate sale
bull its sale must be highly probable
Available for Immediate Sale
Highly Probable
10
copy 2005-13 Nelson Consulting Limited 19
3 Classification as Held For Sale
Available for Immediate Sale
To be classified as held for sale
bull the asset (or disposal group) must be available for immediate sale
ndash in its present condition
ndash subject only to terms that are usual and customary for sales of such assets (or disposal groups)
copy 2005-13 Nelson Consulting Limited 20
3 Classification as Held For SaleCase
The accounting policy on repossessed assets in Annual Report 2012
ndash Non-financial assets acquired in exchange for loans in order to achieve an orderly realisation
bull are reported under ldquoAssets held for salerdquo if ndash the carrying amounts of the assets are
recovered principally through sale
ndash the assets are available for sale in their present condition and
ndash the sale is highly probable
11
copy 2005-13 Nelson Consulting Limited 21
An entity is committed to a plan to sell its headquarters building and has initiated actions to locate a buyer
However the entity has 2 plans and intends to
1 transfer the building to the buyer after it vacates the building or
2 continue to use the building untilconstruction of a new headquartersbuilding is completed
3 Classification as Held For SaleExample
The time necessary to vacate is usual and customary for sale of such asset
The delay in time implies not available for immediate sale
copy 2005-13 Nelson Consulting Limited 22
An entity is committed to a plan to sell a manufacturing facility and has initiated actions to locate a buyerAt the plan commitment date there is a backlog of uncompleted customer orders
The entity has 2 plans and intends to1 sell the facility with its operations
Any uncompleted customer orders at the sale date will be transferred to the buyer
2 sell the facility but without its operations The entity does not intend to transfer the facility to a buyer until after it ceases all operations of the facility and eliminates the backlog of uncompleted customer orders
3 Classification as Held For SaleExample
It will not affect the timing of the transfer
The delay in the timing of the transfer of the facility imposed by the entity (seller) demonstrates that the facility is not available for immediate sale
12
copy 2005-13 Nelson Consulting Limited 23
3 Classification as Held For Sale
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 24
3 Classification as Held For Sale
Annual Report 2012bull Non-current assets and disposal groups classified as
held for salendash Non-current assets or disposal groups are classified as
held for salebull if their carrying amount will be principally recovered
through a sale transaction rather than through continuing use
ndash This requires that bull the asset or disposal group must be available for
immediate sale in its present condition and bull its sale must be highly probable
ndash The appropriate level of management must be committed to a plan to sell the asset or disposal group and the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification
Case
13
copy 2005-13 Nelson Consulting Limited 25
3 Classification as Held For Sale
Can the following situations fulfill the criteria to be classified as held for sale
a) Entity A a commercial leasing and finance company is holding for sale or lease equipment thatbull has recently ceased to be leased
andbull the ultimate form of a future
transaction (sale or lease) has not yet been determined
b) Entity B is committed to a plan to lsquosellrsquo a property that is in use and the transfer of the property will be accounted for as ldquoa sale and finance leasebackrdquo
Example
Not yet committed to plan to sell
Committed but not a completed sale within one year
copy 2005-13 Nelson Consulting Limited 26
3 Classification as Held For Sale
bull IFRS 5 also specifies that
ndash An entity that is committed to a sale planinvolving loss of control of a subsidiary shall
bull classify all the assets and liabilities of that subsidiary as held for sale
ndash when the criteria set out in IFRS 5 6 to 8 (ie available for immediate sale and highly probable) are met regardless of whether the entity will retain a non-controlling interest in its former subsidiary after the sale (IFRS 58A)
bull disclose the information required in IFRS 533 to 36 (ie presenting as discontinued operation)
ndash when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
Measurement may not be the
same
Affect presentation
only
14
copy 2005-13 Nelson Consulting Limited 27
3 Classification as Held For Sale
Extension to Complete Beyond 1 year
Highly Probable
Extension to complete sale beyond one year
bull Events or circumstances may extend the period to complete the sale beyond one year
bull Not preclude an asset from being classified as held for sale if
1 the delay is caused by events or circumstances beyond the entityrsquos control and
2 there is sufficient evidence that the entity remains committed to its plan to sell the asset (or disposal group)
Beyond Control
Remain Committed
1 Year
copy 2005-13 Nelson Consulting Limited 28
3 Classification as Held For SaleCase
bull On September 20 2012 the Group announced that it has reached an agreement with Kleinwort Benson Group a wholly owned subsidiary of RHJ International on the sale of BHF-BANK AG
ndash The transaction is subject to regulatory approvals ndash Closing is not expected to occur before the publication
of this interim report ndash Given the uncertainty created by outstanding
substantive approvals the Group bull does not consider held for sale classification
appropriate as of March 31 2013 andbull will not reclassify the disposal group as held for
sale until such approvals are given
Deutsche BankInterim Report as of March 31 2013
15
copy 2005-13 Nelson Consulting Limited 29
Sale transactions includendash exchanges of non-current assets for other non-current assets
when the exchange has commercial substance in accordance with IAS 16 Property Plant and Equipment
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
Non-current asset (or disposal group) acquired exclusively with a view to its subsequent disposalshall be classified as held for sale at the acquisition date only ifndash the one-year requirement is met and
ndash it is highly probable that any other criteria that are not met at that date will be met within a short periodfollowing the acquisition (usually within 3 months)
copy 2005-13 Nelson Consulting Limited 30
Events after the Reporting Period
bull If the criteria to be classified as asset held for sale are met after the reporting period(for example the criteria have been met on 2 Jan 2012 for the year ended 31 Dec 2011)ndash an entity shall not classify a non-current asset (or
disposal group) as held for sale in those financial statements when issued
bull When those criteria are met after the reporting period but before the authorisation of the financial statements for issue ndash the entity shall disclose the information specified
in IFRS 541(a) (b) and (d) in the notes (to be discussed as ldquoAdditional Disclosuresrdquo later)
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
16
copy 2005-13 Nelson Consulting Limited 31
3 Classification as Held For Distribution
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 32
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull A non-current asset (or disposal group) is classified as held for distribution to owners ndash when the entity is committed to distribute the asset (or disposal group) to
the owners
bull For this to be the case ndash the assets must be available for immediate
distribution in their present condition and
ndash the distribution must be highly probable
Available for Immediate Distribution
Highly Probable
17
copy 2005-13 Nelson Consulting Limited 33
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull For the distribution to be highly probable
The entity is committed to distribute the asset (or disposal group) to the owners
Actions to complete the distribution must have been initiated and should be expected to be completed within one year from the date of classification
Actions required to complete the distribution should indicate that it is unlikelybullthat significant changes to the distribution will be made or bullthat the distribution will be withdrawn
The probability of shareholdersrsquo approval (if required in the jurisdiction) should be considered as part of the assessment of whether the distribution is highly probable
Available for Immediate Distribution
Highly Probable
copy 2005-13 Nelson Consulting Limited 34
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull If such disposal group meets the criteria as an operation (what is ldquoan operationrdquo discussed later)
ndash the entity shall still present the results and cash flows of the disposal group as
bull discontinued operations at the date on which it ceases to be used
bull Shall not classify them as held for sale
bull Because its carrying amount will be
ndash recovered principally through continuing use
ndash not recovered principally through a sale transaction
18
copy 2005-13 Nelson Consulting Limited 35
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull Non-current assets (or disposal groups) to be abandoned include
ndash non-current assets (disposal group)
bull used to the end of their economic life
bull closed rather than sold
bull An entity shall not account for a non-current asset thathas been temporarily taken out of use as if it had been abandoned
Not within IFRS 5
copy 2005-13 Nelson Consulting Limited 36
4 Measurement
bull An entity shall measure non-current asset (or disposal group) classified as held for sale at the lower of itsbull Carrying amount and
bull Fair value less costs to sell (IFRS 515)
bull When the sale is expected to occur beyond one year
ndash the entity shall measure the costs to sell at their present value
bull Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost
Classification
Measurement
Presentation
Classification
Measurement
Presentation
Any implication on
ndash newly acquired assets
ndash assets acquired under business combination
bull An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of itsbull Carrying amount and
bull Fair value less costs to distribute (IFRS 515A)
19
copy 2005-13 Nelson Consulting Limited 37
4 Measurement
bull An entity shall not depreciate (or amortise) a non-current asset while
ndash it is classified as held for sale or
ndash while it is part of a disposal group classified as held for sale
bull Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
ndash shall continue to be recognised
copy 2005-13 Nelson Consulting Limited 38
4 Measurement
Annual Report 2012 ndash Notes to financial statements Assets acquired in exchange for loansndash Non-financial assets acquired in exchange for loans as part of an orderly
realisation are recorded as assets held for sale and reported in lsquoOther assetsrsquo if bull the carrying amounts of the assets are recovered principally through sale bull the assets are available for sale in their present condition and bull their sale is highly probable
ndash The asset acquired is recorded at the lower ofbull its fair value less costs to sell and bull the carrying amount of the loan (net of impairment allowance) at the date of
exchange ndash No depreciation is charged in respect of assets held for sale ndash Any subsequent write-down of the acquired asset to fair value less costs to sell
is recognised in the income statement in lsquoOther operating incomersquondash Any subsequent increase in the fair value less costs to sell to the extent this
does not exceed the cumulative write-down is also recognised in lsquoOther operating incomersquo together with any realised gains or losses on disposal
Case
20
copy 2005-13 Nelson Consulting Limited 39
4 Measurement ndash Change
Changes to a plan of sale
If the criteria to be classified as held for saleare no longer metndash the entity shall cease to classify the asset as held for sale
ndash then an entity shall measure such non-current asset that ceases to be classified as held for sale at the lower of
bull its carrying amount before the asset was classified as held for sale
ndash adjusted for any depreciation amortisation or revaluations that would have been recognised had the asset not been classified as held for sale and
bull its recoverable amount at the date of the subsequent decision not to sell
ndash Any consequential adjustment shall be included
bull in income from continuing operations in the period in which the criteria on asset to be classified as held for sale are no longer met
bull unless revaluation under IAS 1638 is adopted before classification as held for sale
copy 2005-13 Nelson Consulting Limited 40
bull At beginning of Year 1 Entity A acquired a motor vehicle with an estimated useful of 10 years at $800000 (with no residual value)
bull After the receipt of the vehicle 5 days later Entity A decided to sell it
4 Measurement ndash ChangeExample
Vehicle is carried at $800000 and classified as non-current asset held for sale
Cease to classify it as held for salebull had the asset not been classified
as held for sale the carrying amount would be $720000 (depreciated over 10 years)
bull A year later Entity A decided to withdraw the sale and use the vehicle for its own travelling purpose
bull At that date Entity A estimates that the recoverable amount may be
1) $750000 or
2) $600000
bull Calculate the necessary adjustments
bull The planned disposal fulfilled the criteria under IFRS 5 and the fair value less estimated costs to sell is same as cost
Vehicle carried at $720K and adjustment to PL is $80K
Vehicle carried at $600K and adjustment to PL is $200K
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
4
copy 2005-13 Nelson Consulting Limited 7
2 Scope of IFRS 5
Classification
Presentation
bull Classification and presentationrequirements of IFRS 5 apply to
ndash all recognised non-current asset
ndash all disposal groups of an entity
Non-Current Assets
Disposal Groups
No non-current assets can be classified as current unless IFRS 5 is fulfilled
Strict Criteria Imposed
copy 2005-13 Nelson Consulting Limited 8
2 Scope of IFRS 5
Classification
Presentation
bull Classification and presentationrequirements of IFRS 5 apply to
ndash all recognised non-current asset
ndash all disposal groups of an entity
No non-current assets can be classified as current unless IFRS 5 is fulfilled
bull What is non-current asset
ndash An asset that does not meet the definition of a current asset
bull What is current asset
5
copy 2005-13 Nelson Consulting Limited 9
2 Scope of IFRS 5
Classification
Presentation
bull Classification and presentationrequirements of IFRS 5 apply to
ndash all recognised non-current asset
ndash all disposal groups of an entity
No non-current assets can be classified as current unless IFRS 5 is fulfilled
bull Current asset is
An asset that satisfies any of the following criteriaa) it is expected to be realised in or is intended for sale or consumption in
the entityrsquos normal operating cycle
b) it is held primarily for the purpose of being traded
c) it is expected to be realised within twelve months after the reporting period or
d) it is cash or a cash equivalent asset
ndash unless it is restricted from being exchanged or used to settle a liabilityfor at least twelve months after the reporting period
copy 2005-13 Nelson Consulting Limited 10
2 Scope of IFRS 5
Classification
Presentation
bull Classification and presentationrequirements of IFRS 5 apply to
ndash all recognised non-current asset
ndash all disposal groups of an entity
bull Assets classified as non-current in accordance with IAS 1 shall not be reclassified as current assetsndash until they meet the criteria to be classified as held for
sale in accordance with IFRS 5
bull Assets of a class that an entity would normally regard as non-current that are acquired exclusively with a view to resale shall not be classified as currentndash unless they meet the criteria to be classified as held
for sale in accordance with IFRS 5
No non-current assets can be classified as current unless IFRS 5 is fulfilled
6
copy 2005-13 Nelson Consulting Limited 11
Is it current
2 Scope of IFRS 5
bull In its 2012 Annual Report HKFRS was adopted and the report set out that
ndash Available-for-sale financial assets are non-derivatives that are either
bull designated in this category or
bull not classified in any other category
ndash They are included in non-current assets
bull unless management intends to dispose of the investment within 12 months of the balance sheet date
Case
copy 2005-13 Nelson Consulting Limited 12
2 Scope of IFRS 5
Can the following be classified as current assets withoutobserving IFRS 51 A property received by a bank as a consideration to
settle the bankrsquos loans receivable from its customers
2 A BMW motor car acquired by a trading company which has disposed of it within 3 months after year end
3 A property purchased by a property developer for refurbishment and resale
4 A subsidiary in hotel business purchased by a holding company which intended to dispose of it within 6 months after year end
Example
No
No
Yes
No
7
copy 2005-13 Nelson Consulting Limited 13
2 Scope of IFRS 5
Classification
Presentation
bull a group of assets to be disposed of by sale or otherwise together as a group in a single transaction and
bull liabilities directly associated with those assets that will be transferred in the transaction
Disposal Group
bull The group includes goodwill acquired in a business combinationndash if the group is a cash-generating unit (CGU)
to which goodwill has been allocated in accordance with the requirements of IAS 36 or
ndash if it is an operation within such a CGU
bull It may be a group of CGU a single CGU or part of a CGU
copy 2005-13 Nelson Consulting Limited 14
2 Scope of IFRS 5
Classification
Presentation
Disposal Group
bull If a non-current asset within the scope of the measurement requirements of IFRS 5 is part of a disposal group
ndash the measurement requirements of IFRS 5 apply to the group as a whole
so that the group is measured at the lower of
bull its carrying amount and
bull fair value less costs to sell (the requirements for measurement to be discussed later)
8
copy 2005-13 Nelson Consulting Limited 15
Items to be reclassifiedProperty $4MLiabilities $2MGoodwill $1MNet $3M
Goodwill $2M
2 Scope of IFRS 5Example
bull Entity A a garment manufacturing company has acquired a property holding company Entity X for HK$6 million
bull At the date of acquisition Entity X holds 2 properties with same fair value at HK$4 million each
bull Entity X has 2 separate outstanding bank loans of HK$2 million each to finance the purchase of its 2 properties and the loan is secured by the properties
bull Entity X has no other assets and liabilitiesbull Entity A intends to dispose of one of the
above propertiesbull If the disposal fulfils the criteria in
IFRS 5 what is the consequence of the reclassification
Cost of acquisition $6M
Total assets $8M
Total liabilities $4M
Cost of property $4M
copy 2005-13 Nelson Consulting Limited 16
2 Scope of IFRS 5
bull Measurement requirements of IFRS 5 also apply to all recognised non-current asset and to all disposal groups except for(either as individual assets or as part of a disposal group)
Classification
Measurement
Presentation
Excluded items Relevant IFRSIAS
Deferred tax assets IAS 12
Assets arising from employee benefits IAS 19
Financial assets within the scope of IAS 39 IAS 39
Non-current assets accounted for in fair value model in IAS 40
IAS 40
Non-current assets measured at fair value less costs to sell under IAS 41
IAS 41
Contractual rights under insurance contracts as defined in IFRS 4
IFRS 4
9
copy 2005-13 Nelson Consulting Limited 17
2 Scope of IFRS 5
bull The classification presentation and measurement requirements in IFRS 5 applicable to a non-current asset (or disposal group) that is classified as held for sale apply also to
ndash a non-current asset (or disposal group) that is classified as held for distribution to owners acting in their capacity as owners (held for distribution to owners) (IFRS 55A)
bull While IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations
ndash disclosures in other IFRSs do not apply to such assets (or disposal groups)unless those IFRSs require
a) specific disclosures in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations or
b) disclosures about measurement of assets and liabilities within a disposal group that are not within the scope of the measurement requirement of IFRS 5 and such disclosure are not already provided in the other notes to the financial statements (IFRS 55B)
copy 2005-13 Nelson Consulting Limited 18
Classification
Measurement
Presentation
For this to be the caseFor this to be the case
3 Classification as Held For Sale
Classification
Measurement
Presentation
bull An entity shall classify a non-current asset (or disposal group) as held for sale if
ndash its carrying amount will be recovered principally
bull through a sale transaction
bull rather than through continuing use
bull the asset (or disposal group) must beavailable for immediate sale
bull its sale must be highly probable
Available for Immediate Sale
Highly Probable
10
copy 2005-13 Nelson Consulting Limited 19
3 Classification as Held For Sale
Available for Immediate Sale
To be classified as held for sale
bull the asset (or disposal group) must be available for immediate sale
ndash in its present condition
ndash subject only to terms that are usual and customary for sales of such assets (or disposal groups)
copy 2005-13 Nelson Consulting Limited 20
3 Classification as Held For SaleCase
The accounting policy on repossessed assets in Annual Report 2012
ndash Non-financial assets acquired in exchange for loans in order to achieve an orderly realisation
bull are reported under ldquoAssets held for salerdquo if ndash the carrying amounts of the assets are
recovered principally through sale
ndash the assets are available for sale in their present condition and
ndash the sale is highly probable
11
copy 2005-13 Nelson Consulting Limited 21
An entity is committed to a plan to sell its headquarters building and has initiated actions to locate a buyer
However the entity has 2 plans and intends to
1 transfer the building to the buyer after it vacates the building or
2 continue to use the building untilconstruction of a new headquartersbuilding is completed
3 Classification as Held For SaleExample
The time necessary to vacate is usual and customary for sale of such asset
The delay in time implies not available for immediate sale
copy 2005-13 Nelson Consulting Limited 22
An entity is committed to a plan to sell a manufacturing facility and has initiated actions to locate a buyerAt the plan commitment date there is a backlog of uncompleted customer orders
The entity has 2 plans and intends to1 sell the facility with its operations
Any uncompleted customer orders at the sale date will be transferred to the buyer
2 sell the facility but without its operations The entity does not intend to transfer the facility to a buyer until after it ceases all operations of the facility and eliminates the backlog of uncompleted customer orders
3 Classification as Held For SaleExample
It will not affect the timing of the transfer
The delay in the timing of the transfer of the facility imposed by the entity (seller) demonstrates that the facility is not available for immediate sale
12
copy 2005-13 Nelson Consulting Limited 23
3 Classification as Held For Sale
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 24
3 Classification as Held For Sale
Annual Report 2012bull Non-current assets and disposal groups classified as
held for salendash Non-current assets or disposal groups are classified as
held for salebull if their carrying amount will be principally recovered
through a sale transaction rather than through continuing use
ndash This requires that bull the asset or disposal group must be available for
immediate sale in its present condition and bull its sale must be highly probable
ndash The appropriate level of management must be committed to a plan to sell the asset or disposal group and the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification
Case
13
copy 2005-13 Nelson Consulting Limited 25
3 Classification as Held For Sale
Can the following situations fulfill the criteria to be classified as held for sale
a) Entity A a commercial leasing and finance company is holding for sale or lease equipment thatbull has recently ceased to be leased
andbull the ultimate form of a future
transaction (sale or lease) has not yet been determined
b) Entity B is committed to a plan to lsquosellrsquo a property that is in use and the transfer of the property will be accounted for as ldquoa sale and finance leasebackrdquo
Example
Not yet committed to plan to sell
Committed but not a completed sale within one year
copy 2005-13 Nelson Consulting Limited 26
3 Classification as Held For Sale
bull IFRS 5 also specifies that
ndash An entity that is committed to a sale planinvolving loss of control of a subsidiary shall
bull classify all the assets and liabilities of that subsidiary as held for sale
ndash when the criteria set out in IFRS 5 6 to 8 (ie available for immediate sale and highly probable) are met regardless of whether the entity will retain a non-controlling interest in its former subsidiary after the sale (IFRS 58A)
bull disclose the information required in IFRS 533 to 36 (ie presenting as discontinued operation)
ndash when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
Measurement may not be the
same
Affect presentation
only
14
copy 2005-13 Nelson Consulting Limited 27
3 Classification as Held For Sale
Extension to Complete Beyond 1 year
Highly Probable
Extension to complete sale beyond one year
bull Events or circumstances may extend the period to complete the sale beyond one year
bull Not preclude an asset from being classified as held for sale if
1 the delay is caused by events or circumstances beyond the entityrsquos control and
2 there is sufficient evidence that the entity remains committed to its plan to sell the asset (or disposal group)
Beyond Control
Remain Committed
1 Year
copy 2005-13 Nelson Consulting Limited 28
3 Classification as Held For SaleCase
bull On September 20 2012 the Group announced that it has reached an agreement with Kleinwort Benson Group a wholly owned subsidiary of RHJ International on the sale of BHF-BANK AG
ndash The transaction is subject to regulatory approvals ndash Closing is not expected to occur before the publication
of this interim report ndash Given the uncertainty created by outstanding
substantive approvals the Group bull does not consider held for sale classification
appropriate as of March 31 2013 andbull will not reclassify the disposal group as held for
sale until such approvals are given
Deutsche BankInterim Report as of March 31 2013
15
copy 2005-13 Nelson Consulting Limited 29
Sale transactions includendash exchanges of non-current assets for other non-current assets
when the exchange has commercial substance in accordance with IAS 16 Property Plant and Equipment
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
Non-current asset (or disposal group) acquired exclusively with a view to its subsequent disposalshall be classified as held for sale at the acquisition date only ifndash the one-year requirement is met and
ndash it is highly probable that any other criteria that are not met at that date will be met within a short periodfollowing the acquisition (usually within 3 months)
copy 2005-13 Nelson Consulting Limited 30
Events after the Reporting Period
bull If the criteria to be classified as asset held for sale are met after the reporting period(for example the criteria have been met on 2 Jan 2012 for the year ended 31 Dec 2011)ndash an entity shall not classify a non-current asset (or
disposal group) as held for sale in those financial statements when issued
bull When those criteria are met after the reporting period but before the authorisation of the financial statements for issue ndash the entity shall disclose the information specified
in IFRS 541(a) (b) and (d) in the notes (to be discussed as ldquoAdditional Disclosuresrdquo later)
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
16
copy 2005-13 Nelson Consulting Limited 31
3 Classification as Held For Distribution
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 32
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull A non-current asset (or disposal group) is classified as held for distribution to owners ndash when the entity is committed to distribute the asset (or disposal group) to
the owners
bull For this to be the case ndash the assets must be available for immediate
distribution in their present condition and
ndash the distribution must be highly probable
Available for Immediate Distribution
Highly Probable
17
copy 2005-13 Nelson Consulting Limited 33
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull For the distribution to be highly probable
The entity is committed to distribute the asset (or disposal group) to the owners
Actions to complete the distribution must have been initiated and should be expected to be completed within one year from the date of classification
Actions required to complete the distribution should indicate that it is unlikelybullthat significant changes to the distribution will be made or bullthat the distribution will be withdrawn
The probability of shareholdersrsquo approval (if required in the jurisdiction) should be considered as part of the assessment of whether the distribution is highly probable
Available for Immediate Distribution
Highly Probable
copy 2005-13 Nelson Consulting Limited 34
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull If such disposal group meets the criteria as an operation (what is ldquoan operationrdquo discussed later)
ndash the entity shall still present the results and cash flows of the disposal group as
bull discontinued operations at the date on which it ceases to be used
bull Shall not classify them as held for sale
bull Because its carrying amount will be
ndash recovered principally through continuing use
ndash not recovered principally through a sale transaction
18
copy 2005-13 Nelson Consulting Limited 35
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull Non-current assets (or disposal groups) to be abandoned include
ndash non-current assets (disposal group)
bull used to the end of their economic life
bull closed rather than sold
bull An entity shall not account for a non-current asset thathas been temporarily taken out of use as if it had been abandoned
Not within IFRS 5
copy 2005-13 Nelson Consulting Limited 36
4 Measurement
bull An entity shall measure non-current asset (or disposal group) classified as held for sale at the lower of itsbull Carrying amount and
bull Fair value less costs to sell (IFRS 515)
bull When the sale is expected to occur beyond one year
ndash the entity shall measure the costs to sell at their present value
bull Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost
Classification
Measurement
Presentation
Classification
Measurement
Presentation
Any implication on
ndash newly acquired assets
ndash assets acquired under business combination
bull An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of itsbull Carrying amount and
bull Fair value less costs to distribute (IFRS 515A)
19
copy 2005-13 Nelson Consulting Limited 37
4 Measurement
bull An entity shall not depreciate (or amortise) a non-current asset while
ndash it is classified as held for sale or
ndash while it is part of a disposal group classified as held for sale
