Table of Contents

Chapter 1 - Introduction. 1

What is IFRS?. 1

The IFRS Conceptual Framework. 2

How this Book is Organized. 4

How to Use this Book. 5

Accounting Principles. 5

Chapter 2 - Presentation of Financial Statements. 9

Overview of the Financial Statements. 9

The Statement of Financial Position. 11

The Standard Balance Sheet Format 12

The Common Size Balance Sheet 13

How to Construct a Balance Sheet 15

Overview of the Statement of Profit or Loss. 16

Presentation by Nature or Function. 18

The Single-Step Income Statement 21

The Multi-Step Income Statement 22

The Contribution Margin Income Statement 22

The Multi-Period Income Statement 23

How to Construct the Income Statement 24

Overview of the Statement of Changes in Equity. 26

Income Statement Disclosures. 27

Chapter 3 - Statement of Cash Flows. 31

Overview of the Statement of Cash Flows. 31

The Direct Method. 33

The Indirect Method. 35

How to Prepare the Statement of Cash Flows. 36

Disclosures for the Statement of Cash Flows. 38

Chapter 4 - Consolidated and Separate Financial Statements. 41

The Control Concept 41

Consolidation Accounting. 44

Separate Financial Statements. 46

Chapter 5 - Accounting Policies, Estimate Changes and Errors. 48

Accounting Policies. 48

Changes in Accounting Estimates. 49

Errors. 50

Impracticability of Application. 51

Disclosures for Policies, Estimate Changes, and Errors. 51

Accounting Policies. 51

Changes in Accounting Estimates. 52

Errors. 52

Chapter 6 - Financial Reporting in Hyperinflationary Economies. 54

Overview of Hyperinflationary Reporting. 54

Net Monetary Position. 56

Comparative Information. 57

Initial Restatement 57

Consolidation Issues. 57

Termination of Hyperinflationary Period. 58

Historical Presentation. 58

Hyperinflationary Reporting Disclosures. 58

Chapter 7 - Earnings per Share. 60

Basic Earnings per Share. 60

Diluted Earnings per Share. 61

Disclosure of Earnings per Share. 65

Chapter 8 - Interim Financial Reporting. 68

Overview of Interim Financial Reporting. 68

Content of an Interim Financial Report 68

Reduced Information Requirements. 69

General Interim Reporting Rule. 70

Goodwill Impairment Losses. 71

Interim Period Restatements. 71

The Integral View.. 72

Chapter 9 - Operating Segments. 75

Overview of Segment Reporting. 75

Segment Disclosure. 78

Segment Disclosure. 78

Revenue Disclosure. 80

Geographic Area Disclosure. 80

Chapter 10 - Joint Arrangements. 83

Overview of Joint Arrangements. 83

Financial Statement Presentation of Joint Arrangements. 86

Chapter 11 - Investments in Associates and Joint Ventures. 89

Investments in Associates and Joint Ventures. 89

Significant Influence. 89

The Equity Method. 90

Members Shares in Cooperative Entities. 93

Disclosures. 94

Chapter 12 - Disclosure of Interests in Other Entities. 96

Overview of Interests in Other Entities. 96

Interests in Subsidiaries. 97

Interests in Joint Arrangements and Associates. 97

Interests in Unconsolidated Structured Entities. 98

Chapter 13 - Inventories. 101

Overview of Inventory. 101

The Periodic Inventory System.. 103

The Perpetual Inventory System.. 104

Inventory Costing. 105

The First In, First Out Method. 105

The Last In, First Out Method. 106

The Weighted Average Method. 106

Standard Costing. 108

The Retail Inventory Method. 109

The Gross Profit Method. 110

Overhead Allocation. 111

Net Realizable Value. 114

Accounting for Obsolete Inventory. 114

Work in Process Accounting. 116

Inventory Measurement by Commodity Broker-Traders. 116

Inventory Disclosures. 117

Chapter 14 - Property, Plant, and Equipment 119

Recognition of Property, Plant and Equipment 119

Subsequent Fixed Asset Recognition. 121

The Cost Model 121

The Revaluation Model 121

Depreciation. 123

Straight-Line Method. 125

Sum-of-the-Years Digits Method. 126

Double-Declining Balance Method. 127

Depletion Method. 129

Units of Production Method. 131

Land Depreciation. 131

Land Improvement Depreciation. 132

Depreciation Accounting Entries. 132

Derecognition of Property, Plant and Equipment 134

Compensation for Impaired Assets. 135

Decommissioning Liabilities. 135

Decommissioning Funds. 136

Property, Plant and Equipment Disclosures. 136

Chapter 15 - Intangible Assets. 139

Overview of Intangible Assets. 139

Accounting for Intangible Assets. 140

Intangible Assets Acquired in a Business Combination. 141

Internally Developed Intangible Assets. 142

Other Forms of Intangible Asset Acquisition. 143

