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*51. (L.O. 13) When a company first adopts IFRS, it must present at least one year of
comparative information, and its first set of financial statements must include at least
3 statements of financial position and two statements comprehensive income, two
separate income statements (if presented), two statements of cash flows, and two
1. Costs of Disclosure.
3. The increase in disclosure requirements is linked to:
4. IFRS for SME’s (small and medium sized companies).
1. Summary of Significant Accounting Policies. Should be the first note.
3. Property, Plant, and Equipment (Chapter 11). The basis of valuation, pledges, loans,
4. Creditor Claims (Chapter 14). How financing operations, costs to be borne in future
5. Equity Holders’ Claims (Chapters 15 and 16). In addition to number of shares
6. Contingencies and Commitments (Chapters 7, 9, and 13). Contingencies related to
7. Fair Value. Companies that have assets or liabilities measured at fair value must
8. Deferred Taxes, Pensions, and Leases (Chapters 19, 20, and 21). Extensive
9. Changes in Accounting Policies (Chapter 22). Including material changes in
1. Related Party Transactions: Transactions that have not been carried out on an
“arms-length” or free market basis. The nature of the relationship, a description of the
2. Subsequent Events. Events that occur subsequent to date of the financial statements,
but before issuance.
a. Events that provide additional evidence about conditions that existed at the
2. Pros and Cons of Disclosing Segment Information.
Reasons against disclosing segment information:
a. Data that is meaningless for, or misleading, to investors.
3. Objective of reporting disaggregate information: To provide information about the
different types of business activities a company engages in and the different economic
4. Management approach: Segments are those components of the business that
5. Identifying operating segments: A component:
a. That earns revenues and incurs expenses.
6. Aggregation of Segments: Is allowed if they have the same basic characteristics in
each of the following areas:
7. Tests for significance: Made to determine if a segment is significant enough to
warrant disclosure. Must satisfy at least one of the following:
or
(2) The combined loss of all operating segments that did incur a loss.
8. Additional factors:
9. Measurement principles:
10. Segmented information reported:
(1) Revenues from transactions with external customers.
(3) Interest revenue and expense.
(5) Unusual items.
(7) Income tax expense or benefit.
(8) Significant noncash items other than depreciation, depletion, and amortization
(2) Total operating segments’ assets and liabilities to total assets and liabilities of
(1) Revenues from external customers.
(3) Expenditures during the period for long-lived assets.
This information, if material, must be reported in the company’s country of domicile
1. Discrete versus Integral Views. IASB requires the discrete approach.
2. Companies use the same accounting policies for interim and annual reports.
4. IFRS requires the annualized approach for income taxes. That is, income tax expense
5. Companies subject to material seasonal variations must disclose the seasonal nature of
1. Reporting standards.
a. Must state whether the financial statements are presented in accordance with IFRS.
3. Standard unmodified opinion with explanatory paragraph.
4. Reasons for departure from unqualified opinion.
a. Scope of examination is limited or effected by conditions or restrictions.
1. Management commentary. Helps in the interpretation of financial information.
2. Management’s responsibilities for financial statements.
1. Discuss the similarities and differences of forecasts and projections.
2. Arguments for requiring published forecasts:
3. Reasons against requiring published forecasts:
a. Problems with accuracy.
4. Discuss:
a. Safe harbor rule.
1. Causes.
J. (L.O. 5) Appendix 24-A. Basic Financial Statement Analysis.
1. Uses of Financial Analysis. The type of analysis employed depends on who the analyst
is, and what their interest is:
2. (L.O. 6) Basic Measures of Financial Analysis.
a. Liquidity Ratios: Measure short-run ability of the firm to pay its maturing
3. (L.O. 7) Limitations of Ratio Analysis.
a. Historical cost can distort measures of performance.
5. (L.O. 9) Percentage (Common Size) Analysis: Reducing a series of related amounts
to a series of percentages of a given base.
1. (L.O. 10) When a company first converts its financial statements to IFRS, the overriding
principle is full retrospective application of all IFRS. The relevant dates are a
2. (L.O. 11) When preparing the opening IFRS statement of financial position, a company
3. (L.O. 12) When amounts relating to prior periods cannot be reasonably determined,
retrospective application is not required:
4. (L.O. 13) When a company first adopts IFRS, it must present at least one year of
comparative information, and its first set of financial statements must include:
a. At least three statements of financial position,
Copyright © 2018 John Wiley & Sons, Inc. Kieso Intermediate: IFRS 3e, Instructor’s Manual 24-23