bull Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
ndash shall continue to be recognised
copy 2005-13 Nelson Consulting Limited 38
4 Measurement
Annual Report 2012 ndash Notes to financial statements Assets acquired in exchange for loansndash Non-financial assets acquired in exchange for loans as part of an orderly
realisation are recorded as assets held for sale and reported in lsquoOther assetsrsquo if bull the carrying amounts of the assets are recovered principally through sale bull the assets are available for sale in their present condition and bull their sale is highly probable
ndash The asset acquired is recorded at the lower ofbull its fair value less costs to sell and bull the carrying amount of the loan (net of impairment allowance) at the date of
exchange ndash No depreciation is charged in respect of assets held for sale ndash Any subsequent write-down of the acquired asset to fair value less costs to sell
is recognised in the income statement in lsquoOther operating incomersquondash Any subsequent increase in the fair value less costs to sell to the extent this
does not exceed the cumulative write-down is also recognised in lsquoOther operating incomersquo together with any realised gains or losses on disposal
Case
20
copy 2005-13 Nelson Consulting Limited 39
4 Measurement ndash Change
Changes to a plan of sale
If the criteria to be classified as held for saleare no longer metndash the entity shall cease to classify the asset as held for sale
ndash then an entity shall measure such non-current asset that ceases to be classified as held for sale at the lower of
bull its carrying amount before the asset was classified as held for sale
ndash adjusted for any depreciation amortisation or revaluations that would have been recognised had the asset not been classified as held for sale and
bull its recoverable amount at the date of the subsequent decision not to sell
ndash Any consequential adjustment shall be included
bull in income from continuing operations in the period in which the criteria on asset to be classified as held for sale are no longer met
bull unless revaluation under IAS 1638 is adopted before classification as held for sale
copy 2005-13 Nelson Consulting Limited 40
bull At beginning of Year 1 Entity A acquired a motor vehicle with an estimated useful of 10 years at $800000 (with no residual value)
bull After the receipt of the vehicle 5 days later Entity A decided to sell it
4 Measurement ndash ChangeExample
Vehicle is carried at $800000 and classified as non-current asset held for sale
Cease to classify it as held for salebull had the asset not been classified
as held for sale the carrying amount would be $720000 (depreciated over 10 years)
bull A year later Entity A decided to withdraw the sale and use the vehicle for its own travelling purpose
bull At that date Entity A estimates that the recoverable amount may be
1) $750000 or
2) $600000
bull Calculate the necessary adjustments
bull The planned disposal fulfilled the criteria under IFRS 5 and the fair value less estimated costs to sell is same as cost
Vehicle carried at $720K and adjustment to PL is $80K
Vehicle carried at $600K and adjustment to PL is $200K
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
5
copy 2005-13 Nelson Consulting Limited 9
2 Scope of IFRS 5
Classification
Presentation
bull Classification and presentationrequirements of IFRS 5 apply to
ndash all recognised non-current asset
ndash all disposal groups of an entity
No non-current assets can be classified as current unless IFRS 5 is fulfilled
bull Current asset is
An asset that satisfies any of the following criteriaa) it is expected to be realised in or is intended for sale or consumption in
the entityrsquos normal operating cycle
b) it is held primarily for the purpose of being traded
c) it is expected to be realised within twelve months after the reporting period or
d) it is cash or a cash equivalent asset
ndash unless it is restricted from being exchanged or used to settle a liabilityfor at least twelve months after the reporting period
copy 2005-13 Nelson Consulting Limited 10
2 Scope of IFRS 5
Classification
Presentation
bull Classification and presentationrequirements of IFRS 5 apply to
ndash all recognised non-current asset
ndash all disposal groups of an entity
bull Assets classified as non-current in accordance with IAS 1 shall not be reclassified as current assetsndash until they meet the criteria to be classified as held for
sale in accordance with IFRS 5
bull Assets of a class that an entity would normally regard as non-current that are acquired exclusively with a view to resale shall not be classified as currentndash unless they meet the criteria to be classified as held
for sale in accordance with IFRS 5
No non-current assets can be classified as current unless IFRS 5 is fulfilled
6
copy 2005-13 Nelson Consulting Limited 11
Is it current
2 Scope of IFRS 5
bull In its 2012 Annual Report HKFRS was adopted and the report set out that
ndash Available-for-sale financial assets are non-derivatives that are either
bull designated in this category or
bull not classified in any other category
ndash They are included in non-current assets
bull unless management intends to dispose of the investment within 12 months of the balance sheet date
Case
copy 2005-13 Nelson Consulting Limited 12
2 Scope of IFRS 5
Can the following be classified as current assets withoutobserving IFRS 51 A property received by a bank as a consideration to
settle the bankrsquos loans receivable from its customers
2 A BMW motor car acquired by a trading company which has disposed of it within 3 months after year end
3 A property purchased by a property developer for refurbishment and resale
4 A subsidiary in hotel business purchased by a holding company which intended to dispose of it within 6 months after year end
Example
No
No
Yes
No
7
copy 2005-13 Nelson Consulting Limited 13
2 Scope of IFRS 5
Classification
Presentation
bull a group of assets to be disposed of by sale or otherwise together as a group in a single transaction and
bull liabilities directly associated with those assets that will be transferred in the transaction
Disposal Group
bull The group includes goodwill acquired in a business combinationndash if the group is a cash-generating unit (CGU)
to which goodwill has been allocated in accordance with the requirements of IAS 36 or
ndash if it is an operation within such a CGU
bull It may be a group of CGU a single CGU or part of a CGU
copy 2005-13 Nelson Consulting Limited 14
2 Scope of IFRS 5
Classification
Presentation
Disposal Group
bull If a non-current asset within the scope of the measurement requirements of IFRS 5 is part of a disposal group
ndash the measurement requirements of IFRS 5 apply to the group as a whole
so that the group is measured at the lower of
bull its carrying amount and
bull fair value less costs to sell (the requirements for measurement to be discussed later)
8
copy 2005-13 Nelson Consulting Limited 15
Items to be reclassifiedProperty $4MLiabilities $2MGoodwill $1MNet $3M
Goodwill $2M
2 Scope of IFRS 5Example
bull Entity A a garment manufacturing company has acquired a property holding company Entity X for HK$6 million
bull At the date of acquisition Entity X holds 2 properties with same fair value at HK$4 million each
bull Entity X has 2 separate outstanding bank loans of HK$2 million each to finance the purchase of its 2 properties and the loan is secured by the properties
bull Entity X has no other assets and liabilitiesbull Entity A intends to dispose of one of the
above propertiesbull If the disposal fulfils the criteria in
IFRS 5 what is the consequence of the reclassification
Cost of acquisition $6M
Total assets $8M
Total liabilities $4M
Cost of property $4M
copy 2005-13 Nelson Consulting Limited 16
2 Scope of IFRS 5
bull Measurement requirements of IFRS 5 also apply to all recognised non-current asset and to all disposal groups except for(either as individual assets or as part of a disposal group)
Classification
Measurement
Presentation
Excluded items Relevant IFRSIAS
Deferred tax assets IAS 12
Assets arising from employee benefits IAS 19
Financial assets within the scope of IAS 39 IAS 39
Non-current assets accounted for in fair value model in IAS 40
IAS 40
Non-current assets measured at fair value less costs to sell under IAS 41
IAS 41
Contractual rights under insurance contracts as defined in IFRS 4
IFRS 4
9
copy 2005-13 Nelson Consulting Limited 17
2 Scope of IFRS 5
bull The classification presentation and measurement requirements in IFRS 5 applicable to a non-current asset (or disposal group) that is classified as held for sale apply also to
ndash a non-current asset (or disposal group) that is classified as held for distribution to owners acting in their capacity as owners (held for distribution to owners) (IFRS 55A)
bull While IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations
ndash disclosures in other IFRSs do not apply to such assets (or disposal groups)unless those IFRSs require
a) specific disclosures in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations or
b) disclosures about measurement of assets and liabilities within a disposal group that are not within the scope of the measurement requirement of IFRS 5 and such disclosure are not already provided in the other notes to the financial statements (IFRS 55B)
copy 2005-13 Nelson Consulting Limited 18
Classification
Measurement
Presentation
For this to be the caseFor this to be the case
3 Classification as Held For Sale
Classification
Measurement
Presentation
bull An entity shall classify a non-current asset (or disposal group) as held for sale if
ndash its carrying amount will be recovered principally
bull through a sale transaction
bull rather than through continuing use
bull the asset (or disposal group) must beavailable for immediate sale
bull its sale must be highly probable
Available for Immediate Sale
Highly Probable
10
copy 2005-13 Nelson Consulting Limited 19
3 Classification as Held For Sale
Available for Immediate Sale
To be classified as held for sale
bull the asset (or disposal group) must be available for immediate sale
ndash in its present condition
ndash subject only to terms that are usual and customary for sales of such assets (or disposal groups)
copy 2005-13 Nelson Consulting Limited 20
3 Classification as Held For SaleCase
The accounting policy on repossessed assets in Annual Report 2012
ndash Non-financial assets acquired in exchange for loans in order to achieve an orderly realisation
bull are reported under ldquoAssets held for salerdquo if ndash the carrying amounts of the assets are
recovered principally through sale
ndash the assets are available for sale in their present condition and
ndash the sale is highly probable
11
copy 2005-13 Nelson Consulting Limited 21
An entity is committed to a plan to sell its headquarters building and has initiated actions to locate a buyer
However the entity has 2 plans and intends to
1 transfer the building to the buyer after it vacates the building or
2 continue to use the building untilconstruction of a new headquartersbuilding is completed
3 Classification as Held For SaleExample
The time necessary to vacate is usual and customary for sale of such asset
The delay in time implies not available for immediate sale
copy 2005-13 Nelson Consulting Limited 22
An entity is committed to a plan to sell a manufacturing facility and has initiated actions to locate a buyerAt the plan commitment date there is a backlog of uncompleted customer orders
The entity has 2 plans and intends to1 sell the facility with its operations
Any uncompleted customer orders at the sale date will be transferred to the buyer
2 sell the facility but without its operations The entity does not intend to transfer the facility to a buyer until after it ceases all operations of the facility and eliminates the backlog of uncompleted customer orders
3 Classification as Held For SaleExample
It will not affect the timing of the transfer
The delay in the timing of the transfer of the facility imposed by the entity (seller) demonstrates that the facility is not available for immediate sale
12
copy 2005-13 Nelson Consulting Limited 23
3 Classification as Held For Sale
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 24
3 Classification as Held For Sale
Annual Report 2012bull Non-current assets and disposal groups classified as
held for salendash Non-current assets or disposal groups are classified as
held for salebull if their carrying amount will be principally recovered
through a sale transaction rather than through continuing use
ndash This requires that bull the asset or disposal group must be available for
immediate sale in its present condition and bull its sale must be highly probable
ndash The appropriate level of management must be committed to a plan to sell the asset or disposal group and the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification
Case
13
copy 2005-13 Nelson Consulting Limited 25
3 Classification as Held For Sale
Can the following situations fulfill the criteria to be classified as held for sale
a) Entity A a commercial leasing and finance company is holding for sale or lease equipment thatbull has recently ceased to be leased
andbull the ultimate form of a future
transaction (sale or lease) has not yet been determined
b) Entity B is committed to a plan to lsquosellrsquo a property that is in use and the transfer of the property will be accounted for as ldquoa sale and finance leasebackrdquo
Example
Not yet committed to plan to sell
Committed but not a completed sale within one year
copy 2005-13 Nelson Consulting Limited 26
3 Classification as Held For Sale
bull IFRS 5 also specifies that
ndash An entity that is committed to a sale planinvolving loss of control of a subsidiary shall
bull classify all the assets and liabilities of that subsidiary as held for sale
ndash when the criteria set out in IFRS 5 6 to 8 (ie available for immediate sale and highly probable) are met regardless of whether the entity will retain a non-controlling interest in its former subsidiary after the sale (IFRS 58A)
bull disclose the information required in IFRS 533 to 36 (ie presenting as discontinued operation)
ndash when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
Measurement may not be the
same
Affect presentation
only
14
copy 2005-13 Nelson Consulting Limited 27
3 Classification as Held For Sale
Extension to Complete Beyond 1 year
Highly Probable
Extension to complete sale beyond one year
bull Events or circumstances may extend the period to complete the sale beyond one year
bull Not preclude an asset from being classified as held for sale if
1 the delay is caused by events or circumstances beyond the entityrsquos control and
2 there is sufficient evidence that the entity remains committed to its plan to sell the asset (or disposal group)
Beyond Control
Remain Committed
1 Year
copy 2005-13 Nelson Consulting Limited 28
3 Classification as Held For SaleCase
bull On September 20 2012 the Group announced that it has reached an agreement with Kleinwort Benson Group a wholly owned subsidiary of RHJ International on the sale of BHF-BANK AG
ndash The transaction is subject to regulatory approvals ndash Closing is not expected to occur before the publication
of this interim report ndash Given the uncertainty created by outstanding
substantive approvals the Group bull does not consider held for sale classification
appropriate as of March 31 2013 andbull will not reclassify the disposal group as held for
sale until such approvals are given
Deutsche BankInterim Report as of March 31 2013
15
copy 2005-13 Nelson Consulting Limited 29
Sale transactions includendash exchanges of non-current assets for other non-current assets
when the exchange has commercial substance in accordance with IAS 16 Property Plant and Equipment
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
Non-current asset (or disposal group) acquired exclusively with a view to its subsequent disposalshall be classified as held for sale at the acquisition date only ifndash the one-year requirement is met and
ndash it is highly probable that any other criteria that are not met at that date will be met within a short periodfollowing the acquisition (usually within 3 months)
copy 2005-13 Nelson Consulting Limited 30
Events after the Reporting Period
bull If the criteria to be classified as asset held for sale are met after the reporting period(for example the criteria have been met on 2 Jan 2012 for the year ended 31 Dec 2011)ndash an entity shall not classify a non-current asset (or
disposal group) as held for sale in those financial statements when issued
bull When those criteria are met after the reporting period but before the authorisation of the financial statements for issue ndash the entity shall disclose the information specified
in IFRS 541(a) (b) and (d) in the notes (to be discussed as ldquoAdditional Disclosuresrdquo later)
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
16
copy 2005-13 Nelson Consulting Limited 31
3 Classification as Held For Distribution
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 32
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull A non-current asset (or disposal group) is classified as held for distribution to owners ndash when the entity is committed to distribute the asset (or disposal group) to
the owners
bull For this to be the case ndash the assets must be available for immediate
distribution in their present condition and
ndash the distribution must be highly probable
Available for Immediate Distribution
Highly Probable
17
copy 2005-13 Nelson Consulting Limited 33
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull For the distribution to be highly probable
The entity is committed to distribute the asset (or disposal group) to the owners
Actions to complete the distribution must have been initiated and should be expected to be completed within one year from the date of classification
Actions required to complete the distribution should indicate that it is unlikelybullthat significant changes to the distribution will be made or bullthat the distribution will be withdrawn
The probability of shareholdersrsquo approval (if required in the jurisdiction) should be considered as part of the assessment of whether the distribution is highly probable
Available for Immediate Distribution
Highly Probable
copy 2005-13 Nelson Consulting Limited 34
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull If such disposal group meets the criteria as an operation (what is ldquoan operationrdquo discussed later)
ndash the entity shall still present the results and cash flows of the disposal group as
bull discontinued operations at the date on which it ceases to be used
bull Shall not classify them as held for sale
bull Because its carrying amount will be
ndash recovered principally through continuing use
ndash not recovered principally through a sale transaction
18
copy 2005-13 Nelson Consulting Limited 35
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull Non-current assets (or disposal groups) to be abandoned include
ndash non-current assets (disposal group)
bull used to the end of their economic life
bull closed rather than sold
bull An entity shall not account for a non-current asset thathas been temporarily taken out of use as if it had been abandoned
Not within IFRS 5
copy 2005-13 Nelson Consulting Limited 36
4 Measurement
bull An entity shall measure non-current asset (or disposal group) classified as held for sale at the lower of itsbull Carrying amount and
bull Fair value less costs to sell (IFRS 515)
bull When the sale is expected to occur beyond one year
ndash the entity shall measure the costs to sell at their present value
bull Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost
Classification
Measurement
Presentation
Classification
Measurement
Presentation
Any implication on
ndash newly acquired assets
ndash assets acquired under business combination
bull An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of itsbull Carrying amount and
bull Fair value less costs to distribute (IFRS 515A)
19
copy 2005-13 Nelson Consulting Limited 37
4 Measurement
bull An entity shall not depreciate (or amortise) a non-current asset while
ndash it is classified as held for sale or
ndash while it is part of a disposal group classified as held for sale
bull Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
ndash shall continue to be recognised
copy 2005-13 Nelson Consulting Limited 38
4 Measurement
Annual Report 2012 ndash Notes to financial statements Assets acquired in exchange for loansndash Non-financial assets acquired in exchange for loans as part of an orderly
realisation are recorded as assets held for sale and reported in lsquoOther assetsrsquo if bull the carrying amounts of the assets are recovered principally through sale bull the assets are available for sale in their present condition and bull their sale is highly probable
ndash The asset acquired is recorded at the lower ofbull its fair value less costs to sell and bull the carrying amount of the loan (net of impairment allowance) at the date of
exchange ndash No depreciation is charged in respect of assets held for sale ndash Any subsequent write-down of the acquired asset to fair value less costs to sell
is recognised in the income statement in lsquoOther operating incomersquondash Any subsequent increase in the fair value less costs to sell to the extent this
does not exceed the cumulative write-down is also recognised in lsquoOther operating incomersquo together with any realised gains or losses on disposal
Case
20
copy 2005-13 Nelson Consulting Limited 39
4 Measurement ndash Change
Changes to a plan of sale
If the criteria to be classified as held for saleare no longer metndash the entity shall cease to classify the asset as held for sale
ndash then an entity shall measure such non-current asset that ceases to be classified as held for sale at the lower of
bull its carrying amount before the asset was classified as held for sale
ndash adjusted for any depreciation amortisation or revaluations that would have been recognised had the asset not been classified as held for sale and
bull its recoverable amount at the date of the subsequent decision not to sell
ndash Any consequential adjustment shall be included
bull in income from continuing operations in the period in which the criteria on asset to be classified as held for sale are no longer met
bull unless revaluation under IAS 1638 is adopted before classification as held for sale
copy 2005-13 Nelson Consulting Limited 40
bull At beginning of Year 1 Entity A acquired a motor vehicle with an estimated useful of 10 years at $800000 (with no residual value)
bull After the receipt of the vehicle 5 days later Entity A decided to sell it
4 Measurement ndash ChangeExample
Vehicle is carried at $800000 and classified as non-current asset held for sale
Cease to classify it as held for salebull had the asset not been classified
as held for sale the carrying amount would be $720000 (depreciated over 10 years)
bull A year later Entity A decided to withdraw the sale and use the vehicle for its own travelling purpose
bull At that date Entity A estimates that the recoverable amount may be
1) $750000 or
2) $600000
bull Calculate the necessary adjustments
bull The planned disposal fulfilled the criteria under IFRS 5 and the fair value less estimated costs to sell is same as cost
Vehicle carried at $720K and adjustment to PL is $80K
Vehicle carried at $600K and adjustment to PL is $200K
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
6
copy 2005-13 Nelson Consulting Limited 11
Is it current
2 Scope of IFRS 5
bull In its 2012 Annual Report HKFRS was adopted and the report set out that
ndash Available-for-sale financial assets are non-derivatives that are either
bull designated in this category or
bull not classified in any other category
ndash They are included in non-current assets
bull unless management intends to dispose of the investment within 12 months of the balance sheet date
Case
copy 2005-13 Nelson Consulting Limited 12
2 Scope of IFRS 5
Can the following be classified as current assets withoutobserving IFRS 51 A property received by a bank as a consideration to
settle the bankrsquos loans receivable from its customers
2 A BMW motor car acquired by a trading company which has disposed of it within 3 months after year end
3 A property purchased by a property developer for refurbishment and resale
4 A subsidiary in hotel business purchased by a holding company which intended to dispose of it within 6 months after year end
Example
No
No
Yes
No
7
copy 2005-13 Nelson Consulting Limited 13
2 Scope of IFRS 5
Classification
Presentation
bull a group of assets to be disposed of by sale or otherwise together as a group in a single transaction and
bull liabilities directly associated with those assets that will be transferred in the transaction
Disposal Group
bull The group includes goodwill acquired in a business combinationndash if the group is a cash-generating unit (CGU)
to which goodwill has been allocated in accordance with the requirements of IAS 36 or
ndash if it is an operation within such a CGU
bull It may be a group of CGU a single CGU or part of a CGU
copy 2005-13 Nelson Consulting Limited 14
2 Scope of IFRS 5
Classification
Presentation
Disposal Group
bull If a non-current asset within the scope of the measurement requirements of IFRS 5 is part of a disposal group
ndash the measurement requirements of IFRS 5 apply to the group as a whole
so that the group is measured at the lower of
bull its carrying amount and
bull fair value less costs to sell (the requirements for measurement to be discussed later)
8
copy 2005-13 Nelson Consulting Limited 15
Items to be reclassifiedProperty $4MLiabilities $2MGoodwill $1MNet $3M
Goodwill $2M
2 Scope of IFRS 5Example
bull Entity A a garment manufacturing company has acquired a property holding company Entity X for HK$6 million
bull At the date of acquisition Entity X holds 2 properties with same fair value at HK$4 million each
bull Entity X has 2 separate outstanding bank loans of HK$2 million each to finance the purchase of its 2 properties and the loan is secured by the properties
bull Entity X has no other assets and liabilitiesbull Entity A intends to dispose of one of the
above propertiesbull If the disposal fulfils the criteria in
IFRS 5 what is the consequence of the reclassification
Cost of acquisition $6M
Total assets $8M
Total liabilities $4M
Cost of property $4M
copy 2005-13 Nelson Consulting Limited 16
2 Scope of IFRS 5
bull Measurement requirements of IFRS 5 also apply to all recognised non-current asset and to all disposal groups except for(either as individual assets or as part of a disposal group)
Classification
Measurement
Presentation
Excluded items Relevant IFRSIAS
Deferred tax assets IAS 12
Assets arising from employee benefits IAS 19
Financial assets within the scope of IAS 39 IAS 39
Non-current assets accounted for in fair value model in IAS 40
IAS 40
Non-current assets measured at fair value less costs to sell under IAS 41
IAS 41
Contractual rights under insurance contracts as defined in IFRS 4
IFRS 4
9
copy 2005-13 Nelson Consulting Limited 17
2 Scope of IFRS 5
bull The classification presentation and measurement requirements in IFRS 5 applicable to a non-current asset (or disposal group) that is classified as held for sale apply also to
ndash a non-current asset (or disposal group) that is classified as held for distribution to owners acting in their capacity as owners (held for distribution to owners) (IFRS 55A)
bull While IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations
ndash disclosures in other IFRSs do not apply to such assets (or disposal groups)unless those IFRSs require
a) specific disclosures in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations or
b) disclosures about measurement of assets and liabilities within a disposal group that are not within the scope of the measurement requirement of IFRS 5 and such disclosure are not already provided in the other notes to the financial statements (IFRS 55B)
copy 2005-13 Nelson Consulting Limited 18
Classification
Measurement
Presentation
For this to be the caseFor this to be the case
3 Classification as Held For Sale
Classification
Measurement
Presentation
bull An entity shall classify a non-current asset (or disposal group) as held for sale if
ndash its carrying amount will be recovered principally
bull through a sale transaction
bull rather than through continuing use
bull the asset (or disposal group) must beavailable for immediate sale
bull its sale must be highly probable
Available for Immediate Sale
Highly Probable
10
copy 2005-13 Nelson Consulting Limited 19
3 Classification as Held For Sale
Available for Immediate Sale
To be classified as held for sale
bull the asset (or disposal group) must be available for immediate sale
ndash in its present condition
ndash subject only to terms that are usual and customary for sales of such assets (or disposal groups)
copy 2005-13 Nelson Consulting Limited 20
3 Classification as Held For SaleCase
The accounting policy on repossessed assets in Annual Report 2012
ndash Non-financial assets acquired in exchange for loans in order to achieve an orderly realisation
bull are reported under ldquoAssets held for salerdquo if ndash the carrying amounts of the assets are
recovered principally through sale
ndash the assets are available for sale in their present condition and
ndash the sale is highly probable
11
copy 2005-13 Nelson Consulting Limited 21
An entity is committed to a plan to sell its headquarters building and has initiated actions to locate a buyer
However the entity has 2 plans and intends to
1 transfer the building to the buyer after it vacates the building or
2 continue to use the building untilconstruction of a new headquartersbuilding is completed
3 Classification as Held For SaleExample
The time necessary to vacate is usual and customary for sale of such asset
The delay in time implies not available for immediate sale
copy 2005-13 Nelson Consulting Limited 22
An entity is committed to a plan to sell a manufacturing facility and has initiated actions to locate a buyerAt the plan commitment date there is a backlog of uncompleted customer orders
The entity has 2 plans and intends to1 sell the facility with its operations
Any uncompleted customer orders at the sale date will be transferred to the buyer
2 sell the facility but without its operations The entity does not intend to transfer the facility to a buyer until after it ceases all operations of the facility and eliminates the backlog of uncompleted customer orders
3 Classification as Held For SaleExample
It will not affect the timing of the transfer
The delay in the timing of the transfer of the facility imposed by the entity (seller) demonstrates that the facility is not available for immediate sale
12
copy 2005-13 Nelson Consulting Limited 23
3 Classification as Held For Sale
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 24
3 Classification as Held For Sale
Annual Report 2012bull Non-current assets and disposal groups classified as
held for salendash Non-current assets or disposal groups are classified as
held for salebull if their carrying amount will be principally recovered
through a sale transaction rather than through continuing use
ndash This requires that bull the asset or disposal group must be available for
immediate sale in its present condition and bull its sale must be highly probable
ndash The appropriate level of management must be committed to a plan to sell the asset or disposal group and the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification
Case
13