Subsequent Intangible Asset Recognition. 143

The Cost Model 143

The Revaluation Model 144

Intangible Asset Derecognition. 145

Web Site Costs. 146

Additional Intangible Asset Issues. 147

Intangible Asset Disclosures. 149

Chapter 16 - Investment Property. 152

Overview of Investment Property. 152

Accounting for Investment Property. 153

Investment Property Transfers. 155

Investment Property Disposals. 156

Investment Property Disclosures  Fair Value Model 156

Investment Property Disclosures Cost Model 157

Chapter 17 - Impairment of Assets. 160

Overview of Asset Impairment 160

Indications of Impairment 160

Timing of the Impairment Test 161

Recoverable Amount 162

The Impairment Test 164

The Cash-Generating Unit 165

Asset Impairment Reversals. 167

Other Impairment Topics. 170

Corporate Assets. 170

Goodwill Allocation to Cash-Generating Units. 170

Impairment Testing Efficiencies. 171

Asset Impairment Disclosures. 171

Chapter 18 - Assets Held for Sale and Discontinued Operations. 175

Accounting for Non-Current Assets Held for Sale. 175

Disclosure of Non-Current Assets Held for Sale. 178

Disclosure of Discontinued Operations. 178

Chapter 19 - Provisions, Contingent Liabilities and Contingent Assets. 182

Overview of Provisions. 182

Accounting for Provisions. 184

The Provision for Restructuring. 186

Accounting for Contingent Liabilities. 187

Accounting for Contingent Assets. 187

Accounting for Reimbursements. 188

Accounting for Levies. 188

Disclosure of Provisions and Contingent Items. 188

Chapter 20 - Revenue from Contracts with Customers. 192

The Nature of a Customer. 192

Steps in Revenue Recognition. 193

Step One: Link Contract to Customer. 193

Step Two: Note Performance Obligations. 195

Step Three: Determine Prices. 197

Variable Consideration. 198

Possibility of Reversal 199

Time Value of Money. 201

Noncash Consideration. 203

Payments to Customers. 203

Refund Liabilities. 204

Step Four: Allocate Prices to Obligations. 204

Allocation of Price Discounts. 206

Allocation of Variable Consideration. 207

Subsequent Price Changes. 207

Step Five: Recognize Revenue. 208

Measurement of Progress Completion. 210

Output Methods. 210

Input Methods. 211

Change in Estimate. 212

Progress Measurement 212

Right of Return. 212

Consistency. 213

Contract Modifications. 213

Treatment as Separate Contract 213

Treatment as Continuing Contract 214

Entitlement to Payment 216

Bill-and-Hold Arrangements. 217

Consideration Received from a Supplier. 218

Customer Acceptance. 219

Customer Options for Additional Purchases. 220

Licensing. 222

Nonrefundable Upfront Fees. 223

Principal versus Agent 224

Repurchase Agreements. 225

Unexercised Rights of Customers. 227

Warranties. 227

Contract-Related Costs. 228

Costs to Obtain a Contract 228

Costs to Fulfill a Contract 229

Amortization of Costs. 230

Impairment of Costs. 230

Exclusions. 231

Revenue Disclosures. 231

Chapter 21 - Employee Benefits and Retirement Plans. 238

Short-term Employee Benefits. 238

Post-Employment Benefits. 240

Defined Contribution Plans. 241

Defined Benefit Plans. 241

Projected Unit Credit Method. 243

Attribution of Benefits to Periods of Service. 243

Actuarial Assumptions. 245

Past Service Cost 245

Gains and Losses on Settlement 246

Measurement of Plan Assets. 246

Defined Benefit Costs. 246

Termination Benefits. 247

Defined Contribution Plan Disclosures. 247

Defined Benefit Plan Disclosures. 248

Defined Benefit Plan Financial Statements. 249

Chapter 22 - Share-based Payment 253

Overview of Share-based Payments. 253

Share-based Payments Settled with Equity. 253

Share-based Payments Settled with Cash. 258

Share-based Payments with Cash Alternatives. 259

Counterparty Has Choice of Settlement 259

Issuer Has Choice of Settlement 260

Share-based Payment Disclosures. 260

Chapter 23 - Income Taxes. 263

The Tax Base Concept 263

Current Tax Liabilities and Assets. 264

Deferred Tax Liabilities and Assets. 264

Taxable Temporary Differences. 264

Deductible Temporary Differences. 266

Unused Tax Losses and Tax Credits. 268

Reassessment of Unrecognized Deferred Tax Assets. 268

Investments in Other Entities. 268

Tax Rates. 269

Current and Deferred Tax Recognition. 270

Uncertainty over Income Tax Treatment 271

Changes in Tax Status. 271

Income Tax Presentation. 271

Income Tax Disclosures. 272

Chapter 24 - Business Combinations. 276

The Acquisition Method. 276

Identification of a Business Combination. 276

Identify the Acquirer 277

Determine the Acquisition Date. 277

Recognize Assets, Liabilities, and Non-controlling Interests. 277

Recognize Goodwill or a Bargain Purchase Gain. 279

Additional Acquisition Issues. 281

Reverse Acquisitions. 282

Subsequent Measurement 283

Business Combination Disclosures. 284

Chapter 25 - Financial Instruments. 290

Measurement of Financial Assets and Liabilities. 290

Initial Measurement 290

Subsequent Measurement 292

Expected Credit Losses. 293

Impairment 294

Reclassification. 295

Embedded Derivatives. 295

Gains and Losses. 296

Dividends and Interest 296

Hedging. 297

Hedging Instruments. 297

Hedged Items. 297

Accounting for Hedges. 298

Financial Asset and Liability Derecognition. 302

Financial Asset Derecognition. 302

Financial Liability Derecognition. 303

Servicing Assets and Liabilities. 304

Valuation of Replacement Financial Asset 304

Collateral 304

Financial Instrument Presentation. 304

Financial Instrument Disclosures. 305

Chapter 26 - Fair Value Measurement 313

Overview of Fair Value. 313

General Concepts. 313

Measurement Issues. 314

Initial Recognition. 314

Measurement of Non-Financial Assets. 314

Measurement of Liabilities and Equity. 315

Measurement of a Group of Financial Assets and Liabilities. 316

Valuation Methods. 316

Fair Value Disclosures. 318

Chapter 27 - Effects of Changes in Foreign Exchange Rates. 322

Foreign Exchange Transactions. 322

Financial Statement Translation. 323

Determination of Functional Currency. 323

Translation of Financial Statements. 325

Hyperinflationary Effects. 328

Derecognition of a Foreign Entity Investment 328

Foreign Currency Disclosures. 328

Chapter 28 - Borrowing Costs. 330

Overview of Borrowing Costs. 330

Borrowing Cost Disclosures. 334

Chapter 29 - Leases. 336

The Nature of a Lease. 336

Lease Components (Lessee) 338

Lease Components (Lessor) 340

The Lease Term.. 340

Lease Accounting by the Lessee. 341

Lease Recognition. 341

Initial Lease Measurement 342

Subsequent Lease Measurement - Assets. 343

Subsequent Lease Measurement - Liabilities. 343

Lease Modifications. 344

Lease Accounting by the Lessor. 344

Financing Leases. 344

Operating Leases. 347

Sale and Leaseback Transactions. 347

Presentation of Lease Information. 348

Lessee Presentations. 348

Lessor Presentations. 348

Lease Disclosures by the Lessee. 348

Lease Disclosures by the Lessor. 349

Chapter 30 - Related Party Disclosures. 352

Overview of Related Parties. 352

Related Party Disclosures. 352

Chapter 31 - Events after the Reporting Period. 355

Overview of Events after the Reporting Period. 355

The Going Concern Issue. 356

Disclosure of Events after the Reporting Period. 356

Chapter 32 - Insurance Contracts. 359

Insurance Contract Aggregation. 359

Initial Recognition of Insurance Contracts. 360

Initial Measurement of Insurance Contracts. 360

Estimated Future Cash Flows. 361

Discount Rates Used. 361

Risk Adjustment for Non-Financial Risk. 361

Contractual Service Margin. 361

Subsequent Measurement of Insurance Contracts. 362

Modification of Insurance Contracts. 364

Derecognition of Insurance Contracts. 364

Accounting Policy Changes. 364

Presentation of Insurance Contract Information. 365

Disclosures. 365

Chapter 33 - Agriculture. 369

Accounting for Agriculture. 369

Bearer Plants. 370

Agriculture Disclosures. 370

Chapter 34 - Government Grants. 374

Accounting for Government Grants. 374

Government Grant Presentation. 376

Government Grant Disclosures. 377

Chapter 35 - Regulatory Deferral Accounts. 379

Accounting for Regulatory Deferral Accounts. 379

Regulatory Deferral Account Presentation. 379

Regulatory Deferral Account Disclosures. 380

Chapter 36 - Mineral Resources. 383

Accounting for Mineral Resources. 383

Accounting for Stripping Costs. 384

Mineral Resources Presentation. 385

Mineral Resources Disclosures. 385

Chapter 37 - Service Concessions. 387

Overview of Service Concessions. 387

Service Concession Disclosures. 388

Chapter 38 - Other Topics. 391

Liabilities from Waste Electrical and Electronic Equipment 391

Hedges of a Net Investment in a Foreign Operation. 392

Distributions of Non-cash Assets to Owners. 393

Extinguishing Financial Liabilities with Equity Instruments. 393

Answers to Chapter Questions. 396

Glossary. 438

Index. 446

 

Final Examination.....................................................................................................................................................452