copy 2005-13 Nelson Consulting Limited 25
3 Classification as Held For Sale
Can the following situations fulfill the criteria to be classified as held for sale
a) Entity A a commercial leasing and finance company is holding for sale or lease equipment thatbull has recently ceased to be leased
andbull the ultimate form of a future
transaction (sale or lease) has not yet been determined
b) Entity B is committed to a plan to lsquosellrsquo a property that is in use and the transfer of the property will be accounted for as ldquoa sale and finance leasebackrdquo
Example
Not yet committed to plan to sell
Committed but not a completed sale within one year
copy 2005-13 Nelson Consulting Limited 26
3 Classification as Held For Sale
bull IFRS 5 also specifies that
ndash An entity that is committed to a sale planinvolving loss of control of a subsidiary shall
bull classify all the assets and liabilities of that subsidiary as held for sale
ndash when the criteria set out in IFRS 5 6 to 8 (ie available for immediate sale and highly probable) are met regardless of whether the entity will retain a non-controlling interest in its former subsidiary after the sale (IFRS 58A)
bull disclose the information required in IFRS 533 to 36 (ie presenting as discontinued operation)
ndash when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
Measurement may not be the
same
Affect presentation
only
14
copy 2005-13 Nelson Consulting Limited 27
3 Classification as Held For Sale
Extension to Complete Beyond 1 year
Highly Probable
Extension to complete sale beyond one year
bull Events or circumstances may extend the period to complete the sale beyond one year
bull Not preclude an asset from being classified as held for sale if
1 the delay is caused by events or circumstances beyond the entityrsquos control and
2 there is sufficient evidence that the entity remains committed to its plan to sell the asset (or disposal group)
Beyond Control
Remain Committed
1 Year
copy 2005-13 Nelson Consulting Limited 28
3 Classification as Held For SaleCase
bull On September 20 2012 the Group announced that it has reached an agreement with Kleinwort Benson Group a wholly owned subsidiary of RHJ International on the sale of BHF-BANK AG
ndash The transaction is subject to regulatory approvals ndash Closing is not expected to occur before the publication
of this interim report ndash Given the uncertainty created by outstanding
substantive approvals the Group bull does not consider held for sale classification
appropriate as of March 31 2013 andbull will not reclassify the disposal group as held for
sale until such approvals are given
Deutsche BankInterim Report as of March 31 2013
15
copy 2005-13 Nelson Consulting Limited 29
Sale transactions includendash exchanges of non-current assets for other non-current assets
when the exchange has commercial substance in accordance with IAS 16 Property Plant and Equipment
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
Non-current asset (or disposal group) acquired exclusively with a view to its subsequent disposalshall be classified as held for sale at the acquisition date only ifndash the one-year requirement is met and
ndash it is highly probable that any other criteria that are not met at that date will be met within a short periodfollowing the acquisition (usually within 3 months)
copy 2005-13 Nelson Consulting Limited 30
Events after the Reporting Period
bull If the criteria to be classified as asset held for sale are met after the reporting period(for example the criteria have been met on 2 Jan 2012 for the year ended 31 Dec 2011)ndash an entity shall not classify a non-current asset (or
disposal group) as held for sale in those financial statements when issued
bull When those criteria are met after the reporting period but before the authorisation of the financial statements for issue ndash the entity shall disclose the information specified
in IFRS 541(a) (b) and (d) in the notes (to be discussed as ldquoAdditional Disclosuresrdquo later)
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
16
copy 2005-13 Nelson Consulting Limited 31
3 Classification as Held For Distribution
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 32
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull A non-current asset (or disposal group) is classified as held for distribution to owners ndash when the entity is committed to distribute the asset (or disposal group) to
the owners
bull For this to be the case ndash the assets must be available for immediate
distribution in their present condition and
ndash the distribution must be highly probable
Available for Immediate Distribution
Highly Probable
17
copy 2005-13 Nelson Consulting Limited 33
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull For the distribution to be highly probable
The entity is committed to distribute the asset (or disposal group) to the owners
Actions to complete the distribution must have been initiated and should be expected to be completed within one year from the date of classification
Actions required to complete the distribution should indicate that it is unlikelybullthat significant changes to the distribution will be made or bullthat the distribution will be withdrawn
The probability of shareholdersrsquo approval (if required in the jurisdiction) should be considered as part of the assessment of whether the distribution is highly probable
Available for Immediate Distribution
Highly Probable
copy 2005-13 Nelson Consulting Limited 34
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull If such disposal group meets the criteria as an operation (what is ldquoan operationrdquo discussed later)
ndash the entity shall still present the results and cash flows of the disposal group as
bull discontinued operations at the date on which it ceases to be used
bull Shall not classify them as held for sale
bull Because its carrying amount will be
ndash recovered principally through continuing use
ndash not recovered principally through a sale transaction
18
copy 2005-13 Nelson Consulting Limited 35
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull Non-current assets (or disposal groups) to be abandoned include
ndash non-current assets (disposal group)
bull used to the end of their economic life
bull closed rather than sold
bull An entity shall not account for a non-current asset thathas been temporarily taken out of use as if it had been abandoned
Not within IFRS 5
copy 2005-13 Nelson Consulting Limited 36
4 Measurement
bull An entity shall measure non-current asset (or disposal group) classified as held for sale at the lower of itsbull Carrying amount and
bull Fair value less costs to sell (IFRS 515)
bull When the sale is expected to occur beyond one year
ndash the entity shall measure the costs to sell at their present value
bull Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost
Classification
Measurement
Presentation
Classification
Measurement
Presentation
Any implication on
ndash newly acquired assets
ndash assets acquired under business combination
bull An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of itsbull Carrying amount and
bull Fair value less costs to distribute (IFRS 515A)
19
copy 2005-13 Nelson Consulting Limited 37
4 Measurement
bull An entity shall not depreciate (or amortise) a non-current asset while
ndash it is classified as held for sale or
ndash while it is part of a disposal group classified as held for sale
bull Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
ndash shall continue to be recognised
copy 2005-13 Nelson Consulting Limited 38
4 Measurement
Annual Report 2012 ndash Notes to financial statements Assets acquired in exchange for loansndash Non-financial assets acquired in exchange for loans as part of an orderly
realisation are recorded as assets held for sale and reported in lsquoOther assetsrsquo if bull the carrying amounts of the assets are recovered principally through sale bull the assets are available for sale in their present condition and bull their sale is highly probable
ndash The asset acquired is recorded at the lower ofbull its fair value less costs to sell and bull the carrying amount of the loan (net of impairment allowance) at the date of
exchange ndash No depreciation is charged in respect of assets held for sale ndash Any subsequent write-down of the acquired asset to fair value less costs to sell
is recognised in the income statement in lsquoOther operating incomersquondash Any subsequent increase in the fair value less costs to sell to the extent this
does not exceed the cumulative write-down is also recognised in lsquoOther operating incomersquo together with any realised gains or losses on disposal
Case
20
copy 2005-13 Nelson Consulting Limited 39
4 Measurement ndash Change
Changes to a plan of sale
If the criteria to be classified as held for saleare no longer metndash the entity shall cease to classify the asset as held for sale
ndash then an entity shall measure such non-current asset that ceases to be classified as held for sale at the lower of
bull its carrying amount before the asset was classified as held for sale
ndash adjusted for any depreciation amortisation or revaluations that would have been recognised had the asset not been classified as held for sale and
bull its recoverable amount at the date of the subsequent decision not to sell
ndash Any consequential adjustment shall be included
bull in income from continuing operations in the period in which the criteria on asset to be classified as held for sale are no longer met
bull unless revaluation under IAS 1638 is adopted before classification as held for sale
copy 2005-13 Nelson Consulting Limited 40
bull At beginning of Year 1 Entity A acquired a motor vehicle with an estimated useful of 10 years at $800000 (with no residual value)
bull After the receipt of the vehicle 5 days later Entity A decided to sell it
4 Measurement ndash ChangeExample
Vehicle is carried at $800000 and classified as non-current asset held for sale
Cease to classify it as held for salebull had the asset not been classified
as held for sale the carrying amount would be $720000 (depreciated over 10 years)
bull A year later Entity A decided to withdraw the sale and use the vehicle for its own travelling purpose
bull At that date Entity A estimates that the recoverable amount may be
1) $750000 or
2) $600000
bull Calculate the necessary adjustments
bull The planned disposal fulfilled the criteria under IFRS 5 and the fair value less estimated costs to sell is same as cost
Vehicle carried at $720K and adjustment to PL is $80K
Vehicle carried at $600K and adjustment to PL is $200K
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
7
copy 2005-13 Nelson Consulting Limited 13
2 Scope of IFRS 5
Classification
Presentation
bull a group of assets to be disposed of by sale or otherwise together as a group in a single transaction and
bull liabilities directly associated with those assets that will be transferred in the transaction
Disposal Group
bull The group includes goodwill acquired in a business combinationndash if the group is a cash-generating unit (CGU)
to which goodwill has been allocated in accordance with the requirements of IAS 36 or
ndash if it is an operation within such a CGU
bull It may be a group of CGU a single CGU or part of a CGU
copy 2005-13 Nelson Consulting Limited 14
2 Scope of IFRS 5
Classification
Presentation
Disposal Group
bull If a non-current asset within the scope of the measurement requirements of IFRS 5 is part of a disposal group
ndash the measurement requirements of IFRS 5 apply to the group as a whole
so that the group is measured at the lower of
bull its carrying amount and
bull fair value less costs to sell (the requirements for measurement to be discussed later)
8
copy 2005-13 Nelson Consulting Limited 15
Items to be reclassifiedProperty $4MLiabilities $2MGoodwill $1MNet $3M
Goodwill $2M
2 Scope of IFRS 5Example
bull Entity A a garment manufacturing company has acquired a property holding company Entity X for HK$6 million
bull At the date of acquisition Entity X holds 2 properties with same fair value at HK$4 million each
bull Entity X has 2 separate outstanding bank loans of HK$2 million each to finance the purchase of its 2 properties and the loan is secured by the properties
bull Entity X has no other assets and liabilitiesbull Entity A intends to dispose of one of the
above propertiesbull If the disposal fulfils the criteria in
IFRS 5 what is the consequence of the reclassification
Cost of acquisition $6M
Total assets $8M
Total liabilities $4M
Cost of property $4M
copy 2005-13 Nelson Consulting Limited 16
2 Scope of IFRS 5
bull Measurement requirements of IFRS 5 also apply to all recognised non-current asset and to all disposal groups except for(either as individual assets or as part of a disposal group)
Classification
Measurement
Presentation
Excluded items Relevant IFRSIAS
Deferred tax assets IAS 12
Assets arising from employee benefits IAS 19
Financial assets within the scope of IAS 39 IAS 39
Non-current assets accounted for in fair value model in IAS 40
IAS 40
Non-current assets measured at fair value less costs to sell under IAS 41
IAS 41
Contractual rights under insurance contracts as defined in IFRS 4
IFRS 4
9
copy 2005-13 Nelson Consulting Limited 17
2 Scope of IFRS 5
bull The classification presentation and measurement requirements in IFRS 5 applicable to a non-current asset (or disposal group) that is classified as held for sale apply also to
ndash a non-current asset (or disposal group) that is classified as held for distribution to owners acting in their capacity as owners (held for distribution to owners) (IFRS 55A)
bull While IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations
ndash disclosures in other IFRSs do not apply to such assets (or disposal groups)unless those IFRSs require
a) specific disclosures in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations or
b) disclosures about measurement of assets and liabilities within a disposal group that are not within the scope of the measurement requirement of IFRS 5 and such disclosure are not already provided in the other notes to the financial statements (IFRS 55B)
copy 2005-13 Nelson Consulting Limited 18
Classification
Measurement
Presentation
For this to be the caseFor this to be the case
3 Classification as Held For Sale
Classification
Measurement
Presentation
bull An entity shall classify a non-current asset (or disposal group) as held for sale if
ndash its carrying amount will be recovered principally
bull through a sale transaction
bull rather than through continuing use
bull the asset (or disposal group) must beavailable for immediate sale
bull its sale must be highly probable
Available for Immediate Sale
Highly Probable
10
copy 2005-13 Nelson Consulting Limited 19
3 Classification as Held For Sale
Available for Immediate Sale
To be classified as held for sale
bull the asset (or disposal group) must be available for immediate sale
ndash in its present condition
ndash subject only to terms that are usual and customary for sales of such assets (or disposal groups)
copy 2005-13 Nelson Consulting Limited 20
3 Classification as Held For SaleCase
The accounting policy on repossessed assets in Annual Report 2012
ndash Non-financial assets acquired in exchange for loans in order to achieve an orderly realisation
bull are reported under ldquoAssets held for salerdquo if ndash the carrying amounts of the assets are
recovered principally through sale
ndash the assets are available for sale in their present condition and
ndash the sale is highly probable
11
copy 2005-13 Nelson Consulting Limited 21
An entity is committed to a plan to sell its headquarters building and has initiated actions to locate a buyer
However the entity has 2 plans and intends to
1 transfer the building to the buyer after it vacates the building or
2 continue to use the building untilconstruction of a new headquartersbuilding is completed
3 Classification as Held For SaleExample
The time necessary to vacate is usual and customary for sale of such asset
The delay in time implies not available for immediate sale
copy 2005-13 Nelson Consulting Limited 22
An entity is committed to a plan to sell a manufacturing facility and has initiated actions to locate a buyerAt the plan commitment date there is a backlog of uncompleted customer orders
The entity has 2 plans and intends to1 sell the facility with its operations
Any uncompleted customer orders at the sale date will be transferred to the buyer
2 sell the facility but without its operations The entity does not intend to transfer the facility to a buyer until after it ceases all operations of the facility and eliminates the backlog of uncompleted customer orders
3 Classification as Held For SaleExample
It will not affect the timing of the transfer
The delay in the timing of the transfer of the facility imposed by the entity (seller) demonstrates that the facility is not available for immediate sale
12
copy 2005-13 Nelson Consulting Limited 23
3 Classification as Held For Sale
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 24
3 Classification as Held For Sale
Annual Report 2012bull Non-current assets and disposal groups classified as
held for salendash Non-current assets or disposal groups are classified as
held for salebull if their carrying amount will be principally recovered
through a sale transaction rather than through continuing use
ndash This requires that bull the asset or disposal group must be available for
immediate sale in its present condition and bull its sale must be highly probable
ndash The appropriate level of management must be committed to a plan to sell the asset or disposal group and the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification
Case
13
copy 2005-13 Nelson Consulting Limited 25
3 Classification as Held For Sale
Can the following situations fulfill the criteria to be classified as held for sale
a) Entity A a commercial leasing and finance company is holding for sale or lease equipment thatbull has recently ceased to be leased
andbull the ultimate form of a future
transaction (sale or lease) has not yet been determined
b) Entity B is committed to a plan to lsquosellrsquo a property that is in use and the transfer of the property will be accounted for as ldquoa sale and finance leasebackrdquo
Example
Not yet committed to plan to sell
Committed but not a completed sale within one year
copy 2005-13 Nelson Consulting Limited 26
3 Classification as Held For Sale
bull IFRS 5 also specifies that
ndash An entity that is committed to a sale planinvolving loss of control of a subsidiary shall
bull classify all the assets and liabilities of that subsidiary as held for sale
ndash when the criteria set out in IFRS 5 6 to 8 (ie available for immediate sale and highly probable) are met regardless of whether the entity will retain a non-controlling interest in its former subsidiary after the sale (IFRS 58A)
bull disclose the information required in IFRS 533 to 36 (ie presenting as discontinued operation)
ndash when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
Measurement may not be the
same
Affect presentation
only
14
copy 2005-13 Nelson Consulting Limited 27
3 Classification as Held For Sale
Extension to Complete Beyond 1 year
Highly Probable
Extension to complete sale beyond one year
bull Events or circumstances may extend the period to complete the sale beyond one year
bull Not preclude an asset from being classified as held for sale if
1 the delay is caused by events or circumstances beyond the entityrsquos control and
2 there is sufficient evidence that the entity remains committed to its plan to sell the asset (or disposal group)
Beyond Control
Remain Committed
1 Year
copy 2005-13 Nelson Consulting Limited 28
3 Classification as Held For SaleCase
bull On September 20 2012 the Group announced that it has reached an agreement with Kleinwort Benson Group a wholly owned subsidiary of RHJ International on the sale of BHF-BANK AG
ndash The transaction is subject to regulatory approvals ndash Closing is not expected to occur before the publication
of this interim report ndash Given the uncertainty created by outstanding
substantive approvals the Group bull does not consider held for sale classification
appropriate as of March 31 2013 andbull will not reclassify the disposal group as held for
sale until such approvals are given
Deutsche BankInterim Report as of March 31 2013
15
copy 2005-13 Nelson Consulting Limited 29
Sale transactions includendash exchanges of non-current assets for other non-current assets
when the exchange has commercial substance in accordance with IAS 16 Property Plant and Equipment
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
Non-current asset (or disposal group) acquired exclusively with a view to its subsequent disposalshall be classified as held for sale at the acquisition date only ifndash the one-year requirement is met and
ndash it is highly probable that any other criteria that are not met at that date will be met within a short periodfollowing the acquisition (usually within 3 months)
copy 2005-13 Nelson Consulting Limited 30
Events after the Reporting Period
bull If the criteria to be classified as asset held for sale are met after the reporting period(for example the criteria have been met on 2 Jan 2012 for the year ended 31 Dec 2011)ndash an entity shall not classify a non-current asset (or
disposal group) as held for sale in those financial statements when issued
bull When those criteria are met after the reporting period but before the authorisation of the financial statements for issue ndash the entity shall disclose the information specified
in IFRS 541(a) (b) and (d) in the notes (to be discussed as ldquoAdditional Disclosuresrdquo later)
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
16
copy 2005-13 Nelson Consulting Limited 31
3 Classification as Held For Distribution
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 32
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull A non-current asset (or disposal group) is classified as held for distribution to owners ndash when the entity is committed to distribute the asset (or disposal group) to
the owners
bull For this to be the case ndash the assets must be available for immediate
distribution in their present condition and
ndash the distribution must be highly probable
Available for Immediate Distribution
Highly Probable
17
copy 2005-13 Nelson Consulting Limited 33
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull For the distribution to be highly probable
The entity is committed to distribute the asset (or disposal group) to the owners
Actions to complete the distribution must have been initiated and should be expected to be completed within one year from the date of classification
Actions required to complete the distribution should indicate that it is unlikelybullthat significant changes to the distribution will be made or bullthat the distribution will be withdrawn
The probability of shareholdersrsquo approval (if required in the jurisdiction) should be considered as part of the assessment of whether the distribution is highly probable
Available for Immediate Distribution
Highly Probable
copy 2005-13 Nelson Consulting Limited 34
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull If such disposal group meets the criteria as an operation (what is ldquoan operationrdquo discussed later)
ndash the entity shall still present the results and cash flows of the disposal group as
bull discontinued operations at the date on which it ceases to be used
bull Shall not classify them as held for sale
bull Because its carrying amount will be
ndash recovered principally through continuing use
ndash not recovered principally through a sale transaction
18
copy 2005-13 Nelson Consulting Limited 35
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull Non-current assets (or disposal groups) to be abandoned include
ndash non-current assets (disposal group)
bull used to the end of their economic life
bull closed rather than sold
bull An entity shall not account for a non-current asset thathas been temporarily taken out of use as if it had been abandoned
Not within IFRS 5
copy 2005-13 Nelson Consulting Limited 36
4 Measurement
bull An entity shall measure non-current asset (or disposal group) classified as held for sale at the lower of itsbull Carrying amount and
bull Fair value less costs to sell (IFRS 515)
bull When the sale is expected to occur beyond one year
ndash the entity shall measure the costs to sell at their present value
bull Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost
Classification
Measurement
Presentation
Classification
Measurement
Presentation
Any implication on
ndash newly acquired assets
ndash assets acquired under business combination
bull An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of itsbull Carrying amount and
bull Fair value less costs to distribute (IFRS 515A)
19
copy 2005-13 Nelson Consulting Limited 37
4 Measurement
bull An entity shall not depreciate (or amortise) a non-current asset while
ndash it is classified as held for sale or
ndash while it is part of a disposal group classified as held for sale
bull Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
ndash shall continue to be recognised
copy 2005-13 Nelson Consulting Limited 38
4 Measurement
Annual Report 2012 ndash Notes to financial statements Assets acquired in exchange for loansndash Non-financial assets acquired in exchange for loans as part of an orderly
realisation are recorded as assets held for sale and reported in lsquoOther assetsrsquo if bull the carrying amounts of the assets are recovered principally through sale bull the assets are available for sale in their present condition and bull their sale is highly probable
ndash The asset acquired is recorded at the lower ofbull its fair value less costs to sell and bull the carrying amount of the loan (net of impairment allowance) at the date of
exchange ndash No depreciation is charged in respect of assets held for sale ndash Any subsequent write-down of the acquired asset to fair value less costs to sell
is recognised in the income statement in lsquoOther operating incomersquondash Any subsequent increase in the fair value less costs to sell to the extent this
does not exceed the cumulative write-down is also recognised in lsquoOther operating incomersquo together with any realised gains or losses on disposal
Case
20
copy 2005-13 Nelson Consulting Limited 39
4 Measurement ndash Change
Changes to a plan of sale
If the criteria to be classified as held for saleare no longer metndash the entity shall cease to classify the asset as held for sale
ndash then an entity shall measure such non-current asset that ceases to be classified as held for sale at the lower of
bull its carrying amount before the asset was classified as held for sale
ndash adjusted for any depreciation amortisation or revaluations that would have been recognised had the asset not been classified as held for sale and
bull its recoverable amount at the date of the subsequent decision not to sell
ndash Any consequential adjustment shall be included
bull in income from continuing operations in the period in which the criteria on asset to be classified as held for sale are no longer met
bull unless revaluation under IAS 1638 is adopted before classification as held for sale
copy 2005-13 Nelson Consulting Limited 40
bull At beginning of Year 1 Entity A acquired a motor vehicle with an estimated useful of 10 years at $800000 (with no residual value)
bull After the receipt of the vehicle 5 days later Entity A decided to sell it
4 Measurement ndash ChangeExample
Vehicle is carried at $800000 and classified as non-current asset held for sale
Cease to classify it as held for salebull had the asset not been classified
as held for sale the carrying amount would be $720000 (depreciated over 10 years)
bull A year later Entity A decided to withdraw the sale and use the vehicle for its own travelling purpose
bull At that date Entity A estimates that the recoverable amount may be
1) $750000 or
2) $600000
bull Calculate the necessary adjustments
bull The planned disposal fulfilled the criteria under IFRS 5 and the fair value less estimated costs to sell is same as cost
Vehicle carried at $720K and adjustment to PL is $80K
Vehicle carried at $600K and adjustment to PL is $200K
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
8
copy 2005-13 Nelson Consulting Limited 15
Items to be reclassifiedProperty $4MLiabilities $2MGoodwill $1MNet $3M
Goodwill $2M
2 Scope of IFRS 5Example
bull Entity A a garment manufacturing company has acquired a property holding company Entity X for HK$6 million
bull At the date of acquisition Entity X holds 2 properties with same fair value at HK$4 million each
bull Entity X has 2 separate outstanding bank loans of HK$2 million each to finance the purchase of its 2 properties and the loan is secured by the properties
bull Entity X has no other assets and liabilitiesbull Entity A intends to dispose of one of the
above propertiesbull If the disposal fulfils the criteria in
IFRS 5 what is the consequence of the reclassification
Cost of acquisition $6M
Total assets $8M
Total liabilities $4M
Cost of property $4M
copy 2005-13 Nelson Consulting Limited 16
2 Scope of IFRS 5
bull Measurement requirements of IFRS 5 also apply to all recognised non-current asset and to all disposal groups except for(either as individual assets or as part of a disposal group)
Classification
Measurement
Presentation
Excluded items Relevant IFRSIAS
Deferred tax assets IAS 12
Assets arising from employee benefits IAS 19
Financial assets within the scope of IAS 39 IAS 39
Non-current assets accounted for in fair value model in IAS 40
IAS 40
Non-current assets measured at fair value less costs to sell under IAS 41
IAS 41
Contractual rights under insurance contracts as defined in IFRS 4
IFRS 4
9
copy 2005-13 Nelson Consulting Limited 17
2 Scope of IFRS 5
bull The classification presentation and measurement requirements in IFRS 5 applicable to a non-current asset (or disposal group) that is classified as held for sale apply also to
ndash a non-current asset (or disposal group) that is classified as held for distribution to owners acting in their capacity as owners (held for distribution to owners) (IFRS 55A)
bull While IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations
ndash disclosures in other IFRSs do not apply to such assets (or disposal groups)unless those IFRSs require
a) specific disclosures in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations or
b) disclosures about measurement of assets and liabilities within a disposal group that are not within the scope of the measurement requirement of IFRS 5 and such disclosure are not already provided in the other notes to the financial statements (IFRS 55B)
copy 2005-13 Nelson Consulting Limited 18
Classification
Measurement
Presentation
For this to be the caseFor this to be the case
3 Classification as Held For Sale
Classification
Measurement
Presentation
bull An entity shall classify a non-current asset (or disposal group) as held for sale if
ndash its carrying amount will be recovered principally
bull through a sale transaction
bull rather than through continuing use
bull the asset (or disposal group) must beavailable for immediate sale
bull its sale must be highly probable
Available for Immediate Sale
Highly Probable
10
copy 2005-13 Nelson Consulting Limited 19
3 Classification as Held For Sale
Available for Immediate Sale
To be classified as held for sale
bull the asset (or disposal group) must be available for immediate sale
ndash in its present condition
ndash subject only to terms that are usual and customary for sales of such assets (or disposal groups)
copy 2005-13 Nelson Consulting Limited 20
3 Classification as Held For SaleCase
The accounting policy on repossessed assets in Annual Report 2012
ndash Non-financial assets acquired in exchange for loans in order to achieve an orderly realisation
bull are reported under ldquoAssets held for salerdquo if ndash the carrying amounts of the assets are
recovered principally through sale
ndash the assets are available for sale in their present condition and
ndash the sale is highly probable
11
copy 2005-13 Nelson Consulting Limited 21
An entity is committed to a plan to sell its headquarters building and has initiated actions to locate a buyer
However the entity has 2 plans and intends to
1 transfer the building to the buyer after it vacates the building or
2 continue to use the building untilconstruction of a new headquartersbuilding is completed
3 Classification as Held For SaleExample
The time necessary to vacate is usual and customary for sale of such asset
The delay in time implies not available for immediate sale
copy 2005-13 Nelson Consulting Limited 22
An entity is committed to a plan to sell a manufacturing facility and has initiated actions to locate a buyerAt the plan commitment date there is a backlog of uncompleted customer orders
The entity has 2 plans and intends to1 sell the facility with its operations
Any uncompleted customer orders at the sale date will be transferred to the buyer
2 sell the facility but without its operations The entity does not intend to transfer the facility to a buyer until after it ceases all operations of the facility and eliminates the backlog of uncompleted customer orders
3 Classification as Held For SaleExample
It will not affect the timing of the transfer
The delay in the timing of the transfer of the facility imposed by the entity (seller) demonstrates that the facility is not available for immediate sale
12
copy 2005-13 Nelson Consulting Limited 23
3 Classification as Held For Sale
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 24
3 Classification as Held For Sale
Annual Report 2012bull Non-current assets and disposal groups classified as
held for salendash Non-current assets or disposal groups are classified as
held for salebull if their carrying amount will be principally recovered
through a sale transaction rather than through continuing use
ndash This requires that bull the asset or disposal group must be available for
immediate sale in its present condition and bull its sale must be highly probable
ndash The appropriate level of management must be committed to a plan to sell the asset or disposal group and the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification
Case
13
copy 2005-13 Nelson Consulting Limited 25
3 Classification as Held For Sale
Can the following situations fulfill the criteria to be classified as held for sale
a) Entity A a commercial leasing and finance company is holding for sale or lease equipment thatbull has recently ceased to be leased
andbull the ultimate form of a future
transaction (sale or lease) has not yet been determined
b) Entity B is committed to a plan to lsquosellrsquo a property that is in use and the transfer of the property will be accounted for as ldquoa sale and finance leasebackrdquo
Example
Not yet committed to plan to sell
Committed but not a completed sale within one year
copy 2005-13 Nelson Consulting Limited 26
3 Classification as Held For Sale
bull IFRS 5 also specifies that
ndash An entity that is committed to a sale planinvolving loss of control of a subsidiary shall
bull classify all the assets and liabilities of that subsidiary as held for sale
ndash when the criteria set out in IFRS 5 6 to 8 (ie available for immediate sale and highly probable) are met regardless of whether the entity will retain a non-controlling interest in its former subsidiary after the sale (IFRS 58A)
bull disclose the information required in IFRS 533 to 36 (ie presenting as discontinued operation)
ndash when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
Measurement may not be the
same
Affect presentation
only
14
copy 2005-13 Nelson Consulting Limited 27
3 Classification as Held For Sale
Extension to Complete Beyond 1 year
Highly Probable
Extension to complete sale beyond one year
bull Events or circumstances may extend the period to complete the sale beyond one year
bull Not preclude an asset from being classified as held for sale if
1 the delay is caused by events or circumstances beyond the entityrsquos control and
2 there is sufficient evidence that the entity remains committed to its plan to sell the asset (or disposal group)
Beyond Control
Remain Committed
1 Year
copy 2005-13 Nelson Consulting Limited 28
3 Classification as Held For SaleCase
bull On September 20 2012 the Group announced that it has reached an agreement with Kleinwort Benson Group a wholly owned subsidiary of RHJ International on the sale of BHF-BANK AG
ndash The transaction is subject to regulatory approvals ndash Closing is not expected to occur before the publication
of this interim report ndash Given the uncertainty created by outstanding
substantive approvals the Group bull does not consider held for sale classification
appropriate as of March 31 2013 andbull will not reclassify the disposal group as held for
sale until such approvals are given
Deutsche BankInterim Report as of March 31 2013
15
copy 2005-13 Nelson Consulting Limited 29
Sale transactions includendash exchanges of non-current assets for other non-current assets
when the exchange has commercial substance in accordance with IAS 16 Property Plant and Equipment
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
Non-current asset (or disposal group) acquired exclusively with a view to its subsequent disposalshall be classified as held for sale at the acquisition date only ifndash the one-year requirement is met and
ndash it is highly probable that any other criteria that are not met at that date will be met within a short periodfollowing the acquisition (usually within 3 months)
copy 2005-13 Nelson Consulting Limited 30
Events after the Reporting Period
bull If the criteria to be classified as asset held for sale are met after the reporting period(for example the criteria have been met on 2 Jan 2012 for the year ended 31 Dec 2011)ndash an entity shall not classify a non-current asset (or
disposal group) as held for sale in those financial statements when issued
bull When those criteria are met after the reporting period but before the authorisation of the financial statements for issue ndash the entity shall disclose the information specified
in IFRS 541(a) (b) and (d) in the notes (to be discussed as ldquoAdditional Disclosuresrdquo later)
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
16
copy 2005-13 Nelson Consulting Limited 31
3 Classification as Held For Distribution
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 32
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull A non-current asset (or disposal group) is classified as held for distribution to owners ndash when the entity is committed to distribute the asset (or disposal group) to
the owners
bull For this to be the case ndash the assets must be available for immediate
distribution in their present condition and
ndash the distribution must be highly probable
Available for Immediate Distribution
Highly Probable
17
copy 2005-13 Nelson Consulting Limited 33
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull For the distribution to be highly probable
The entity is committed to distribute the asset (or disposal group) to the owners
Actions to complete the distribution must have been initiated and should be expected to be completed within one year from the date of classification
Actions required to complete the distribution should indicate that it is unlikelybullthat significant changes to the distribution will be made or bullthat the distribution will be withdrawn
The probability of shareholdersrsquo approval (if required in the jurisdiction) should be considered as part of the assessment of whether the distribution is highly probable
Available for Immediate Distribution
Highly Probable
copy 2005-13 Nelson Consulting Limited 34
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull If such disposal group meets the criteria as an operation (what is ldquoan operationrdquo discussed later)
ndash the entity shall still present the results and cash flows of the disposal group as
bull discontinued operations at the date on which it ceases to be used
bull Shall not classify them as held for sale
bull Because its carrying amount will be
ndash recovered principally through continuing use
ndash not recovered principally through a sale transaction
18
copy 2005-13 Nelson Consulting Limited 35
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull Non-current assets (or disposal groups) to be abandoned include
ndash non-current assets (disposal group)
bull used to the end of their economic life
bull closed rather than sold
bull An entity shall not account for a non-current asset thathas been temporarily taken out of use as if it had been abandoned
Not within IFRS 5
copy 2005-13 Nelson Consulting Limited 36
4 Measurement
bull An entity shall measure non-current asset (or disposal group) classified as held for sale at the lower of itsbull Carrying amount and
bull Fair value less costs to sell (IFRS 515)
bull When the sale is expected to occur beyond one year
ndash the entity shall measure the costs to sell at their present value
bull Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost
Classification
Measurement
Presentation
Classification
Measurement
Presentation
Any implication on
ndash newly acquired assets
ndash assets acquired under business combination
bull An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of itsbull Carrying amount and
bull Fair value less costs to distribute (IFRS 515A)
19
copy 2005-13 Nelson Consulting Limited 37
4 Measurement
bull An entity shall not depreciate (or amortise) a non-current asset while
ndash it is classified as held for sale or
ndash while it is part of a disposal group classified as held for sale
bull Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
ndash shall continue to be recognised
copy 2005-13 Nelson Consulting Limited 38
4 Measurement
Annual Report 2012 ndash Notes to financial statements Assets acquired in exchange for loansndash Non-financial assets acquired in exchange for loans as part of an orderly
realisation are recorded as assets held for sale and reported in lsquoOther assetsrsquo if bull the carrying amounts of the assets are recovered principally through sale bull the assets are available for sale in their present condition and bull their sale is highly probable
ndash The asset acquired is recorded at the lower ofbull its fair value less costs to sell and bull the carrying amount of the loan (net of impairment allowance) at the date of
exchange ndash No depreciation is charged in respect of assets held for sale ndash Any subsequent write-down of the acquired asset to fair value less costs to sell
is recognised in the income statement in lsquoOther operating incomersquondash Any subsequent increase in the fair value less costs to sell to the extent this
does not exceed the cumulative write-down is also recognised in lsquoOther operating incomersquo together with any realised gains or losses on disposal
Case
20
copy 2005-13 Nelson Consulting Limited 39
4 Measurement ndash Change
Changes to a plan of sale
If the criteria to be classified as held for saleare no longer metndash the entity shall cease to classify the asset as held for sale
ndash then an entity shall measure such non-current asset that ceases to be classified as held for sale at the lower of
bull its carrying amount before the asset was classified as held for sale
ndash adjusted for any depreciation amortisation or revaluations that would have been recognised had the asset not been classified as held for sale and
bull its recoverable amount at the date of the subsequent decision not to sell
ndash Any consequential adjustment shall be included
bull in income from continuing operations in the period in which the criteria on asset to be classified as held for sale are no longer met
bull unless revaluation under IAS 1638 is adopted before classification as held for sale
copy 2005-13 Nelson Consulting Limited 40
bull At beginning of Year 1 Entity A acquired a motor vehicle with an estimated useful of 10 years at $800000 (with no residual value)
bull After the receipt of the vehicle 5 days later Entity A decided to sell it
4 Measurement ndash ChangeExample
Vehicle is carried at $800000 and classified as non-current asset held for sale
Cease to classify it as held for salebull had the asset not been classified
as held for sale the carrying amount would be $720000 (depreciated over 10 years)
bull A year later Entity A decided to withdraw the sale and use the vehicle for its own travelling purpose
bull At that date Entity A estimates that the recoverable amount may be
1) $750000 or
2) $600000
bull Calculate the necessary adjustments
bull The planned disposal fulfilled the criteria under IFRS 5 and the fair value less estimated costs to sell is same as cost
Vehicle carried at $720K and adjustment to PL is $80K
Vehicle carried at $600K and adjustment to PL is $200K
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
9
copy 2005-13 Nelson Consulting Limited 17
2 Scope of IFRS 5
bull The classification presentation and measurement requirements in IFRS 5 applicable to a non-current asset (or disposal group) that is classified as held for sale apply also to
ndash a non-current asset (or disposal group) that is classified as held for distribution to owners acting in their capacity as owners (held for distribution to owners) (IFRS 55A)
bull While IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations
ndash disclosures in other IFRSs do not apply to such assets (or disposal groups)unless those IFRSs require
a) specific disclosures in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations or
b) disclosures about measurement of assets and liabilities within a disposal group that are not within the scope of the measurement requirement of IFRS 5 and such disclosure are not already provided in the other notes to the financial statements (IFRS 55B)
copy 2005-13 Nelson Consulting Limited 18
Classification
Measurement
Presentation
For this to be the caseFor this to be the case
3 Classification as Held For Sale
Classification
Measurement
Presentation
bull An entity shall classify a non-current asset (or disposal group) as held for sale if
ndash its carrying amount will be recovered principally
bull through a sale transaction
bull rather than through continuing use
bull the asset (or disposal group) must beavailable for immediate sale
bull its sale must be highly probable
Available for Immediate Sale
Highly Probable
10
copy 2005-13 Nelson Consulting Limited 19
3 Classification as Held For Sale
Available for Immediate Sale
To be classified as held for sale
bull the asset (or disposal group) must be available for immediate sale
ndash in its present condition
ndash subject only to terms that are usual and customary for sales of such assets (or disposal groups)
copy 2005-13 Nelson Consulting Limited 20
3 Classification as Held For SaleCase
The accounting policy on repossessed assets in Annual Report 2012
ndash Non-financial assets acquired in exchange for loans in order to achieve an orderly realisation
bull are reported under ldquoAssets held for salerdquo if ndash the carrying amounts of the assets are
recovered principally through sale
ndash the assets are available for sale in their present condition and
ndash the sale is highly probable
11
copy 2005-13 Nelson Consulting Limited 21
An entity is committed to a plan to sell its headquarters building and has initiated actions to locate a buyer
However the entity has 2 plans and intends to
1 transfer the building to the buyer after it vacates the building or
2 continue to use the building untilconstruction of a new headquartersbuilding is completed
3 Classification as Held For SaleExample
The time necessary to vacate is usual and customary for sale of such asset
The delay in time implies not available for immediate sale
copy 2005-13 Nelson Consulting Limited 22
An entity is committed to a plan to sell a manufacturing facility and has initiated actions to locate a buyerAt the plan commitment date there is a backlog of uncompleted customer orders
The entity has 2 plans and intends to1 sell the facility with its operations
Any uncompleted customer orders at the sale date will be transferred to the buyer
2 sell the facility but without its operations The entity does not intend to transfer the facility to a buyer until after it ceases all operations of the facility and eliminates the backlog of uncompleted customer orders
3 Classification as Held For SaleExample
It will not affect the timing of the transfer
The delay in the timing of the transfer of the facility imposed by the entity (seller) demonstrates that the facility is not available for immediate sale
12
copy 2005-13 Nelson Consulting Limited 23
3 Classification as Held For Sale
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 24
3 Classification as Held For Sale
Annual Report 2012bull Non-current assets and disposal groups classified as
held for salendash Non-current assets or disposal groups are classified as
held for salebull if their carrying amount will be principally recovered
through a sale transaction rather than through continuing use
ndash This requires that bull the asset or disposal group must be available for
immediate sale in its present condition and bull its sale must be highly probable
ndash The appropriate level of management must be committed to a plan to sell the asset or disposal group and the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification
Case
13
copy 2005-13 Nelson Consulting Limited 25
3 Classification as Held For Sale
Can the following situations fulfill the criteria to be classified as held for sale
a) Entity A a commercial leasing and finance company is holding for sale or lease equipment thatbull has recently ceased to be leased
andbull the ultimate form of a future
transaction (sale or lease) has not yet been determined
b) Entity B is committed to a plan to lsquosellrsquo a property that is in use and the transfer of the property will be accounted for as ldquoa sale and finance leasebackrdquo
Example
Not yet committed to plan to sell
Committed but not a completed sale within one year
copy 2005-13 Nelson Consulting Limited 26
3 Classification as Held For Sale
bull IFRS 5 also specifies that
ndash An entity that is committed to a sale planinvolving loss of control of a subsidiary shall
bull classify all the assets and liabilities of that subsidiary as held for sale
ndash when the criteria set out in IFRS 5 6 to 8 (ie available for immediate sale and highly probable) are met regardless of whether the entity will retain a non-controlling interest in its former subsidiary after the sale (IFRS 58A)
bull disclose the information required in IFRS 533 to 36 (ie presenting as discontinued operation)
ndash when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
Measurement may not be the
same
Affect presentation
only
14
copy 2005-13 Nelson Consulting Limited 27
3 Classification as Held For Sale
Extension to Complete Beyond 1 year
Highly Probable
Extension to complete sale beyond one year
bull Events or circumstances may extend the period to complete the sale beyond one year
bull Not preclude an asset from being classified as held for sale if
1 the delay is caused by events or circumstances beyond the entityrsquos control and
2 there is sufficient evidence that the entity remains committed to its plan to sell the asset (or disposal group)
Beyond Control
Remain Committed
1 Year
copy 2005-13 Nelson Consulting Limited 28
3 Classification as Held For SaleCase
bull On September 20 2012 the Group announced that it has reached an agreement with Kleinwort Benson Group a wholly owned subsidiary of RHJ International on the sale of BHF-BANK AG
ndash The transaction is subject to regulatory approvals ndash Closing is not expected to occur before the publication
of this interim report ndash Given the uncertainty created by outstanding
substantive approvals the Group bull does not consider held for sale classification
appropriate as of March 31 2013 andbull will not reclassify the disposal group as held for
sale until such approvals are given
Deutsche BankInterim Report as of March 31 2013
15
copy 2005-13 Nelson Consulting Limited 29
Sale transactions includendash exchanges of non-current assets for other non-current assets
when the exchange has commercial substance in accordance with IAS 16 Property Plant and Equipment
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
Non-current asset (or disposal group) acquired exclusively with a view to its subsequent disposalshall be classified as held for sale at the acquisition date only ifndash the one-year requirement is met and
ndash it is highly probable that any other criteria that are not met at that date will be met within a short periodfollowing the acquisition (usually within 3 months)
copy 2005-13 Nelson Consulting Limited 30
Events after the Reporting Period
bull If the criteria to be classified as asset held for sale are met after the reporting period(for example the criteria have been met on 2 Jan 2012 for the year ended 31 Dec 2011)ndash an entity shall not classify a non-current asset (or
disposal group) as held for sale in those financial statements when issued
bull When those criteria are met after the reporting period but before the authorisation of the financial statements for issue ndash the entity shall disclose the information specified
in IFRS 541(a) (b) and (d) in the notes (to be discussed as ldquoAdditional Disclosuresrdquo later)
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
16
copy 2005-13 Nelson Consulting Limited 31
3 Classification as Held For Distribution
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 32
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull A non-current asset (or disposal group) is classified as held for distribution to owners ndash when the entity is committed to distribute the asset (or disposal group) to
the owners
bull For this to be the case ndash the assets must be available for immediate
distribution in their present condition and
ndash the distribution must be highly probable
Available for Immediate Distribution
Highly Probable
17
copy 2005-13 Nelson Consulting Limited 33
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull For the distribution to be highly probable
The entity is committed to distribute the asset (or disposal group) to the owners
Actions to complete the distribution must have been initiated and should be expected to be completed within one year from the date of classification
Actions required to complete the distribution should indicate that it is unlikelybullthat significant changes to the distribution will be made or bullthat the distribution will be withdrawn
The probability of shareholdersrsquo approval (if required in the jurisdiction) should be considered as part of the assessment of whether the distribution is highly probable
Available for Immediate Distribution
Highly Probable
copy 2005-13 Nelson Consulting Limited 34
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull If such disposal group meets the criteria as an operation (what is ldquoan operationrdquo discussed later)
ndash the entity shall still present the results and cash flows of the disposal group as
bull discontinued operations at the date on which it ceases to be used
bull Shall not classify them as held for sale
bull Because its carrying amount will be
ndash recovered principally through continuing use
ndash not recovered principally through a sale transaction
18
copy 2005-13 Nelson Consulting Limited 35
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull Non-current assets (or disposal groups) to be abandoned include
ndash non-current assets (disposal group)
bull used to the end of their economic life
bull closed rather than sold
bull An entity shall not account for a non-current asset thathas been temporarily taken out of use as if it had been abandoned
Not within IFRS 5
copy 2005-13 Nelson Consulting Limited 36
4 Measurement
bull An entity shall measure non-current asset (or disposal group) classified as held for sale at the lower of itsbull Carrying amount and
bull Fair value less costs to sell (IFRS 515)
bull When the sale is expected to occur beyond one year
ndash the entity shall measure the costs to sell at their present value
bull Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost
Classification
Measurement
Presentation
Classification
Measurement
Presentation
Any implication on
ndash newly acquired assets
ndash assets acquired under business combination
bull An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of itsbull Carrying amount and
bull Fair value less costs to distribute (IFRS 515A)
19
copy 2005-13 Nelson Consulting Limited 37
4 Measurement
bull An entity shall not depreciate (or amortise) a non-current asset while
ndash it is classified as held for sale or
ndash while it is part of a disposal group classified as held for sale
bull Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
ndash shall continue to be recognised
copy 2005-13 Nelson Consulting Limited 38
4 Measurement
Annual Report 2012 ndash Notes to financial statements Assets acquired in exchange for loansndash Non-financial assets acquired in exchange for loans as part of an orderly
realisation are recorded as assets held for sale and reported in lsquoOther assetsrsquo if bull the carrying amounts of the assets are recovered principally through sale bull the assets are available for sale in their present condition and bull their sale is highly probable
ndash The asset acquired is recorded at the lower ofbull its fair value less costs to sell and bull the carrying amount of the loan (net of impairment allowance) at the date of
exchange ndash No depreciation is charged in respect of assets held for sale ndash Any subsequent write-down of the acquired asset to fair value less costs to sell
is recognised in the income statement in lsquoOther operating incomersquondash Any subsequent increase in the fair value less costs to sell to the extent this
does not exceed the cumulative write-down is also recognised in lsquoOther operating incomersquo together with any realised gains or losses on disposal
Case
20
copy 2005-13 Nelson Consulting Limited 39
4 Measurement ndash Change
Changes to a plan of sale
If the criteria to be classified as held for saleare no longer metndash the entity shall cease to classify the asset as held for sale
ndash then an entity shall measure such non-current asset that ceases to be classified as held for sale at the lower of
bull its carrying amount before the asset was classified as held for sale
ndash adjusted for any depreciation amortisation or revaluations that would have been recognised had the asset not been classified as held for sale and
bull its recoverable amount at the date of the subsequent decision not to sell
ndash Any consequential adjustment shall be included
bull in income from continuing operations in the period in which the criteria on asset to be classified as held for sale are no longer met
bull unless revaluation under IAS 1638 is adopted before classification as held for sale
copy 2005-13 Nelson Consulting Limited 40
bull At beginning of Year 1 Entity A acquired a motor vehicle with an estimated useful of 10 years at $800000 (with no residual value)
bull After the receipt of the vehicle 5 days later Entity A decided to sell it
4 Measurement ndash ChangeExample
Vehicle is carried at $800000 and classified as non-current asset held for sale
Cease to classify it as held for salebull had the asset not been classified
as held for sale the carrying amount would be $720000 (depreciated over 10 years)
bull A year later Entity A decided to withdraw the sale and use the vehicle for its own travelling purpose
bull At that date Entity A estimates that the recoverable amount may be
1) $750000 or
2) $600000
bull Calculate the necessary adjustments
bull The planned disposal fulfilled the criteria under IFRS 5 and the fair value less estimated costs to sell is same as cost
Vehicle carried at $720K and adjustment to PL is $80K
Vehicle carried at $600K and adjustment to PL is $200K
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
10
copy 2005-13 Nelson Consulting Limited 19
3 Classification as Held For Sale
Available for Immediate Sale
To be classified as held for sale
bull the asset (or disposal group) must be available for immediate sale
ndash in its present condition
ndash subject only to terms that are usual and customary for sales of such assets (or disposal groups)
copy 2005-13 Nelson Consulting Limited 20
3 Classification as Held For SaleCase
The accounting policy on repossessed assets in Annual Report 2012
ndash Non-financial assets acquired in exchange for loans in order to achieve an orderly realisation
bull are reported under ldquoAssets held for salerdquo if ndash the carrying amounts of the assets are
recovered principally through sale
ndash the assets are available for sale in their present condition and
ndash the sale is highly probable
11
copy 2005-13 Nelson Consulting Limited 21
An entity is committed to a plan to sell its headquarters building and has initiated actions to locate a buyer
However the entity has 2 plans and intends to
1 transfer the building to the buyer after it vacates the building or
2 continue to use the building untilconstruction of a new headquartersbuilding is completed
3 Classification as Held For SaleExample
The time necessary to vacate is usual and customary for sale of such asset
The delay in time implies not available for immediate sale
copy 2005-13 Nelson Consulting Limited 22
An entity is committed to a plan to sell a manufacturing facility and has initiated actions to locate a buyerAt the plan commitment date there is a backlog of uncompleted customer orders
The entity has 2 plans and intends to1 sell the facility with its operations
Any uncompleted customer orders at the sale date will be transferred to the buyer
2 sell the facility but without its operations The entity does not intend to transfer the facility to a buyer until after it ceases all operations of the facility and eliminates the backlog of uncompleted customer orders
3 Classification as Held For SaleExample
It will not affect the timing of the transfer
The delay in the timing of the transfer of the facility imposed by the entity (seller) demonstrates that the facility is not available for immediate sale
12
copy 2005-13 Nelson Consulting Limited 23
3 Classification as Held For Sale
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 24
3 Classification as Held For Sale
Annual Report 2012bull Non-current assets and disposal groups classified as
held for salendash Non-current assets or disposal groups are classified as
held for salebull if their carrying amount will be principally recovered
through a sale transaction rather than through continuing use
ndash This requires that bull the asset or disposal group must be available for
immediate sale in its present condition and bull its sale must be highly probable
ndash The appropriate level of management must be committed to a plan to sell the asset or disposal group and the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification
Case
13
copy 2005-13 Nelson Consulting Limited 25
3 Classification as Held For Sale
Can the following situations fulfill the criteria to be classified as held for sale
a) Entity A a commercial leasing and finance company is holding for sale or lease equipment thatbull has recently ceased to be leased
andbull the ultimate form of a future
transaction (sale or lease) has not yet been determined
b) Entity B is committed to a plan to lsquosellrsquo a property that is in use and the transfer of the property will be accounted for as ldquoa sale and finance leasebackrdquo
Example
Not yet committed to plan to sell
Committed but not a completed sale within one year
copy 2005-13 Nelson Consulting Limited 26
3 Classification as Held For Sale
bull IFRS 5 also specifies that
ndash An entity that is committed to a sale planinvolving loss of control of a subsidiary shall
bull classify all the assets and liabilities of that subsidiary as held for sale
ndash when the criteria set out in IFRS 5 6 to 8 (ie available for immediate sale and highly probable) are met regardless of whether the entity will retain a non-controlling interest in its former subsidiary after the sale (IFRS 58A)
bull disclose the information required in IFRS 533 to 36 (ie presenting as discontinued operation)
ndash when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
Measurement may not be the
same
Affect presentation
only
14
copy 2005-13 Nelson Consulting Limited 27
3 Classification as Held For Sale
Extension to Complete Beyond 1 year
Highly Probable
Extension to complete sale beyond one year
bull Events or circumstances may extend the period to complete the sale beyond one year
bull Not preclude an asset from being classified as held for sale if
1 the delay is caused by events or circumstances beyond the entityrsquos control and
2 there is sufficient evidence that the entity remains committed to its plan to sell the asset (or disposal group)
Beyond Control
Remain Committed
1 Year
copy 2005-13 Nelson Consulting Limited 28
3 Classification as Held For SaleCase
bull On September 20 2012 the Group announced that it has reached an agreement with Kleinwort Benson Group a wholly owned subsidiary of RHJ International on the sale of BHF-BANK AG
ndash The transaction is subject to regulatory approvals ndash Closing is not expected to occur before the publication
of this interim report ndash Given the uncertainty created by outstanding
substantive approvals the Group bull does not consider held for sale classification
appropriate as of March 31 2013 andbull will not reclassify the disposal group as held for
sale until such approvals are given
Deutsche BankInterim Report as of March 31 2013
15
copy 2005-13 Nelson Consulting Limited 29
Sale transactions includendash exchanges of non-current assets for other non-current assets
when the exchange has commercial substance in accordance with IAS 16 Property Plant and Equipment
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
Non-current asset (or disposal group) acquired exclusively with a view to its subsequent disposalshall be classified as held for sale at the acquisition date only ifndash the one-year requirement is met and
ndash it is highly probable that any other criteria that are not met at that date will be met within a short periodfollowing the acquisition (usually within 3 months)
copy 2005-13 Nelson Consulting Limited 30
Events after the Reporting Period
bull If the criteria to be classified as asset held for sale are met after the reporting period(for example the criteria have been met on 2 Jan 2012 for the year ended 31 Dec 2011)ndash an entity shall not classify a non-current asset (or
disposal group) as held for sale in those financial statements when issued
bull When those criteria are met after the reporting period but before the authorisation of the financial statements for issue ndash the entity shall disclose the information specified
in IFRS 541(a) (b) and (d) in the notes (to be discussed as ldquoAdditional Disclosuresrdquo later)
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
16
copy 2005-13 Nelson Consulting Limited 31
3 Classification as Held For Distribution
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 32
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull A non-current asset (or disposal group) is classified as held for distribution to owners ndash when the entity is committed to distribute the asset (or disposal group) to
the owners
bull For this to be the case ndash the assets must be available for immediate
distribution in their present condition and
ndash the distribution must be highly probable
Available for Immediate Distribution
Highly Probable
17
copy 2005-13 Nelson Consulting Limited 33
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull For the distribution to be highly probable
The entity is committed to distribute the asset (or disposal group) to the owners
Actions to complete the distribution must have been initiated and should be expected to be completed within one year from the date of classification
Actions required to complete the distribution should indicate that it is unlikelybullthat significant changes to the distribution will be made or bullthat the distribution will be withdrawn
The probability of shareholdersrsquo approval (if required in the jurisdiction) should be considered as part of the assessment of whether the distribution is highly probable
Available for Immediate Distribution
Highly Probable
copy 2005-13 Nelson Consulting Limited 34
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull If such disposal group meets the criteria as an operation (what is ldquoan operationrdquo discussed later)
ndash the entity shall still present the results and cash flows of the disposal group as
bull discontinued operations at the date on which it ceases to be used
bull Shall not classify them as held for sale
bull Because its carrying amount will be
ndash recovered principally through continuing use
ndash not recovered principally through a sale transaction
18
copy 2005-13 Nelson Consulting Limited 35
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull Non-current assets (or disposal groups) to be abandoned include
ndash non-current assets (disposal group)
bull used to the end of their economic life
bull closed rather than sold
bull An entity shall not account for a non-current asset thathas been temporarily taken out of use as if it had been abandoned
Not within IFRS 5
copy 2005-13 Nelson Consulting Limited 36
4 Measurement
bull An entity shall measure non-current asset (or disposal group) classified as held for sale at the lower of itsbull Carrying amount and
bull Fair value less costs to sell (IFRS 515)
bull When the sale is expected to occur beyond one year
ndash the entity shall measure the costs to sell at their present value
bull Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost
Classification
Measurement
Presentation
Classification
Measurement
Presentation
Any implication on
ndash newly acquired assets
ndash assets acquired under business combination
bull An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of itsbull Carrying amount and
bull Fair value less costs to distribute (IFRS 515A)
19
copy 2005-13 Nelson Consulting Limited 37
4 Measurement
bull An entity shall not depreciate (or amortise) a non-current asset while
ndash it is classified as held for sale or
ndash while it is part of a disposal group classified as held for sale
bull Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
ndash shall continue to be recognised
copy 2005-13 Nelson Consulting Limited 38
4 Measurement
Annual Report 2012 ndash Notes to financial statements Assets acquired in exchange for loansndash Non-financial assets acquired in exchange for loans as part of an orderly
realisation are recorded as assets held for sale and reported in lsquoOther assetsrsquo if bull the carrying amounts of the assets are recovered principally through sale bull the assets are available for sale in their present condition and bull their sale is highly probable
ndash The asset acquired is recorded at the lower ofbull its fair value less costs to sell and bull the carrying amount of the loan (net of impairment allowance) at the date of
exchange ndash No depreciation is charged in respect of assets held for sale ndash Any subsequent write-down of the acquired asset to fair value less costs to sell
is recognised in the income statement in lsquoOther operating incomersquondash Any subsequent increase in the fair value less costs to sell to the extent this
does not exceed the cumulative write-down is also recognised in lsquoOther operating incomersquo together with any realised gains or losses on disposal
Case
20
copy 2005-13 Nelson Consulting Limited 39
4 Measurement ndash Change
Changes to a plan of sale
If the criteria to be classified as held for saleare no longer metndash the entity shall cease to classify the asset as held for sale
ndash then an entity shall measure such non-current asset that ceases to be classified as held for sale at the lower of
bull its carrying amount before the asset was classified as held for sale
ndash adjusted for any depreciation amortisation or revaluations that would have been recognised had the asset not been classified as held for sale and
bull its recoverable amount at the date of the subsequent decision not to sell
ndash Any consequential adjustment shall be included
bull in income from continuing operations in the period in which the criteria on asset to be classified as held for sale are no longer met
bull unless revaluation under IAS 1638 is adopted before classification as held for sale
copy 2005-13 Nelson Consulting Limited 40
bull At beginning of Year 1 Entity A acquired a motor vehicle with an estimated useful of 10 years at $800000 (with no residual value)
bull After the receipt of the vehicle 5 days later Entity A decided to sell it
4 Measurement ndash ChangeExample
Vehicle is carried at $800000 and classified as non-current asset held for sale
Cease to classify it as held for salebull had the asset not been classified
as held for sale the carrying amount would be $720000 (depreciated over 10 years)
bull A year later Entity A decided to withdraw the sale and use the vehicle for its own travelling purpose
bull At that date Entity A estimates that the recoverable amount may be
1) $750000 or
2) $600000
bull Calculate the necessary adjustments
bull The planned disposal fulfilled the criteria under IFRS 5 and the fair value less estimated costs to sell is same as cost
Vehicle carried at $720K and adjustment to PL is $80K
Vehicle carried at $600K and adjustment to PL is $200K
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
11
copy 2005-13 Nelson Consulting Limited 21
An entity is committed to a plan to sell its headquarters building and has initiated actions to locate a buyer
However the entity has 2 plans and intends to
1 transfer the building to the buyer after it vacates the building or
2 continue to use the building untilconstruction of a new headquartersbuilding is completed
3 Classification as Held For SaleExample
The time necessary to vacate is usual and customary for sale of such asset
The delay in time implies not available for immediate sale
copy 2005-13 Nelson Consulting Limited 22
An entity is committed to a plan to sell a manufacturing facility and has initiated actions to locate a buyerAt the plan commitment date there is a backlog of uncompleted customer orders
The entity has 2 plans and intends to1 sell the facility with its operations
Any uncompleted customer orders at the sale date will be transferred to the buyer
2 sell the facility but without its operations The entity does not intend to transfer the facility to a buyer until after it ceases all operations of the facility and eliminates the backlog of uncompleted customer orders
3 Classification as Held For SaleExample
It will not affect the timing of the transfer
The delay in the timing of the transfer of the facility imposed by the entity (seller) demonstrates that the facility is not available for immediate sale
12
copy 2005-13 Nelson Consulting Limited 23
3 Classification as Held For Sale
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 24
3 Classification as Held For Sale
Annual Report 2012bull Non-current assets and disposal groups classified as
held for salendash Non-current assets or disposal groups are classified as
held for salebull if their carrying amount will be principally recovered
through a sale transaction rather than through continuing use
ndash This requires that bull the asset or disposal group must be available for
immediate sale in its present condition and bull its sale must be highly probable
ndash The appropriate level of management must be committed to a plan to sell the asset or disposal group and the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification
Case
13
copy 2005-13 Nelson Consulting Limited 25
3 Classification as Held For Sale
Can the following situations fulfill the criteria to be classified as held for sale
a) Entity A a commercial leasing and finance company is holding for sale or lease equipment thatbull has recently ceased to be leased
andbull the ultimate form of a future
transaction (sale or lease) has not yet been determined
b) Entity B is committed to a plan to lsquosellrsquo a property that is in use and the transfer of the property will be accounted for as ldquoa sale and finance leasebackrdquo
Example
Not yet committed to plan to sell
Committed but not a completed sale within one year
copy 2005-13 Nelson Consulting Limited 26
3 Classification as Held For Sale
bull IFRS 5 also specifies that
ndash An entity that is committed to a sale planinvolving loss of control of a subsidiary shall
bull classify all the assets and liabilities of that subsidiary as held for sale
ndash when the criteria set out in IFRS 5 6 to 8 (ie available for immediate sale and highly probable) are met regardless of whether the entity will retain a non-controlling interest in its former subsidiary after the sale (IFRS 58A)
bull disclose the information required in IFRS 533 to 36 (ie presenting as discontinued operation)
ndash when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
Measurement may not be the
same
Affect presentation
only
14
copy 2005-13 Nelson Consulting Limited 27
3 Classification as Held For Sale
Extension to Complete Beyond 1 year
Highly Probable
Extension to complete sale beyond one year
bull Events or circumstances may extend the period to complete the sale beyond one year
bull Not preclude an asset from being classified as held for sale if
1 the delay is caused by events or circumstances beyond the entityrsquos control and
2 there is sufficient evidence that the entity remains committed to its plan to sell the asset (or disposal group)
Beyond Control
Remain Committed
1 Year
copy 2005-13 Nelson Consulting Limited 28
3 Classification as Held For SaleCase
bull On September 20 2012 the Group announced that it has reached an agreement with Kleinwort Benson Group a wholly owned subsidiary of RHJ International on the sale of BHF-BANK AG
ndash The transaction is subject to regulatory approvals ndash Closing is not expected to occur before the publication
of this interim report ndash Given the uncertainty created by outstanding
substantive approvals the Group bull does not consider held for sale classification
appropriate as of March 31 2013 andbull will not reclassify the disposal group as held for
sale until such approvals are given
Deutsche BankInterim Report as of March 31 2013
15
copy 2005-13 Nelson Consulting Limited 29
Sale transactions includendash exchanges of non-current assets for other non-current assets
when the exchange has commercial substance in accordance with IAS 16 Property Plant and Equipment
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
Non-current asset (or disposal group) acquired exclusively with a view to its subsequent disposalshall be classified as held for sale at the acquisition date only ifndash the one-year requirement is met and
ndash it is highly probable that any other criteria that are not met at that date will be met within a short periodfollowing the acquisition (usually within 3 months)
copy 2005-13 Nelson Consulting Limited 30
Events after the Reporting Period
bull If the criteria to be classified as asset held for sale are met after the reporting period(for example the criteria have been met on 2 Jan 2012 for the year ended 31 Dec 2011)ndash an entity shall not classify a non-current asset (or
disposal group) as held for sale in those financial statements when issued
bull When those criteria are met after the reporting period but before the authorisation of the financial statements for issue ndash the entity shall disclose the information specified
in IFRS 541(a) (b) and (d) in the notes (to be discussed as ldquoAdditional Disclosuresrdquo later)
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
16
copy 2005-13 Nelson Consulting Limited 31
3 Classification as Held For Distribution
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 32
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull A non-current asset (or disposal group) is classified as held for distribution to owners ndash when the entity is committed to distribute the asset (or disposal group) to
the owners
bull For this to be the case ndash the assets must be available for immediate
distribution in their present condition and
ndash the distribution must be highly probable
Available for Immediate Distribution
Highly Probable
17
copy 2005-13 Nelson Consulting Limited 33
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull For the distribution to be highly probable
The entity is committed to distribute the asset (or disposal group) to the owners
Actions to complete the distribution must have been initiated and should be expected to be completed within one year from the date of classification
Actions required to complete the distribution should indicate that it is unlikelybullthat significant changes to the distribution will be made or bullthat the distribution will be withdrawn
The probability of shareholdersrsquo approval (if required in the jurisdiction) should be considered as part of the assessment of whether the distribution is highly probable
Available for Immediate Distribution
Highly Probable
copy 2005-13 Nelson Consulting Limited 34
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull If such disposal group meets the criteria as an operation (what is ldquoan operationrdquo discussed later)
ndash the entity shall still present the results and cash flows of the disposal group as
bull discontinued operations at the date on which it ceases to be used
bull Shall not classify them as held for sale
bull Because its carrying amount will be
ndash recovered principally through continuing use
ndash not recovered principally through a sale transaction
18
copy 2005-13 Nelson Consulting Limited 35
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull Non-current assets (or disposal groups) to be abandoned include
ndash non-current assets (disposal group)
bull used to the end of their economic life
bull closed rather than sold
bull An entity shall not account for a non-current asset thathas been temporarily taken out of use as if it had been abandoned
Not within IFRS 5
copy 2005-13 Nelson Consulting Limited 36
4 Measurement
bull An entity shall measure non-current asset (or disposal group) classified as held for sale at the lower of itsbull Carrying amount and
bull Fair value less costs to sell (IFRS 515)
bull When the sale is expected to occur beyond one year
ndash the entity shall measure the costs to sell at their present value
bull Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost
Classification
Measurement
Presentation
Classification
Measurement
Presentation
Any implication on
ndash newly acquired assets
ndash assets acquired under business combination
bull An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of itsbull Carrying amount and
bull Fair value less costs to distribute (IFRS 515A)
19
copy 2005-13 Nelson Consulting Limited 37
4 Measurement
bull An entity shall not depreciate (or amortise) a non-current asset while
ndash it is classified as held for sale or
ndash while it is part of a disposal group classified as held for sale
bull Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
ndash shall continue to be recognised
copy 2005-13 Nelson Consulting Limited 38
4 Measurement
Annual Report 2012 ndash Notes to financial statements Assets acquired in exchange for loansndash Non-financial assets acquired in exchange for loans as part of an orderly
realisation are recorded as assets held for sale and reported in lsquoOther assetsrsquo if bull the carrying amounts of the assets are recovered principally through sale bull the assets are available for sale in their present condition and bull their sale is highly probable
ndash The asset acquired is recorded at the lower ofbull its fair value less costs to sell and bull the carrying amount of the loan (net of impairment allowance) at the date of
exchange ndash No depreciation is charged in respect of assets held for sale ndash Any subsequent write-down of the acquired asset to fair value less costs to sell
is recognised in the income statement in lsquoOther operating incomersquondash Any subsequent increase in the fair value less costs to sell to the extent this
does not exceed the cumulative write-down is also recognised in lsquoOther operating incomersquo together with any realised gains or losses on disposal
Case
20
copy 2005-13 Nelson Consulting Limited 39
4 Measurement ndash Change
Changes to a plan of sale
If the criteria to be classified as held for saleare no longer metndash the entity shall cease to classify the asset as held for sale
ndash then an entity shall measure such non-current asset that ceases to be classified as held for sale at the lower of
bull its carrying amount before the asset was classified as held for sale
ndash adjusted for any depreciation amortisation or revaluations that would have been recognised had the asset not been classified as held for sale and
bull its recoverable amount at the date of the subsequent decision not to sell
ndash Any consequential adjustment shall be included
bull in income from continuing operations in the period in which the criteria on asset to be classified as held for sale are no longer met
bull unless revaluation under IAS 1638 is adopted before classification as held for sale
copy 2005-13 Nelson Consulting Limited 40
bull At beginning of Year 1 Entity A acquired a motor vehicle with an estimated useful of 10 years at $800000 (with no residual value)
bull After the receipt of the vehicle 5 days later Entity A decided to sell it
4 Measurement ndash ChangeExample
Vehicle is carried at $800000 and classified as non-current asset held for sale
Cease to classify it as held for salebull had the asset not been classified
as held for sale the carrying amount would be $720000 (depreciated over 10 years)
bull A year later Entity A decided to withdraw the sale and use the vehicle for its own travelling purpose
bull At that date Entity A estimates that the recoverable amount may be
1) $750000 or
2) $600000
bull Calculate the necessary adjustments
bull The planned disposal fulfilled the criteria under IFRS 5 and the fair value less estimated costs to sell is same as cost
Vehicle carried at $720K and adjustment to PL is $80K
Vehicle carried at $600K and adjustment to PL is $200K
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
12
copy 2005-13 Nelson Consulting Limited 23
3 Classification as Held For Sale
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 24
3 Classification as Held For Sale
Annual Report 2012bull Non-current assets and disposal groups classified as
held for salendash Non-current assets or disposal groups are classified as
held for salebull if their carrying amount will be principally recovered
through a sale transaction rather than through continuing use
ndash This requires that bull the asset or disposal group must be available for
immediate sale in its present condition and bull its sale must be highly probable
ndash The appropriate level of management must be committed to a plan to sell the asset or disposal group and the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification
Case
13
copy 2005-13 Nelson Consulting Limited 25
3 Classification as Held For Sale
Can the following situations fulfill the criteria to be classified as held for sale
a) Entity A a commercial leasing and finance company is holding for sale or lease equipment thatbull has recently ceased to be leased
andbull the ultimate form of a future
transaction (sale or lease) has not yet been determined
b) Entity B is committed to a plan to lsquosellrsquo a property that is in use and the transfer of the property will be accounted for as ldquoa sale and finance leasebackrdquo
Example
Not yet committed to plan to sell
Committed but not a completed sale within one year
copy 2005-13 Nelson Consulting Limited 26
3 Classification as Held For Sale
bull IFRS 5 also specifies that
ndash An entity that is committed to a sale planinvolving loss of control of a subsidiary shall
bull classify all the assets and liabilities of that subsidiary as held for sale
ndash when the criteria set out in IFRS 5 6 to 8 (ie available for immediate sale and highly probable) are met regardless of whether the entity will retain a non-controlling interest in its former subsidiary after the sale (IFRS 58A)
bull disclose the information required in IFRS 533 to 36 (ie presenting as discontinued operation)
ndash when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
Measurement may not be the
same
Affect presentation
only
14
copy 2005-13 Nelson Consulting Limited 27
3 Classification as Held For Sale
Extension to Complete Beyond 1 year
Highly Probable
Extension to complete sale beyond one year
bull Events or circumstances may extend the period to complete the sale beyond one year
bull Not preclude an asset from being classified as held for sale if
1 the delay is caused by events or circumstances beyond the entityrsquos control and
2 there is sufficient evidence that the entity remains committed to its plan to sell the asset (or disposal group)
Beyond Control
Remain Committed
1 Year
copy 2005-13 Nelson Consulting Limited 28
3 Classification as Held For SaleCase
bull On September 20 2012 the Group announced that it has reached an agreement with Kleinwort Benson Group a wholly owned subsidiary of RHJ International on the sale of BHF-BANK AG
ndash The transaction is subject to regulatory approvals ndash Closing is not expected to occur before the publication
of this interim report ndash Given the uncertainty created by outstanding
substantive approvals the Group bull does not consider held for sale classification
appropriate as of March 31 2013 andbull will not reclassify the disposal group as held for
sale until such approvals are given
Deutsche BankInterim Report as of March 31 2013
15
copy 2005-13 Nelson Consulting Limited 29
Sale transactions includendash exchanges of non-current assets for other non-current assets
when the exchange has commercial substance in accordance with IAS 16 Property Plant and Equipment
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
Non-current asset (or disposal group) acquired exclusively with a view to its subsequent disposalshall be classified as held for sale at the acquisition date only ifndash the one-year requirement is met and
ndash it is highly probable that any other criteria that are not met at that date will be met within a short periodfollowing the acquisition (usually within 3 months)
copy 2005-13 Nelson Consulting Limited 30
Events after the Reporting Period
bull If the criteria to be classified as asset held for sale are met after the reporting period(for example the criteria have been met on 2 Jan 2012 for the year ended 31 Dec 2011)ndash an entity shall not classify a non-current asset (or
disposal group) as held for sale in those financial statements when issued
bull When those criteria are met after the reporting period but before the authorisation of the financial statements for issue ndash the entity shall disclose the information specified
in IFRS 541(a) (b) and (d) in the notes (to be discussed as ldquoAdditional Disclosuresrdquo later)
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
16
copy 2005-13 Nelson Consulting Limited 31
3 Classification as Held For Distribution
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 32
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull A non-current asset (or disposal group) is classified as held for distribution to owners ndash when the entity is committed to distribute the asset (or disposal group) to
the owners
bull For this to be the case ndash the assets must be available for immediate
distribution in their present condition and
ndash the distribution must be highly probable
Available for Immediate Distribution
Highly Probable
17
copy 2005-13 Nelson Consulting Limited 33
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull For the distribution to be highly probable
The entity is committed to distribute the asset (or disposal group) to the owners
Actions to complete the distribution must have been initiated and should be expected to be completed within one year from the date of classification
Actions required to complete the distribution should indicate that it is unlikelybullthat significant changes to the distribution will be made or bullthat the distribution will be withdrawn
The probability of shareholdersrsquo approval (if required in the jurisdiction) should be considered as part of the assessment of whether the distribution is highly probable
Available for Immediate Distribution
Highly Probable
copy 2005-13 Nelson Consulting Limited 34
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull If such disposal group meets the criteria as an operation (what is ldquoan operationrdquo discussed later)
ndash the entity shall still present the results and cash flows of the disposal group as
bull discontinued operations at the date on which it ceases to be used
bull Shall not classify them as held for sale
bull Because its carrying amount will be
ndash recovered principally through continuing use
ndash not recovered principally through a sale transaction
18
copy 2005-13 Nelson Consulting Limited 35
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull Non-current assets (or disposal groups) to be abandoned include
ndash non-current assets (disposal group)
bull used to the end of their economic life
bull closed rather than sold
bull An entity shall not account for a non-current asset thathas been temporarily taken out of use as if it had been abandoned
Not within IFRS 5
copy 2005-13 Nelson Consulting Limited 36
4 Measurement
bull An entity shall measure non-current asset (or disposal group) classified as held for sale at the lower of itsbull Carrying amount and
bull Fair value less costs to sell (IFRS 515)
bull When the sale is expected to occur beyond one year
ndash the entity shall measure the costs to sell at their present value
bull Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost
Classification
Measurement
Presentation
Classification
Measurement
Presentation
Any implication on
ndash newly acquired assets
ndash assets acquired under business combination
bull An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of itsbull Carrying amount and
bull Fair value less costs to distribute (IFRS 515A)
19
copy 2005-13 Nelson Consulting Limited 37
4 Measurement
bull An entity shall not depreciate (or amortise) a non-current asset while
ndash it is classified as held for sale or
ndash while it is part of a disposal group classified as held for sale
bull Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
ndash shall continue to be recognised
copy 2005-13 Nelson Consulting Limited 38
4 Measurement
Annual Report 2012 ndash Notes to financial statements Assets acquired in exchange for loansndash Non-financial assets acquired in exchange for loans as part of an orderly
realisation are recorded as assets held for sale and reported in lsquoOther assetsrsquo if bull the carrying amounts of the assets are recovered principally through sale bull the assets are available for sale in their present condition and bull their sale is highly probable
ndash The asset acquired is recorded at the lower ofbull its fair value less costs to sell and bull the carrying amount of the loan (net of impairment allowance) at the date of
exchange ndash No depreciation is charged in respect of assets held for sale ndash Any subsequent write-down of the acquired asset to fair value less costs to sell
is recognised in the income statement in lsquoOther operating incomersquondash Any subsequent increase in the fair value less costs to sell to the extent this
does not exceed the cumulative write-down is also recognised in lsquoOther operating incomersquo together with any realised gains or losses on disposal
Case
20
copy 2005-13 Nelson Consulting Limited 39
4 Measurement ndash Change
Changes to a plan of sale
If the criteria to be classified as held for saleare no longer metndash the entity shall cease to classify the asset as held for sale
ndash then an entity shall measure such non-current asset that ceases to be classified as held for sale at the lower of
bull its carrying amount before the asset was classified as held for sale
ndash adjusted for any depreciation amortisation or revaluations that would have been recognised had the asset not been classified as held for sale and
bull its recoverable amount at the date of the subsequent decision not to sell
ndash Any consequential adjustment shall be included
bull in income from continuing operations in the period in which the criteria on asset to be classified as held for sale are no longer met
bull unless revaluation under IAS 1638 is adopted before classification as held for sale
copy 2005-13 Nelson Consulting Limited 40
bull At beginning of Year 1 Entity A acquired a motor vehicle with an estimated useful of 10 years at $800000 (with no residual value)
bull After the receipt of the vehicle 5 days later Entity A decided to sell it
4 Measurement ndash ChangeExample
Vehicle is carried at $800000 and classified as non-current asset held for sale
Cease to classify it as held for salebull had the asset not been classified
as held for sale the carrying amount would be $720000 (depreciated over 10 years)
bull A year later Entity A decided to withdraw the sale and use the vehicle for its own travelling purpose
bull At that date Entity A estimates that the recoverable amount may be
1) $750000 or
2) $600000
bull Calculate the necessary adjustments
bull The planned disposal fulfilled the criteria under IFRS 5 and the fair value less estimated costs to sell is same as cost
Vehicle carried at $720K and adjustment to PL is $80K
Vehicle carried at $600K and adjustment to PL is $200K
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
13
copy 2005-13 Nelson Consulting Limited 25
3 Classification as Held For Sale
Can the following situations fulfill the criteria to be classified as held for sale
a) Entity A a commercial leasing and finance company is holding for sale or lease equipment thatbull has recently ceased to be leased
andbull the ultimate form of a future
transaction (sale or lease) has not yet been determined
b) Entity B is committed to a plan to lsquosellrsquo a property that is in use and the transfer of the property will be accounted for as ldquoa sale and finance leasebackrdquo
Example
Not yet committed to plan to sell
Committed but not a completed sale within one year
copy 2005-13 Nelson Consulting Limited 26
3 Classification as Held For Sale
bull IFRS 5 also specifies that
ndash An entity that is committed to a sale planinvolving loss of control of a subsidiary shall
bull classify all the assets and liabilities of that subsidiary as held for sale
ndash when the criteria set out in IFRS 5 6 to 8 (ie available for immediate sale and highly probable) are met regardless of whether the entity will retain a non-controlling interest in its former subsidiary after the sale (IFRS 58A)
bull disclose the information required in IFRS 533 to 36 (ie presenting as discontinued operation)
ndash when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
Measurement may not be the
same
Affect presentation
only
14
copy 2005-13 Nelson Consulting Limited 27
3 Classification as Held For Sale
Extension to Complete Beyond 1 year
Highly Probable
Extension to complete sale beyond one year
bull Events or circumstances may extend the period to complete the sale beyond one year
bull Not preclude an asset from being classified as held for sale if
1 the delay is caused by events or circumstances beyond the entityrsquos control and
2 there is sufficient evidence that the entity remains committed to its plan to sell the asset (or disposal group)
Beyond Control
Remain Committed
1 Year
copy 2005-13 Nelson Consulting Limited 28
3 Classification as Held For SaleCase
bull On September 20 2012 the Group announced that it has reached an agreement with Kleinwort Benson Group a wholly owned subsidiary of RHJ International on the sale of BHF-BANK AG
ndash The transaction is subject to regulatory approvals ndash Closing is not expected to occur before the publication
of this interim report ndash Given the uncertainty created by outstanding
substantive approvals the Group bull does not consider held for sale classification
appropriate as of March 31 2013 andbull will not reclassify the disposal group as held for
sale until such approvals are given
Deutsche BankInterim Report as of March 31 2013
15
copy 2005-13 Nelson Consulting Limited 29
Sale transactions includendash exchanges of non-current assets for other non-current assets
when the exchange has commercial substance in accordance with IAS 16 Property Plant and Equipment
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
Non-current asset (or disposal group) acquired exclusively with a view to its subsequent disposalshall be classified as held for sale at the acquisition date only ifndash the one-year requirement is met and
ndash it is highly probable that any other criteria that are not met at that date will be met within a short periodfollowing the acquisition (usually within 3 months)
copy 2005-13 Nelson Consulting Limited 30
Events after the Reporting Period
bull If the criteria to be classified as asset held for sale are met after the reporting period(for example the criteria have been met on 2 Jan 2012 for the year ended 31 Dec 2011)ndash an entity shall not classify a non-current asset (or
disposal group) as held for sale in those financial statements when issued
bull When those criteria are met after the reporting period but before the authorisation of the financial statements for issue ndash the entity shall disclose the information specified
in IFRS 541(a) (b) and (d) in the notes (to be discussed as ldquoAdditional Disclosuresrdquo later)
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
16
copy 2005-13 Nelson Consulting Limited 31
3 Classification as Held For Distribution
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 32
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull A non-current asset (or disposal group) is classified as held for distribution to owners ndash when the entity is committed to distribute the asset (or disposal group) to
the owners
bull For this to be the case ndash the assets must be available for immediate
distribution in their present condition and
ndash the distribution must be highly probable
Available for Immediate Distribution
Highly Probable
17
copy 2005-13 Nelson Consulting Limited 33
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull For the distribution to be highly probable
The entity is committed to distribute the asset (or disposal group) to the owners
Actions to complete the distribution must have been initiated and should be expected to be completed within one year from the date of classification
Actions required to complete the distribution should indicate that it is unlikelybullthat significant changes to the distribution will be made or bullthat the distribution will be withdrawn
The probability of shareholdersrsquo approval (if required in the jurisdiction) should be considered as part of the assessment of whether the distribution is highly probable
Available for Immediate Distribution
Highly Probable
copy 2005-13 Nelson Consulting Limited 34
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull If such disposal group meets the criteria as an operation (what is ldquoan operationrdquo discussed later)
ndash the entity shall still present the results and cash flows of the disposal group as
bull discontinued operations at the date on which it ceases to be used
bull Shall not classify them as held for sale
bull Because its carrying amount will be
ndash recovered principally through continuing use
ndash not recovered principally through a sale transaction
18
copy 2005-13 Nelson Consulting Limited 35
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull Non-current assets (or disposal groups) to be abandoned include
ndash non-current assets (disposal group)
bull used to the end of their economic life
bull closed rather than sold
bull An entity shall not account for a non-current asset thathas been temporarily taken out of use as if it had been abandoned
Not within IFRS 5
copy 2005-13 Nelson Consulting Limited 36
4 Measurement
bull An entity shall measure non-current asset (or disposal group) classified as held for sale at the lower of itsbull Carrying amount and
bull Fair value less costs to sell (IFRS 515)
bull When the sale is expected to occur beyond one year
ndash the entity shall measure the costs to sell at their present value
bull Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost
Classification
Measurement
Presentation
Classification
Measurement
Presentation
Any implication on
ndash newly acquired assets
ndash assets acquired under business combination
bull An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of itsbull Carrying amount and
bull Fair value less costs to distribute (IFRS 515A)
19
copy 2005-13 Nelson Consulting Limited 37
4 Measurement
bull An entity shall not depreciate (or amortise) a non-current asset while
ndash it is classified as held for sale or
ndash while it is part of a disposal group classified as held for sale
bull Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
ndash shall continue to be recognised
copy 2005-13 Nelson Consulting Limited 38
4 Measurement
Annual Report 2012 ndash Notes to financial statements Assets acquired in exchange for loansndash Non-financial assets acquired in exchange for loans as part of an orderly
realisation are recorded as assets held for sale and reported in lsquoOther assetsrsquo if bull the carrying amounts of the assets are recovered principally through sale bull the assets are available for sale in their present condition and bull their sale is highly probable
ndash The asset acquired is recorded at the lower ofbull its fair value less costs to sell and bull the carrying amount of the loan (net of impairment allowance) at the date of
exchange ndash No depreciation is charged in respect of assets held for sale ndash Any subsequent write-down of the acquired asset to fair value less costs to sell
is recognised in the income statement in lsquoOther operating incomersquondash Any subsequent increase in the fair value less costs to sell to the extent this
does not exceed the cumulative write-down is also recognised in lsquoOther operating incomersquo together with any realised gains or losses on disposal
Case
20
copy 2005-13 Nelson Consulting Limited 39
4 Measurement ndash Change
Changes to a plan of sale
If the criteria to be classified as held for saleare no longer metndash the entity shall cease to classify the asset as held for sale
ndash then an entity shall measure such non-current asset that ceases to be classified as held for sale at the lower of
bull its carrying amount before the asset was classified as held for sale
ndash adjusted for any depreciation amortisation or revaluations that would have been recognised had the asset not been classified as held for sale and
bull its recoverable amount at the date of the subsequent decision not to sell
ndash Any consequential adjustment shall be included
bull in income from continuing operations in the period in which the criteria on asset to be classified as held for sale are no longer met
bull unless revaluation under IAS 1638 is adopted before classification as held for sale
copy 2005-13 Nelson Consulting Limited 40
bull At beginning of Year 1 Entity A acquired a motor vehicle with an estimated useful of 10 years at $800000 (with no residual value)
bull After the receipt of the vehicle 5 days later Entity A decided to sell it
4 Measurement ndash ChangeExample
Vehicle is carried at $800000 and classified as non-current asset held for sale
Cease to classify it as held for salebull had the asset not been classified
as held for sale the carrying amount would be $720000 (depreciated over 10 years)
bull A year later Entity A decided to withdraw the sale and use the vehicle for its own travelling purpose
bull At that date Entity A estimates that the recoverable amount may be
1) $750000 or
2) $600000
bull Calculate the necessary adjustments
bull The planned disposal fulfilled the criteria under IFRS 5 and the fair value less estimated costs to sell is same as cost
Vehicle carried at $720K and adjustment to PL is $80K
Vehicle carried at $600K and adjustment to PL is $200K
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
14
copy 2005-13 Nelson Consulting Limited 27
3 Classification as Held For Sale
Extension to Complete Beyond 1 year
Highly Probable
Extension to complete sale beyond one year
bull Events or circumstances may extend the period to complete the sale beyond one year
bull Not preclude an asset from being classified as held for sale if
1 the delay is caused by events or circumstances beyond the entityrsquos control and
2 there is sufficient evidence that the entity remains committed to its plan to sell the asset (or disposal group)
Beyond Control
Remain Committed
1 Year
copy 2005-13 Nelson Consulting Limited 28
3 Classification as Held For SaleCase
bull On September 20 2012 the Group announced that it has reached an agreement with Kleinwort Benson Group a wholly owned subsidiary of RHJ International on the sale of BHF-BANK AG
ndash The transaction is subject to regulatory approvals ndash Closing is not expected to occur before the publication
of this interim report ndash Given the uncertainty created by outstanding
substantive approvals the Group bull does not consider held for sale classification
appropriate as of March 31 2013 andbull will not reclassify the disposal group as held for
sale until such approvals are given
Deutsche BankInterim Report as of March 31 2013
15
copy 2005-13 Nelson Consulting Limited 29
Sale transactions includendash exchanges of non-current assets for other non-current assets
when the exchange has commercial substance in accordance with IAS 16 Property Plant and Equipment
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
Non-current asset (or disposal group) acquired exclusively with a view to its subsequent disposalshall be classified as held for sale at the acquisition date only ifndash the one-year requirement is met and
ndash it is highly probable that any other criteria that are not met at that date will be met within a short periodfollowing the acquisition (usually within 3 months)
copy 2005-13 Nelson Consulting Limited 30
Events after the Reporting Period
bull If the criteria to be classified as asset held for sale are met after the reporting period(for example the criteria have been met on 2 Jan 2012 for the year ended 31 Dec 2011)ndash an entity shall not classify a non-current asset (or
disposal group) as held for sale in those financial statements when issued
bull When those criteria are met after the reporting period but before the authorisation of the financial statements for issue ndash the entity shall disclose the information specified
in IFRS 541(a) (b) and (d) in the notes (to be discussed as ldquoAdditional Disclosuresrdquo later)
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
16
copy 2005-13 Nelson Consulting Limited 31
3 Classification as Held For Distribution
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 32
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull A non-current asset (or disposal group) is classified as held for distribution to owners ndash when the entity is committed to distribute the asset (or disposal group) to
the owners
bull For this to be the case ndash the assets must be available for immediate
distribution in their present condition and
ndash the distribution must be highly probable
Available for Immediate Distribution
Highly Probable
17
copy 2005-13 Nelson Consulting Limited 33
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull For the distribution to be highly probable
The entity is committed to distribute the asset (or disposal group) to the owners
Actions to complete the distribution must have been initiated and should be expected to be completed within one year from the date of classification
Actions required to complete the distribution should indicate that it is unlikelybullthat significant changes to the distribution will be made or bullthat the distribution will be withdrawn
The probability of shareholdersrsquo approval (if required in the jurisdiction) should be considered as part of the assessment of whether the distribution is highly probable
Available for Immediate Distribution
Highly Probable
copy 2005-13 Nelson Consulting Limited 34
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull If such disposal group meets the criteria as an operation (what is ldquoan operationrdquo discussed later)
ndash the entity shall still present the results and cash flows of the disposal group as
bull discontinued operations at the date on which it ceases to be used
bull Shall not classify them as held for sale
bull Because its carrying amount will be
ndash recovered principally through continuing use
ndash not recovered principally through a sale transaction
18
copy 2005-13 Nelson Consulting Limited 35
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull Non-current assets (or disposal groups) to be abandoned include
ndash non-current assets (disposal group)
bull used to the end of their economic life
bull closed rather than sold
bull An entity shall not account for a non-current asset thathas been temporarily taken out of use as if it had been abandoned
Not within IFRS 5
copy 2005-13 Nelson Consulting Limited 36
4 Measurement
bull An entity shall measure non-current asset (or disposal group) classified as held for sale at the lower of itsbull Carrying amount and
bull Fair value less costs to sell (IFRS 515)
bull When the sale is expected to occur beyond one year
ndash the entity shall measure the costs to sell at their present value
bull Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost
Classification
Measurement
Presentation
Classification
Measurement
Presentation
Any implication on
ndash newly acquired assets
ndash assets acquired under business combination
bull An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of itsbull Carrying amount and
bull Fair value less costs to distribute (IFRS 515A)
19
copy 2005-13 Nelson Consulting Limited 37
4 Measurement
bull An entity shall not depreciate (or amortise) a non-current asset while
ndash it is classified as held for sale or
ndash while it is part of a disposal group classified as held for sale
bull Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
ndash shall continue to be recognised
copy 2005-13 Nelson Consulting Limited 38
4 Measurement
Annual Report 2012 ndash Notes to financial statements Assets acquired in exchange for loansndash Non-financial assets acquired in exchange for loans as part of an orderly
realisation are recorded as assets held for sale and reported in lsquoOther assetsrsquo if bull the carrying amounts of the assets are recovered principally through sale bull the assets are available for sale in their present condition and bull their sale is highly probable
ndash The asset acquired is recorded at the lower ofbull its fair value less costs to sell and bull the carrying amount of the loan (net of impairment allowance) at the date of
exchange ndash No depreciation is charged in respect of assets held for sale ndash Any subsequent write-down of the acquired asset to fair value less costs to sell
is recognised in the income statement in lsquoOther operating incomersquondash Any subsequent increase in the fair value less costs to sell to the extent this
does not exceed the cumulative write-down is also recognised in lsquoOther operating incomersquo together with any realised gains or losses on disposal
Case
20
copy 2005-13 Nelson Consulting Limited 39
4 Measurement ndash Change
Changes to a plan of sale
If the criteria to be classified as held for saleare no longer metndash the entity shall cease to classify the asset as held for sale
ndash then an entity shall measure such non-current asset that ceases to be classified as held for sale at the lower of
bull its carrying amount before the asset was classified as held for sale
ndash adjusted for any depreciation amortisation or revaluations that would have been recognised had the asset not been classified as held for sale and
bull its recoverable amount at the date of the subsequent decision not to sell
ndash Any consequential adjustment shall be included
bull in income from continuing operations in the period in which the criteria on asset to be classified as held for sale are no longer met
bull unless revaluation under IAS 1638 is adopted before classification as held for sale
copy 2005-13 Nelson Consulting Limited 40
bull At beginning of Year 1 Entity A acquired a motor vehicle with an estimated useful of 10 years at $800000 (with no residual value)
bull After the receipt of the vehicle 5 days later Entity A decided to sell it
4 Measurement ndash ChangeExample
Vehicle is carried at $800000 and classified as non-current asset held for sale
Cease to classify it as held for salebull had the asset not been classified
as held for sale the carrying amount would be $720000 (depreciated over 10 years)
bull A year later Entity A decided to withdraw the sale and use the vehicle for its own travelling purpose
bull At that date Entity A estimates that the recoverable amount may be
1) $750000 or
2) $600000
bull Calculate the necessary adjustments
bull The planned disposal fulfilled the criteria under IFRS 5 and the fair value less estimated costs to sell is same as cost
Vehicle carried at $720K and adjustment to PL is $80K
Vehicle carried at $600K and adjustment to PL is $200K
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
15
copy 2005-13 Nelson Consulting Limited 29
Sale transactions includendash exchanges of non-current assets for other non-current assets
when the exchange has commercial substance in accordance with IAS 16 Property Plant and Equipment
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
Non-current asset (or disposal group) acquired exclusively with a view to its subsequent disposalshall be classified as held for sale at the acquisition date only ifndash the one-year requirement is met and
ndash it is highly probable that any other criteria that are not met at that date will be met within a short periodfollowing the acquisition (usually within 3 months)
copy 2005-13 Nelson Consulting Limited 30
Events after the Reporting Period
bull If the criteria to be classified as asset held for sale are met after the reporting period(for example the criteria have been met on 2 Jan 2012 for the year ended 31 Dec 2011)ndash an entity shall not classify a non-current asset (or
disposal group) as held for sale in those financial statements when issued
bull When those criteria are met after the reporting period but before the authorisation of the financial statements for issue ndash the entity shall disclose the information specified
in IFRS 541(a) (b) and (d) in the notes (to be discussed as ldquoAdditional Disclosuresrdquo later)
3 Classification as Held For Sale
Available for Immediate Sale
Highly Probable
16
copy 2005-13 Nelson Consulting Limited 31
3 Classification as Held For Distribution
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 32
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull A non-current asset (or disposal group) is classified as held for distribution to owners ndash when the entity is committed to distribute the asset (or disposal group) to
the owners
bull For this to be the case ndash the assets must be available for immediate
distribution in their present condition and
ndash the distribution must be highly probable
Available for Immediate Distribution
Highly Probable
17
copy 2005-13 Nelson Consulting Limited 33
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull For the distribution to be highly probable
The entity is committed to distribute the asset (or disposal group) to the owners
Actions to complete the distribution must have been initiated and should be expected to be completed within one year from the date of classification
Actions required to complete the distribution should indicate that it is unlikelybullthat significant changes to the distribution will be made or bullthat the distribution will be withdrawn
The probability of shareholdersrsquo approval (if required in the jurisdiction) should be considered as part of the assessment of whether the distribution is highly probable
Available for Immediate Distribution
Highly Probable
copy 2005-13 Nelson Consulting Limited 34
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull If such disposal group meets the criteria as an operation (what is ldquoan operationrdquo discussed later)
ndash the entity shall still present the results and cash flows of the disposal group as
bull discontinued operations at the date on which it ceases to be used
bull Shall not classify them as held for sale
bull Because its carrying amount will be
ndash recovered principally through continuing use
ndash not recovered principally through a sale transaction
18
copy 2005-13 Nelson Consulting Limited 35
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull Non-current assets (or disposal groups) to be abandoned include
ndash non-current assets (disposal group)
bull used to the end of their economic life
bull closed rather than sold
bull An entity shall not account for a non-current asset thathas been temporarily taken out of use as if it had been abandoned
Not within IFRS 5
copy 2005-13 Nelson Consulting Limited 36
4 Measurement
bull An entity shall measure non-current asset (or disposal group) classified as held for sale at the lower of itsbull Carrying amount and
bull Fair value less costs to sell (IFRS 515)
bull When the sale is expected to occur beyond one year
ndash the entity shall measure the costs to sell at their present value
bull Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost
Classification
Measurement
Presentation
Classification
Measurement
Presentation
Any implication on
ndash newly acquired assets
ndash assets acquired under business combination
bull An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of itsbull Carrying amount and
bull Fair value less costs to distribute (IFRS 515A)
19
copy 2005-13 Nelson Consulting Limited 37
4 Measurement
bull An entity shall not depreciate (or amortise) a non-current asset while
ndash it is classified as held for sale or
ndash while it is part of a disposal group classified as held for sale
bull Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
ndash shall continue to be recognised
copy 2005-13 Nelson Consulting Limited 38
4 Measurement
Annual Report 2012 ndash Notes to financial statements Assets acquired in exchange for loansndash Non-financial assets acquired in exchange for loans as part of an orderly
realisation are recorded as assets held for sale and reported in lsquoOther assetsrsquo if bull the carrying amounts of the assets are recovered principally through sale bull the assets are available for sale in their present condition and bull their sale is highly probable
ndash The asset acquired is recorded at the lower ofbull its fair value less costs to sell and bull the carrying amount of the loan (net of impairment allowance) at the date of
exchange ndash No depreciation is charged in respect of assets held for sale ndash Any subsequent write-down of the acquired asset to fair value less costs to sell
is recognised in the income statement in lsquoOther operating incomersquondash Any subsequent increase in the fair value less costs to sell to the extent this
does not exceed the cumulative write-down is also recognised in lsquoOther operating incomersquo together with any realised gains or losses on disposal
Case
20
copy 2005-13 Nelson Consulting Limited 39
4 Measurement ndash Change
Changes to a plan of sale
If the criteria to be classified as held for saleare no longer metndash the entity shall cease to classify the asset as held for sale
ndash then an entity shall measure such non-current asset that ceases to be classified as held for sale at the lower of
bull its carrying amount before the asset was classified as held for sale
ndash adjusted for any depreciation amortisation or revaluations that would have been recognised had the asset not been classified as held for sale and
bull its recoverable amount at the date of the subsequent decision not to sell
ndash Any consequential adjustment shall be included
bull in income from continuing operations in the period in which the criteria on asset to be classified as held for sale are no longer met
bull unless revaluation under IAS 1638 is adopted before classification as held for sale
copy 2005-13 Nelson Consulting Limited 40
bull At beginning of Year 1 Entity A acquired a motor vehicle with an estimated useful of 10 years at $800000 (with no residual value)
bull After the receipt of the vehicle 5 days later Entity A decided to sell it
4 Measurement ndash ChangeExample
Vehicle is carried at $800000 and classified as non-current asset held for sale
Cease to classify it as held for salebull had the asset not been classified
as held for sale the carrying amount would be $720000 (depreciated over 10 years)
bull A year later Entity A decided to withdraw the sale and use the vehicle for its own travelling purpose
bull At that date Entity A estimates that the recoverable amount may be
1) $750000 or
2) $600000
bull Calculate the necessary adjustments
bull The planned disposal fulfilled the criteria under IFRS 5 and the fair value less estimated costs to sell is same as cost
Vehicle carried at $720K and adjustment to PL is $80K
Vehicle carried at $600K and adjustment to PL is $200K
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
16
copy 2005-13 Nelson Consulting Limited 31
3 Classification as Held For Distribution
bull Highly probablendash Significantly more likely than probable
ndash Probable more likely than not
bull For the sale to be highly probableAppropriate level of management must be committed to a plan to sell the asset (or disposal group)Active programme to locate a buyer and complete the plan must have been initiatedAsset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair valueThe sale expected to qualify for recognition as a completed sale within 1 year from the date of classification except as permitted under IFRS 5 andUnlikely that significant changes to the plan will be made or that the plan will be withdrawnThe probability of shareholdersrsquo approval (if needed) should be considered as part of the assessment
Extension to Complete Extension to Complete Beyond 1 year
Highly Probable
Available for Immediate Sale
copy 2005-13 Nelson Consulting Limited 32
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull A non-current asset (or disposal group) is classified as held for distribution to owners ndash when the entity is committed to distribute the asset (or disposal group) to
the owners
bull For this to be the case ndash the assets must be available for immediate
distribution in their present condition and
ndash the distribution must be highly probable
Available for Immediate Distribution
Highly Probable
17
copy 2005-13 Nelson Consulting Limited 33
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull For the distribution to be highly probable
The entity is committed to distribute the asset (or disposal group) to the owners
Actions to complete the distribution must have been initiated and should be expected to be completed within one year from the date of classification
Actions required to complete the distribution should indicate that it is unlikelybullthat significant changes to the distribution will be made or bullthat the distribution will be withdrawn
The probability of shareholdersrsquo approval (if required in the jurisdiction) should be considered as part of the assessment of whether the distribution is highly probable
Available for Immediate Distribution
Highly Probable
copy 2005-13 Nelson Consulting Limited 34
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull If such disposal group meets the criteria as an operation (what is ldquoan operationrdquo discussed later)
ndash the entity shall still present the results and cash flows of the disposal group as
bull discontinued operations at the date on which it ceases to be used
bull Shall not classify them as held for sale
bull Because its carrying amount will be
ndash recovered principally through continuing use
ndash not recovered principally through a sale transaction
18
copy 2005-13 Nelson Consulting Limited 35
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull Non-current assets (or disposal groups) to be abandoned include
ndash non-current assets (disposal group)
bull used to the end of their economic life
bull closed rather than sold
bull An entity shall not account for a non-current asset thathas been temporarily taken out of use as if it had been abandoned
Not within IFRS 5
copy 2005-13 Nelson Consulting Limited 36
4 Measurement
bull An entity shall measure non-current asset (or disposal group) classified as held for sale at the lower of itsbull Carrying amount and
bull Fair value less costs to sell (IFRS 515)
bull When the sale is expected to occur beyond one year
ndash the entity shall measure the costs to sell at their present value
bull Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost
Classification
Measurement
Presentation
Classification
Measurement
Presentation
Any implication on
ndash newly acquired assets
ndash assets acquired under business combination
bull An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of itsbull Carrying amount and
bull Fair value less costs to distribute (IFRS 515A)
19
copy 2005-13 Nelson Consulting Limited 37
4 Measurement
bull An entity shall not depreciate (or amortise) a non-current asset while
ndash it is classified as held for sale or
ndash while it is part of a disposal group classified as held for sale
bull Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
ndash shall continue to be recognised
copy 2005-13 Nelson Consulting Limited 38
4 Measurement
Annual Report 2012 ndash Notes to financial statements Assets acquired in exchange for loansndash Non-financial assets acquired in exchange for loans as part of an orderly
realisation are recorded as assets held for sale and reported in lsquoOther assetsrsquo if bull the carrying amounts of the assets are recovered principally through sale bull the assets are available for sale in their present condition and bull their sale is highly probable
ndash The asset acquired is recorded at the lower ofbull its fair value less costs to sell and bull the carrying amount of the loan (net of impairment allowance) at the date of
exchange ndash No depreciation is charged in respect of assets held for sale ndash Any subsequent write-down of the acquired asset to fair value less costs to sell
is recognised in the income statement in lsquoOther operating incomersquondash Any subsequent increase in the fair value less costs to sell to the extent this
does not exceed the cumulative write-down is also recognised in lsquoOther operating incomersquo together with any realised gains or losses on disposal
Case
20
copy 2005-13 Nelson Consulting Limited 39
4 Measurement ndash Change
Changes to a plan of sale
If the criteria to be classified as held for saleare no longer metndash the entity shall cease to classify the asset as held for sale
ndash then an entity shall measure such non-current asset that ceases to be classified as held for sale at the lower of
bull its carrying amount before the asset was classified as held for sale
ndash adjusted for any depreciation amortisation or revaluations that would have been recognised had the asset not been classified as held for sale and
bull its recoverable amount at the date of the subsequent decision not to sell
ndash Any consequential adjustment shall be included
bull in income from continuing operations in the period in which the criteria on asset to be classified as held for sale are no longer met
bull unless revaluation under IAS 1638 is adopted before classification as held for sale
copy 2005-13 Nelson Consulting Limited 40
bull At beginning of Year 1 Entity A acquired a motor vehicle with an estimated useful of 10 years at $800000 (with no residual value)
bull After the receipt of the vehicle 5 days later Entity A decided to sell it
4 Measurement ndash ChangeExample
Vehicle is carried at $800000 and classified as non-current asset held for sale
Cease to classify it as held for salebull had the asset not been classified
as held for sale the carrying amount would be $720000 (depreciated over 10 years)
bull A year later Entity A decided to withdraw the sale and use the vehicle for its own travelling purpose
bull At that date Entity A estimates that the recoverable amount may be
1) $750000 or
2) $600000
bull Calculate the necessary adjustments
bull The planned disposal fulfilled the criteria under IFRS 5 and the fair value less estimated costs to sell is same as cost
Vehicle carried at $720K and adjustment to PL is $80K
Vehicle carried at $600K and adjustment to PL is $200K
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
17
copy 2005-13 Nelson Consulting Limited 33
3 Classification as Held For Distribution
Non-current assets (or disposal group) held for distribution to owners
bull For the distribution to be highly probable
The entity is committed to distribute the asset (or disposal group) to the owners
Actions to complete the distribution must have been initiated and should be expected to be completed within one year from the date of classification
Actions required to complete the distribution should indicate that it is unlikelybullthat significant changes to the distribution will be made or bullthat the distribution will be withdrawn
The probability of shareholdersrsquo approval (if required in the jurisdiction) should be considered as part of the assessment of whether the distribution is highly probable
Available for Immediate Distribution
Highly Probable
copy 2005-13 Nelson Consulting Limited 34
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull If such disposal group meets the criteria as an operation (what is ldquoan operationrdquo discussed later)
ndash the entity shall still present the results and cash flows of the disposal group as
bull discontinued operations at the date on which it ceases to be used
bull Shall not classify them as held for sale
bull Because its carrying amount will be
ndash recovered principally through continuing use
ndash not recovered principally through a sale transaction
18
copy 2005-13 Nelson Consulting Limited 35
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull Non-current assets (or disposal groups) to be abandoned include
ndash non-current assets (disposal group)
bull used to the end of their economic life
bull closed rather than sold
bull An entity shall not account for a non-current asset thathas been temporarily taken out of use as if it had been abandoned
Not within IFRS 5
copy 2005-13 Nelson Consulting Limited 36
4 Measurement
bull An entity shall measure non-current asset (or disposal group) classified as held for sale at the lower of itsbull Carrying amount and
bull Fair value less costs to sell (IFRS 515)
bull When the sale is expected to occur beyond one year
ndash the entity shall measure the costs to sell at their present value
bull Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost
Classification
Measurement
Presentation
Classification
Measurement
Presentation
Any implication on
ndash newly acquired assets
ndash assets acquired under business combination
bull An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of itsbull Carrying amount and
bull Fair value less costs to distribute (IFRS 515A)
19
copy 2005-13 Nelson Consulting Limited 37
4 Measurement
bull An entity shall not depreciate (or amortise) a non-current asset while
ndash it is classified as held for sale or
ndash while it is part of a disposal group classified as held for sale
bull Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
ndash shall continue to be recognised
copy 2005-13 Nelson Consulting Limited 38
4 Measurement
Annual Report 2012 ndash Notes to financial statements Assets acquired in exchange for loansndash Non-financial assets acquired in exchange for loans as part of an orderly
realisation are recorded as assets held for sale and reported in lsquoOther assetsrsquo if bull the carrying amounts of the assets are recovered principally through sale bull the assets are available for sale in their present condition and bull their sale is highly probable
ndash The asset acquired is recorded at the lower ofbull its fair value less costs to sell and bull the carrying amount of the loan (net of impairment allowance) at the date of
exchange ndash No depreciation is charged in respect of assets held for sale ndash Any subsequent write-down of the acquired asset to fair value less costs to sell
is recognised in the income statement in lsquoOther operating incomersquondash Any subsequent increase in the fair value less costs to sell to the extent this
does not exceed the cumulative write-down is also recognised in lsquoOther operating incomersquo together with any realised gains or losses on disposal
Case
20
copy 2005-13 Nelson Consulting Limited 39
4 Measurement ndash Change
Changes to a plan of sale
If the criteria to be classified as held for saleare no longer metndash the entity shall cease to classify the asset as held for sale
ndash then an entity shall measure such non-current asset that ceases to be classified as held for sale at the lower of
bull its carrying amount before the asset was classified as held for sale
ndash adjusted for any depreciation amortisation or revaluations that would have been recognised had the asset not been classified as held for sale and
bull its recoverable amount at the date of the subsequent decision not to sell
ndash Any consequential adjustment shall be included
bull in income from continuing operations in the period in which the criteria on asset to be classified as held for sale are no longer met
bull unless revaluation under IAS 1638 is adopted before classification as held for sale
copy 2005-13 Nelson Consulting Limited 40
bull At beginning of Year 1 Entity A acquired a motor vehicle with an estimated useful of 10 years at $800000 (with no residual value)
bull After the receipt of the vehicle 5 days later Entity A decided to sell it
4 Measurement ndash ChangeExample
Vehicle is carried at $800000 and classified as non-current asset held for sale
Cease to classify it as held for salebull had the asset not been classified
as held for sale the carrying amount would be $720000 (depreciated over 10 years)
bull A year later Entity A decided to withdraw the sale and use the vehicle for its own travelling purpose
bull At that date Entity A estimates that the recoverable amount may be
1) $750000 or
2) $600000
bull Calculate the necessary adjustments
bull The planned disposal fulfilled the criteria under IFRS 5 and the fair value less estimated costs to sell is same as cost
Vehicle carried at $720K and adjustment to PL is $80K
Vehicle carried at $600K and adjustment to PL is $200K
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
18
copy 2005-13 Nelson Consulting Limited 35
3 Classification as Held For Sale
Non-current assets (or disposal group) that are to be abandoned
bull Non-current assets (or disposal groups) to be abandoned include
ndash non-current assets (disposal group)
bull used to the end of their economic life
bull closed rather than sold
bull An entity shall not account for a non-current asset thathas been temporarily taken out of use as if it had been abandoned
Not within IFRS 5
copy 2005-13 Nelson Consulting Limited 36
4 Measurement
bull An entity shall measure non-current asset (or disposal group) classified as held for sale at the lower of itsbull Carrying amount and
bull Fair value less costs to sell (IFRS 515)
bull When the sale is expected to occur beyond one year
ndash the entity shall measure the costs to sell at their present value
bull Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost
Classification
Measurement
Presentation
Classification
Measurement
Presentation
Any implication on
ndash newly acquired assets
ndash assets acquired under business combination
bull An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of itsbull Carrying amount and
bull Fair value less costs to distribute (IFRS 515A)
19
copy 2005-13 Nelson Consulting Limited 37
4 Measurement
bull An entity shall not depreciate (or amortise) a non-current asset while
ndash it is classified as held for sale or
ndash while it is part of a disposal group classified as held for sale
bull Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
ndash shall continue to be recognised
copy 2005-13 Nelson Consulting Limited 38
4 Measurement
Annual Report 2012 ndash Notes to financial statements Assets acquired in exchange for loansndash Non-financial assets acquired in exchange for loans as part of an orderly
realisation are recorded as assets held for sale and reported in lsquoOther assetsrsquo if bull the carrying amounts of the assets are recovered principally through sale bull the assets are available for sale in their present condition and bull their sale is highly probable
ndash The asset acquired is recorded at the lower ofbull its fair value less costs to sell and bull the carrying amount of the loan (net of impairment allowance) at the date of
exchange ndash No depreciation is charged in respect of assets held for sale ndash Any subsequent write-down of the acquired asset to fair value less costs to sell
is recognised in the income statement in lsquoOther operating incomersquondash Any subsequent increase in the fair value less costs to sell to the extent this
does not exceed the cumulative write-down is also recognised in lsquoOther operating incomersquo together with any realised gains or losses on disposal
Case
20
copy 2005-13 Nelson Consulting Limited 39
4 Measurement ndash Change
Changes to a plan of sale
If the criteria to be classified as held for saleare no longer metndash the entity shall cease to classify the asset as held for sale
ndash then an entity shall measure such non-current asset that ceases to be classified as held for sale at the lower of
bull its carrying amount before the asset was classified as held for sale
ndash adjusted for any depreciation amortisation or revaluations that would have been recognised had the asset not been classified as held for sale and
bull its recoverable amount at the date of the subsequent decision not to sell
ndash Any consequential adjustment shall be included
bull in income from continuing operations in the period in which the criteria on asset to be classified as held for sale are no longer met
bull unless revaluation under IAS 1638 is adopted before classification as held for sale
copy 2005-13 Nelson Consulting Limited 40
bull At beginning of Year 1 Entity A acquired a motor vehicle with an estimated useful of 10 years at $800000 (with no residual value)
bull After the receipt of the vehicle 5 days later Entity A decided to sell it
4 Measurement ndash ChangeExample
Vehicle is carried at $800000 and classified as non-current asset held for sale
Cease to classify it as held for salebull had the asset not been classified
as held for sale the carrying amount would be $720000 (depreciated over 10 years)
bull A year later Entity A decided to withdraw the sale and use the vehicle for its own travelling purpose
bull At that date Entity A estimates that the recoverable amount may be
1) $750000 or
2) $600000
bull Calculate the necessary adjustments
bull The planned disposal fulfilled the criteria under IFRS 5 and the fair value less estimated costs to sell is same as cost
Vehicle carried at $720K and adjustment to PL is $80K
Vehicle carried at $600K and adjustment to PL is $200K
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
19
copy 2005-13 Nelson Consulting Limited 37
4 Measurement
bull An entity shall not depreciate (or amortise) a non-current asset while
ndash it is classified as held for sale or
ndash while it is part of a disposal group classified as held for sale
bull Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
ndash shall continue to be recognised
copy 2005-13 Nelson Consulting Limited 38
4 Measurement
Annual Report 2012 ndash Notes to financial statements Assets acquired in exchange for loansndash Non-financial assets acquired in exchange for loans as part of an orderly
realisation are recorded as assets held for sale and reported in lsquoOther assetsrsquo if bull the carrying amounts of the assets are recovered principally through sale bull the assets are available for sale in their present condition and bull their sale is highly probable
ndash The asset acquired is recorded at the lower ofbull its fair value less costs to sell and bull the carrying amount of the loan (net of impairment allowance) at the date of
exchange ndash No depreciation is charged in respect of assets held for sale ndash Any subsequent write-down of the acquired asset to fair value less costs to sell
is recognised in the income statement in lsquoOther operating incomersquondash Any subsequent increase in the fair value less costs to sell to the extent this
does not exceed the cumulative write-down is also recognised in lsquoOther operating incomersquo together with any realised gains or losses on disposal
Case
20
copy 2005-13 Nelson Consulting Limited 39
4 Measurement ndash Change
Changes to a plan of sale
If the criteria to be classified as held for saleare no longer metndash the entity shall cease to classify the asset as held for sale
ndash then an entity shall measure such non-current asset that ceases to be classified as held for sale at the lower of
bull its carrying amount before the asset was classified as held for sale
ndash adjusted for any depreciation amortisation or revaluations that would have been recognised had the asset not been classified as held for sale and
bull its recoverable amount at the date of the subsequent decision not to sell
ndash Any consequential adjustment shall be included
bull in income from continuing operations in the period in which the criteria on asset to be classified as held for sale are no longer met
bull unless revaluation under IAS 1638 is adopted before classification as held for sale
copy 2005-13 Nelson Consulting Limited 40
bull At beginning of Year 1 Entity A acquired a motor vehicle with an estimated useful of 10 years at $800000 (with no residual value)
bull After the receipt of the vehicle 5 days later Entity A decided to sell it
4 Measurement ndash ChangeExample
Vehicle is carried at $800000 and classified as non-current asset held for sale
Cease to classify it as held for salebull had the asset not been classified
as held for sale the carrying amount would be $720000 (depreciated over 10 years)
bull A year later Entity A decided to withdraw the sale and use the vehicle for its own travelling purpose
bull At that date Entity A estimates that the recoverable amount may be
1) $750000 or
2) $600000
bull Calculate the necessary adjustments
bull The planned disposal fulfilled the criteria under IFRS 5 and the fair value less estimated costs to sell is same as cost
Vehicle carried at $720K and adjustment to PL is $80K
Vehicle carried at $600K and adjustment to PL is $200K
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
20
copy 2005-13 Nelson Consulting Limited 39
4 Measurement ndash Change
Changes to a plan of sale
If the criteria to be classified as held for saleare no longer metndash the entity shall cease to classify the asset as held for sale
ndash then an entity shall measure such non-current asset that ceases to be classified as held for sale at the lower of
bull its carrying amount before the asset was classified as held for sale
ndash adjusted for any depreciation amortisation or revaluations that would have been recognised had the asset not been classified as held for sale and
bull its recoverable amount at the date of the subsequent decision not to sell
ndash Any consequential adjustment shall be included
bull in income from continuing operations in the period in which the criteria on asset to be classified as held for sale are no longer met
bull unless revaluation under IAS 1638 is adopted before classification as held for sale
copy 2005-13 Nelson Consulting Limited 40
bull At beginning of Year 1 Entity A acquired a motor vehicle with an estimated useful of 10 years at $800000 (with no residual value)
bull After the receipt of the vehicle 5 days later Entity A decided to sell it
4 Measurement ndash ChangeExample
Vehicle is carried at $800000 and classified as non-current asset held for sale
Cease to classify it as held for salebull had the asset not been classified
as held for sale the carrying amount would be $720000 (depreciated over 10 years)
bull A year later Entity A decided to withdraw the sale and use the vehicle for its own travelling purpose
bull At that date Entity A estimates that the recoverable amount may be
1) $750000 or
2) $600000
bull Calculate the necessary adjustments
bull The planned disposal fulfilled the criteria under IFRS 5 and the fair value less estimated costs to sell is same as cost
Vehicle carried at $720K and adjustment to PL is $80K
Vehicle carried at $600K and adjustment to PL is $200K
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
21
copy 2005-13 Nelson Consulting Limited 41
4 Measurement ndash Change
Changes to a plan of sale
Removal from disposal group
bull If an entity removes an individual asset or liabilityfrom a disposal group classified as held for salendash the remaining assets and liabilities of the disposal group to be sold
shall continue to be measured as a group only if
bull the group (as a whole) meets the criteria on asset to be classified as held for sale
ndash Otherwise the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale
bull shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date
ndash Any non-current assets that do not meet the criteria shall cease to be classified as held for sale
copy 2005-13 Nelson Consulting Limited 42
5 Presentation
2 Presenting discontinued operations
3 Additional disclosuresClassification
Measurement
Presentation
Classification
Measurement
Presentation
1 Presenting non-current asset(or disposal group) held for sale
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
22
copy 2005-13 Nelson Consulting Limited 43
5 Presentation
bull Such non-current asset or disposal group
shall be presented separately from other assets in the statement of financial position
bull The liabilities of a disposal group classified as held for sale
shall be presented separately from other liabilities in the statement of financial position
bull Such assets and liabilities shall not be offset and presented as a single amount
bull The major classes of assets and liabilities classified as held for sale shall be separately disclosed either
ndash in that statement of financial position or
ndash in the notes
except for newly acquired subsidiary classified as held for sale
bull An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
copy 2005-13 Nelson Consulting Limited 44
5 Presentation
20x5 20x4
AssetsNon current assets
Item 1 $ x $ xItem 2 x x
x xCurrent assets
Item 3 x xItem 4 x x
x xNon-current assets classified as held for sale 8000 -
x xTotal assets x x
1 Presenting non-current asset(or disposal group) held for sale
Example
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
23
copy 2005-13 Nelson Consulting Limited 45
20x5 20x4
LiabilitiesNon-current liabilities
Item 8 x xItem 9 x x
x xCurrent liabilities
Item 10 x xItem 11 x x
x xLiabilities directly associated with non-current
assets classified as held for sale 3300 -x x
Total liabilities x x
5 Presentation1 Presenting non-current asset
(or disposal group) held for saleExample
copy 2005-13 Nelson Consulting Limited 46
20x5 20x4
EquityEquity attributable to equity holders of the parent
Item 6 $ x $ xItem 7 x x
Amounts recognised directly in equity relatingto non-current assets held for sale 400 -
x xNon-controlling interests x xTotal equity x x
5 Presentation
eg revaluation reserves
1 Presenting non-current asset(or disposal group) held for sale
Example
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
24
copy 2005-13 Nelson Consulting Limited 47
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
copy 2005-13 Nelson Consulting Limited 48
Annual Report 2012
5 PresentationCase
1 Presenting non-current asset(or disposal group) held for sale
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
25
copy 2005-13 Nelson Consulting Limited 49
5 Presentation
bull If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition disclosure of the major classes of assets and liabilities
is not required
1 Presenting non-current asset(or disposal group) held for sale
Presented separately
Offset not allowed
Disclose major classes
bull Prior periodrsquos presentation shall not be revised An entity shall not reclassify or re-present amounts
presented for non-current assets (or for the assets and liabilities of disposal groups) classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented
(except for associate and jointly controlled entitiesaccounted for under equity method or proportionate consolidation)
Any special
copy 2005-13 Nelson Consulting Limited 50
5 Presentation
bull An investment in an associate (jointly controlled entities) shall not be accounted for using the equity method (andor proportionate consolidation) when
ndash the investment is classified as held for sale in accordance with IFRS 5
bull Such investments described above
ndash shall be accounted for in accordance with IFRS 5
1 Presenting non-current asset(or disposal group) held for sale
However when they are NOT finally
disposed of or met IFRS 5 again helliphellip
Specific requirements on associate and jointly controlled entity
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
26
copy 2005-13 Nelson Consulting Limited 51
5 Presentation
bull When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified it shall be accounted for using the equity
method as from the date of its classification as held for sale
Financial statements for the periods since classification as held for sale shall be amended accordingly(ie all financial statements for the prior periods shall be amended)
1 Presenting non-current asset(or disposal group) held for sale
Specific requirements on associate and jointly controlled entity
copy 2005-13 Nelson Consulting Limited 52
bull Entity Jedi acquired 30 interest in Neo in Year 0 at $20000 without any goodwill in the acquisition and accounted it as an associate
bull In July of Year 0 Jedi decided to sell Neo and classified it as held for sale Then for Year 0 Neo reported a loss of $10000
bull Fair value less cost to sale of Neo was $20000 in Year 0 and Year 1bull At the end of Year 1 Neo reported a further loss of $10000bull By reviewing the criteria in IFRS 5 Neo can no longer be classified as
held for sale at the end of Year 1
5 Presentation
Year 0
Investment in associate held for sale $20000
bull Jedirsquos balance sheet in Year 0 while Neo was classified as held for sale
Year 0 (Restated) Year 1
Interests in associate $17000 $14000($20000 - $10000 x 30) ($17000 - $10000 x 30)
bull Jedirsquos balance sheet in Year 1
1 Presenting non-current asset(or disposal group) held for sale
Example
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
27
copy 2005-13 Nelson Consulting Limited 53
5 Presentation2 Presenting discontinued operations
bull Discontinued operation replaced discontinuing operation
bull A discontinued operation is defined as
ndash a component of an entity that either has been disposed of or is classified as held for sale and
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale (IFRS 532)
bull A component of an entity is defined as
ndash operations and cash flows that can be clearly distinguished operationallyand for financial reporting purposes from the rest of the entity
bull In other words a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use (IFRS 531)
copy 2005-13 Nelson Consulting Limited 54
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
Meet one of the 3 criteria as an
operation
Discontinued Operation
YesYes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
No
Yes
Discontinued
Operation
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
28
copy 2005-13 Nelson Consulting Limited 55
5 Presentation
bull As discussed before a discontinued operation also includes a disposal group to be abandonedndash at the date on which it ceases to be used (ie abandoned) (IFRS 513)
ndash so long as it also meets the following criteria
bull represents a separate major line of business or geographical area of operations
bull is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 56
5 Presentation
Operation is a component of
an entity
2 Presenting discontinued operations
Has beendisposed of
Classified asheld for sale
YesYes
Disposal group
Ceases to be used
Yes
bull operations and cash flows clearly distinguished operationally and for financial reporting purposes from the rest of the entity
No
Yes
Meet one of the 3 criteria as an
operation
Discontinued Operation
Yes
1 a separate major line of business or geographical area of operations
2 part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
3 a subsidiary acquired exclusively with a view to resale
Yes
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
29
copy 2005-13 Nelson Consulting Limited 57
5 Presentation
bull An entity shall disclosendash a single amount in the statement of comprehensive income comprising
the total of
bull the post-tax profit or loss of discontinued operations and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
bull A further analysis of the above single amount is required and may be presented in the notes or in the statement of comprehensive income egi) the revenue expenses and pre-tax profit or loss of discontinued
operations
ii) the gain or loss recognised on the measurement to fair value less costs to sell and
iii) the related income tax expense as required by IAS 12
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 58
5 Presentation
Guangzhou Automobile Group Company Limited
Case
bull Annual Report 2012 ndash Note 213 ndash A discontinued operation is
bull is a component of the Grouprsquos business the operations and cash flows of
ndash which can be clearly distinguished from the rest of the Group and
ndash which represents a separate major line of business or geographic area of operations or
bull is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
bull is a subsidiary acquired exclusively with a view to resale
ndash When an operation is classified as discontinued a single amount is presented in the income statement which comprises
bull the post-tax profit or loss of the discontinued operation and
bull the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
30
copy 2005-13 Nelson Consulting Limited 59
5 Presentation
bull An entity shall disclosendash the net cash flows attributable to the operating investing and financing
activities of discontinued operations (but it is not required for newly acquired subsidiaries classified as held for sale on acquisition)
ndash the amount of income from continuing operations and from discontinued operations attributable to owners of the parent
These disclosures may be presented either in the notes or in the financial statements
bull If an entity presents the components of profit or loss in a separate income statementbull a section identified as relating to discontinued operations is presented in
that separate statement
bull An entity shall re-present the above disclosures for prior periods presented in the financial statementsndash so that the disclosures relate to all operations that have been discontinued
by the end of the reporting period for the latest period presented
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 60
5 Presentation
20x2 20x1Continuing operationsRevenue $1200 $1000
helliphellip helliphelliphelliphellip helliphellip
Profit before tax 700 500Income tax expense (80) (75)Profit for the period from continuing operations 620 425
Discontinued operationsProfit for the period from discontinued operations 120 105Profit for the period 740 530Attributable to
Owners of the parent 600 400Non-controlling interests 140 130
740 530
As permitted by IFRS 5 the required analysis would be given in the notes to the financial statements
2 Presenting discontinued operations
Example
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
31
copy 2005-13 Nelson Consulting Limited 61
5 Presentation
bull Prohibit retroactive classification of an operation as discontinued
ndash when the criteria for that classification are not met until after the reporting period
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 62
5 Presentation
Adjustments in current period relating to amounts previously presented in discontinued operations
ndash Such adjustments (if directly related to the disposal of a discontinued operation in a prior period) shall be classified separately in discontinued operations
ndash The nature and amount of such adjustments shall be disclosedbull Examples of circumstances in which these adjustments may arise
include the resolution of uncertainties
ndash that arise from the terms of the disposal transaction(say resolution of purchase price adjustments)
ndash arise from and are directly related to the operations of the component before its disposal(say environmental and product warranty obligations)
2 Presenting discontinued operations
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
32
copy 2005-13 Nelson Consulting Limited 63
5 Presentation
Subsidiary is a disposal group that meets the definition of a discontinued operation
ndash An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in IFRS 533-36
bull when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with IFRS 532 (IFRS 536A)
2 Presenting discontinued operations
copy 2005-13 Nelson Consulting Limited 64
5 Presentation
Gains or Losses Relating to Continuing Operations
bull Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation
shall be included in profit or loss from continuing operations
2 Presenting discontinued operations
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
33
copy 2005-13 Nelson Consulting Limited 65
Non-Current Assets Held for Sale and Discontinued Operationsndash Net income (loss) from discontinued operations includes
bull the net total of net income (loss) before tax from discontinued operations and discontinued operations tax expense
ndash Similarly the net cash flows attributable to the operating investing and financing activities of discontinued operations have to be presented separately
ndash The comparative income statement and cash flow information is re-presented for discontinued operations
Deutsche Bank ndash Annual Report 2012
5 Presentation2 Presenting discontinued operations
Case
copy 2005-13 Nelson Consulting Limited 66
5 Presentation3 Additional disclosures
bull An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or solda) a description of the non-current asset (or disposal group)
b) a description of the facts and circumstances of the sale or leading to the expected disposal and the expected manner and timing of that disposal
c) the gain or loss recognised in respect of the impairment loss (or reversal) and if not separately presented on the statement of comprehensive income the caption in the statement of comprehensive income that includes that gain or loss
d) if applicable the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8 Operating Segments
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
34
copy 2005-13 Nelson Consulting Limited 67
Operating Segments(IFRS 8)
copy 2005-13 Nelson Consulting Limited 68
Background
bull IFRS 8 arises from the IASBrsquos consideration of ndash FASB Statement No 131 Disclosures about Segments of
an Enterprise and Related Information (SFAS 131 of United States) issued in 1997 compared with IAS 14 Segment Reporting which is similar to IAS 14
bull IFRS 8 achieves convergence with the requirements of SFAS 131ndash The wording of IFRS 8 is the same as that of SFAS 131
except for changes necessary to make the terminology consistent with that in other IFRSs
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
35
copy 2005-13 Nelson Consulting Limited 69
2 Operating Segments
4 Disclosure
1 Core Principle and Scope
Todayrsquos Agenda
3 Reportable Segments
5 Measurement
6 Entity-Wide Disclosures
copy 2005-13 Nelson Consulting Limited 70
1 Core Principle and Scope
Core Principle
bull An entity shall disclose information to enable users of its financial statements to evaluate
ndash the nature and financial effects of the business activities in which it engages and
ndash the economic environments in which it operates
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
36
copy 2005-13 Nelson Consulting Limited 71
1 Core Principle and Scope
Scope
bull IFRS 8 applies tondash the separate or individual financial statements of
an entity with listed debt and equity
ndash the consolidated financial satements of a group with a parent with listed debt and equity
ndash The segment information of an entity which chooses to follow IFRS 8
bull If a financial report contains both the parentrsquos consolidated financial statements and separate financial statements
ndash segment information is required only in the consolidated financial statements
copy 2005-13 Nelson Consulting Limited 72
2 Operating Segments
bull An operating segment is a component of an entity
a) that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
b) whose operating results are regularly reviewed by the entityrsquos chief operating decision maker to
bull make decisions about resources to be allocated to the segment and
bull assess its performance and
c) for which discrete financial information is available
A business activity might have not yet earned any revenue
For example CEO COO or a group of executive directors
bull Not every part of an entity is necessarily an operating segment or part of an operating segment say corporate headquarter
Operating Segments
Not necessary be geographical areas or products
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
37
copy 2005-13 Nelson Consulting Limited 73
Interim Report 2009
bull HKFRS 8 requires segment disclosure
ndash to be based on the way the Grouprsquos chief operating decisionmaker regards and manages the Group
ndash with the amounts reported for each reportable segment being the measures reported to the Grouprsquos chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters
bull This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Grouprsquos financialstatements into segments based on related services
bull The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Grouprsquos most senior executive management
2 Operating SegmentsCase
IFRS 8
IAS 14
copy 2005-13 Nelson Consulting Limited 74
3 Reporting Segments
bull An entity shall report separately information about each operating segment that
a) has been identified as operating segment or results from aggregating two or more of those segments under the aggregation criteria and
b) exceeds the quantitative thresholds(ldquo10 or more testrdquo)
bull There are also other situations in which separate information about an operating segment shall be reported
Reportable Segment
Aggregation Criteria
Operating Segments
Quantitative Thresholds
Other Situations
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
38
copy 2005-13 Nelson Consulting Limited 75
3 Reporting Segments
bull Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics
ndash For example similar long-term average gross margins for two operating segments would be expected if their economic characteristics were similar
Aggregation Criteria
copy 2005-13 Nelson Consulting Limited 76
Aggregation Criteria
bull Two or more operating segments may be aggregated into a single operating segment if ‒ aggregation is consistent with the core principle of
IFRS 8
‒ the segments have similar economic characteristics and
‒ the segments are similar in each of the following respects
a) the nature of the products and services
b) the nature of the production processes
c) the type or class of customer for their products and services
d) the methods used to distribute their products or provide their services and
e) if applicable the nature of the regulatory environment eg banking or public utilities
3 Reporting Segments
Aggregate segments if desired
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
39
copy 2005-13 Nelson Consulting Limited 77
3 Reporting Segments
bull An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds
a) Its reported revenue (including both sales to external customers and intersegment sales or transfers) is 10 or more of the combined revenue(internal and external) of all operating segments
b) The absolute amount of its reported profit or loss is 10 or more of the greater in absolute amount of
i) the combined reported profit of all operating segments that did not report a loss and
ii) the combined reported loss of all operating segments that reported a loss
c) Its assets are 10 or more of the combined assetsof all operating segments
Quantitative Thresholds
copy 2005-13 Nelson Consulting Limited 78
3 Reporting Segments
Combination of Segments
bull An entity may combine information (combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds) to produce a reportable segment
ndash only if the operating segments
bull have similar economic characteristics and
bull share a majority of the aggregation criteria
bull If the total external revenue reported by operating segments constitutes less than 75 of the entityrsquos revenue
ndash additional operating segments shall be identified as reportable segments (even if they do not meet the quantitative thresholds) until at least 75 of the entityrsquos revenue is included in reportable segments
Other Situations
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
40
copy 2005-13 Nelson Consulting Limited 79
3 Reporting Segments
Not Reportable Segments
bull Information about other business activities and operating segments that are not reportable
ndash shall be combined and disclosed in an ldquoall other segmentsrdquo category separately from other reconciling items in the reconciliations required by IFRS 828
bull The sources of the revenue included in the ldquoall other segmentsrdquo category shall be described
bull If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance
ndash information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability
Other Situations
copy 2005-13 Nelson Consulting Limited 80
4 Disclosure
bull To give effect to the core principle an entity shalldisclose the following for each period for which an income statement is presented
a) general information as described in IFRS 8
b) information about
bull reported segment profit or loss including specified revenues and expenses included in reported segment profit or loss
bull segment assets and
bull the basis of measurement and
c) reconciliations of the totals of
bull segment revenues
bull reported segment profit or loss
bull segment assets and
bull other material segment items
to corresponding entity amounts
General Information
Other Information
Reconciliations
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
41
copy 2005-13 Nelson Consulting Limited 81
4 Disclosure ndash General Information
bull An entity shall disclose the following general information
a) factors used to identify the entityrsquos reportable segments including the basis of organisationfor example
bull whether management has chosen to organise the entity around differences in products and services geographical areas regulatory environments or a combination of factors and
bull whether operating segments have been aggregated and
b) types of products and services from which each reportable segment derives its revenues
General Information
copy 2005-13 Nelson Consulting Limited 82
4 Disclosure ndash Other Information
bull An entity shall report a measure of profit or loss and total assets for each reportable segment
bull An entity shall report a measure of liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker
Other Information
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
42
copy 2005-13 Nelson Consulting Limited 83
4 Disclosure ndash Other Information
bull An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss
a) revenues from external customers
b) revenues from transactions with other operating segments of the same entity
c) interest revenue
d) interest expense
e) depreciation and amortisation
f) material items of income and expense disclosed in accordance with IAS 1
g) the entityrsquos interest in the profit or loss of associates and joint ventures accounted for by the equity method
h) income tax expense or income and
i) material non-cash items other than depreciation and amortisation
Other Information
copy 2005-13 Nelson Consulting Limited 84
4 Disclosure ndash Reconciliations
bull Reconciliations of the amounts in the statement of financial position for reportable segments
ndash to the amounts in the entityrsquos statement of financial position are required for each dateat which a statement of financial position is presented
bull Previously reported information for prior periods shall be restated
Reconciliations
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
43
copy 2005-13 Nelson Consulting Limited 85
5 Measurement
bull The amount of each segment item reported shall be the measure reported to the chief operating decision maker
ndash for the purposes of making decisions about allocating resources to the segment and assessing its performance
bull Compared with IAS 14
ndash IAS 14 required segment information to be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity
ndash IAS 14 defines segment revenue segment expense segment result segment assets and segment liabilities
ndash IFRS 8 does not define these terms but requires an explanation of how segment profit or loss segment assets and segment liabilities are measured for each reportable segment
copy 2005-13 Nelson Consulting Limited 86
5 Measurement
bull Adjustments and eliminations made in preparing an entityrsquos financial statements and allocations of revenues expenses and gains or losses shall be included in determining reported segment profit or loss only if
ndash they are included in the measure of the segmentrsquos profit or loss that is used by the chief operating decision maker
bull Similarly only those assets and liabilities that are included in the measures of the segmentrsquos assets and segmentrsquos liabilities that are used by the chief operating decision maker shall be reported for that segment
bull If amounts are allocated to reported segment profit or loss assets or liabilities those amounts shall be allocated on a reasonable basis
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
44
copy 2005-13 Nelson Consulting Limited 87
5 Measurement ndash Reconciliations
bull If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change
ndash the corresponding information for earlier periods including interim periods shall be restated unless the information is not available and the cost to develop it would be excessive (for each individual item of disclosure)
bull Following a change in the composition of its reportable segments
ndash an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods
copy 2005-13 Nelson Consulting Limited 88
5 Measurement ndash Reconciliations
bull If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods including interim periods is not restated to reflect the change
ndash the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation unless the necessary information is not available and the cost to develop it would be excessive
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
45
copy 2005-13 Nelson Consulting Limited 89
6 Entity-Wide Disclosures
bull All entities subject to IFRS 8 including those that have a single reportable segment are also required to have certain entity-wide disclosures includingndash the revenues from external customers for each
product and service or each group of similar products and services
ndash certain geographical information
ndash information about the extent of its reliance on its major customers
Products and Services
Geographical Areas
Major Customers
copy 2005-13 Nelson Consulting Limited 90
Interim Financial Reporting(IAS 34)
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
46
copy 2005-13 Nelson Consulting Limited 91
Points for Sharing
1 Scope and Definitions
2 Content of an Interim Financial Report
3 Disclosure in Annual Financial Statements
4 Recognition and Measurement
5 Restatement of Previously Reported Interim Periods
copy 2005-13 Nelson Consulting Limited 92
1 Scope and Definition
bull IAS 34 does not mandatendash which entities should be required to publish interim financial
reports
ndash how frequently or
ndash how soon after the end of an interim period
bull However governments securities regulators stock exchanges and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports
bull IAS 34 appliesndash if an entity is required or elects to publish an interim
financial report in accordance with IFRSs (IAS 341)
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
47
copy 2005-13 Nelson Consulting Limited 93
1 Scope and Definition
bull Interim periodndash is a financial reporting period shorter than a full financial
year
bull Interim financial report means a financial report containing either ndash a complete set of financial statements (as described in IAS
1 Presentation of Financial Statements) or
ndash a set of condensed financial statements (as described in IAS 34) for an interim period (IAS 344)
copy 2005-13 Nelson Consulting Limited 94
2 Contents of Interim F Report
a a statement of financial position
b a statement (or statements) of profit or loss (PL) and other comprehensiveincome (OCI) for the period
c a statement of changes in equity
d a statement of cash flows
e notes (comprising other information) and
ea comparative information and
f a statement of financial position as at the beginning of the earliest comparative preceding period (as required by IAS 1) (IAS 345)
Condensed statement of fin position
Condensed statement (or statements)of PL and OCI
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
48
copy 2005-13 Nelson Consulting Limited 95
2 Contents of Interim F Report
bull In the interest of timeliness and cost considerations and to avoid repetition of information previously reported
ndash an entity may be required to or may elect to provide less information at interim dates as compared with its annual financial statements
bull IAS 34 defines the minimum content of an interim financial report as including condensed financial statements and selected explanatory notes
bull The interim financial report is intended to provide an update on the latest complete set of annual financial statements
ndash Accordingly it focuses on new activities events and circumstances and does not duplicate information previously reported (IAS 346)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 96
2 Contents of Interim F Report
bull Nothing in IAS 34
ndash is intended to prohibit or discourage an entity from publishing
bull a complete set of financial statements (as described in IAS 1) in its interim financial report
bull rather than condensed financial statements and selected explanatory notes
bull Nor does IAS 34
ndash prohibit or discourage an entity from including in condensed interim financial statements more than the minimum line items or selected explanatory notes as set out in IAS 34 (IAS 347)
provide a complete set of An entity can choose to
provide a complete set of financial statements
An entity can choose to provide more than the
minimum line items
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
49
copy 2005-13 Nelson Consulting Limited 97
2 Contents of Interim F Report
bull The recognition and measurement guidance in IAS 34 applies also to
ndash complete financial statements for an interim period and such statements would include all of the disclosures required by IAS 34 (particularly the selected note disclosures in IAS 3416) as well as those required by other IFRSs (IAS 347)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 98
2 Contents of Interim F Report
bull An interim financial report shall include at a minimum the following components
a a condensed statement of financial position
b a condensed statement (or statements) of PL and OCI
c a condensed statement of changes in equity
d a condensed statement of cash flows and
e selected explanatory notes (IAS 348)
Condensed statement of fin position
Condensed statement of changes in equity
Condensed statement of cash flows
Selected explanatory notes
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011) it presents interim condensed information from that statement (IAS 348A)
Condensed statement (or statements)of PL and OCI
Interim Financial Report(minimum components
as set out in IAS 34)
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
50
copy 2005-13 Nelson Consulting Limited 99
2 Contents of Interim F Report
bull If an entity publishes a complete set of financial statements in its interim financial report
ndash the form and content of those statements shall conform to the requirements of IAS 1 for a complete set of financial statements (IAS 349)
bull If an entity publishes a set of condensed financial statements in its interim financial report
ndash those condensed statements shall include at a minimum
bull each of the headings and subtotals that were included in its most recent annual financial statements and
bull the selected explanatory notes as required by IAS 34 (IAS 3410)
Additional line items or notes shall be included
bull if their omission would make the condensed interim financial statements misleading (IAS 3410)
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
copy 2005-13 Nelson Consulting Limited 100
2 Contents of Interim F Report
bull In the statement that presents the items of profit or loss for an interim period
ndash an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share (IAS 3411)
bull If an entity presents the items of profit or loss in a separate statement as described in IAS 110A (as amended in 2011)
ndash it presents basic and diluted earnings per share in that statement (IAS 3411A)
Present in the condensed statement of profit or loss
Complete set of financial statements
as defined in IAS 1 contains
Interim Financial Report(minimum components
as set out in IAS 34)
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
51
copy 2005-13 Nelson Consulting Limited 101
2 Contents of Interim F Report
Significant Events and Transactions
bull An entity shall include in its interim financial report
ndash an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period
ndash Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report (IAS 3415)
bull A user of an entityrsquos interim financial report will have access to the most recent annual financial report of that entity
bull Therefore it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report (IAS 3415A)
copy 2005-13 Nelson Consulting Limited 102
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)a the write-down of inventories to net realisable value and the reversal of
such a write-down
b recognition of a loss from the impairment of financial assets property plant and equipment intangible assets or other assets and the reversal of such an impairment loss
c the reversal of any provisions for the costs of restructuring
d acquisitions and disposals of items of property plant and equipment
e commitments for the purchase of property plant and equipment
f litigation settlements
g corrections of prior period errors
h changes in the business or economic circumstances that affect the fair value of the entityrsquos financial assets and financial liabilities whether those assets or liabilities are recognised at fair value or amortised cost
Example
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
52
copy 2005-13 Nelson Consulting Limited 103
2 Contents of Interim F Report
bull The following is a list of events and transactions for which disclosures would be required if they are significant (the list is not exhaustive)i any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period and
j related party transactions
k transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments
l changes in the classification of financial assets as a result of a change in the purpose or use of those assets and
m changes in contingent liabilities or contingent assets (IAS 3415B)
Example
copy 2005-13 Nelson Consulting Limited 104
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
a) statement of financial position
bull as of the end of the current interim period and
a comparative statement of financial position
bull as of the end of the immediately preceding financial year
Periods for which Interim Financial Statements are Required to be Presented
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
53
copy 2005-13 Nelson Consulting Limited 105
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
b) statements of profit or loss and other comprehensive income
bull for the current interim period and
bull cumulatively for the current financial year to date with
comparative statements of profit or loss and comprehensive income
bull for the comparable interim periods (current and year-to-date) of the immediately preceding financial year
ndash As permitted by IAS 1 (as amended in 2011) an interim report may present for each period a statement or statements of profit or loss and other comprehensive income
Periods for which Interim Financial Statements are Required to be Presented
copy 2005-13 Nelson Consulting Limited 106
2 Contents of Interim F Report
bull Interim reports shall include interim financial statements (condensed or complete) for periods as follows
c) statement of changes in equity
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year
d) statement of cash flows
bull cumulatively for the current financial year to date with
a comparative statement
bull for the comparable year-to-date period of the immediately preceding financial year (IAS 3420)
Periods for which Interim Financial Statements are Required to be Presented
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
54
copy 2005-13 Nelson Consulting Limited 107
2 Contents of Interim F Report
Entity A will report the following in its interim financial report
Current Comparative
Statement of financial position as at 3092013 31122012
Statement of PL and OCIFor 3-month period 172013 to 3092013 172012 to 3092012For 9-month period 112013 to 3092013 112012 to 3092012
Statement of changes in equity For 9 month period 112013 to 3092013 112012 to 3092012
Statement of cash flowsFor 9-month period 112013 to 3092013 112012 to 3092012
Example
bull Entity A ends its financial statement at 31 Dec and proposes to report an interim financial report for the three-month period ended 3092013
copy 2005-13 Nelson Consulting Limited 108
2 Contents of Interim F Report
bull For an entity whose business is highly seasonal financial information for the twelve months ending on the interim reporting date and comparative information for the prior twelve-month period may be useful
ndash Accordingly entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in IAS 34
Periods for which Interim Financial Statements are Required to be Presented
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
55
copy 2005-13 Nelson Consulting Limited 109
2 Contents of Interim F Report
bull In deciding how to recognise measure classify or disclose an item for interim financial reporting purposes
ndash materiality shall be assessed in relation to the interim period financial data
bull In making assessments of materiality it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (IAS 3423)
Materiality
copy 2005-13 Nelson Consulting Limited 110
3 Disclosures in Annual Fin S
bull lf an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period
ndash the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year (IAS 3426)
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
56
copy 2005-13 Nelson Consulting Limited 111
4 Recognition and Measurement
bull An entity shall apply the same accounting policiesin its interim financial statements as are applied in its annual financial statements
ndash except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements
bull However the frequency of an entityrsquos reporting (annual half-yearly or quarterly) shall not affect the measurement of its annual results
bull To achieve that objective measurements for interim reporting purposes shall be made on a year-to-date basis (IAS 3428)
copy 2005-13 Nelson Consulting Limited 112
5 Restatement of Previously Reports
bull A change in accounting policy other than one for which the transition is specified by a new Standard or Interpretation shall be reflected by
a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8 or
b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods adjusting the financial statements of prior interim periods of the current financial year and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable (IAS 3443)
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
57
copy 2005-13 Nelson Consulting Limited 113
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining
copy 2005-13 Nelson Consulting Limited 114
Preparation and Presentation of Financial Statements ndash Part 2 24 September 2013
QampA SessionQampA Session
LAM Chi Yuen Nelson 林智遠nelsonnelsoncpacomhkwwwNelsonCPAcomhkwwwFacebookcomNelsonCPA
Full set of slides in PDF can be found in wwwNelsonCPAcomhktraining