IASC: Hedge Accounting FASB: Hedge Accounting Hedge accounting is permitted in certain circumstances, provided that the hedging relationship is clearly defined, measurable, and actually effective. Both IFRS and IAS continue to form a force. This Standard supersedes certain requirements previously contained in HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=989" IAS 8: Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies.In 1999, various paragraphs were amended to conform to the terminology used in HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=953" IAS 10: Events After the Balance Sheet Date and HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=981" IAS 37: Provisions, Contingent Liabilities and Contingent Assets.Summary of IAS 35 The objectives of IAS 35 are to establish a basis for segregating information about a major operation that an enterprise is discontinuing from information about its continuing operations and to specify minimum disclosures about a discontinuing operation. While a similar example is not included in FASB Standards, FASB Standards might be interpreted as prohibiting derecognition by the transferor bank. The work of IASB is funded by contributions from Accounting firms, private financial institutions, companies, banks and other organizations.The objectives of IASC, as contain in its constitution were:(xi) to develop, in the public interest, a single set of high quality accounting standards for use globally. Disclosures are required of various kinds of contingencies and commitments, including off-balance-sheet items. Get the Handbook News. Market values of investments. IAS 12: Income TaxesIAS 12 (revised 1996), Income Taxes, became effective for annual financial statements covering periods beginning on or after 1 January 1998.IAS 12 was amended in May 1999 by HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=953" IAS 10: Events After the Balance Sheet Date. In 1999, various paragraphs were amended to be consistent with HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=953" IAS 10: Events After the Balance Sheet Date. However, a hedge of an unrecognised firm commitment to buy or sell an asset at a fixed price in the enterprise’s reporting currency is accounted for as a cash flow hedge Same... ...except that a hedge of an unrecognised firm commitment to buy or sell an asset at a fixed price in the enterprise’s reporting currency is accounted for as a fair value hedge. Will be effective for financial reporting periods beginning on or after 1 January 1998. It explains changes in cash and cash equivalents during a period. Lease income should be recognised on the basis of a constant periodic rate of return. Î Ÿ¥ Ÿ¥ Ví ÿÿ ÿÿ ÿÿ l Ö Ö Ö Ö Ö Ö Ö ê ~V ~V ~V ~V ŠW d ê 3ˆ š úY ¸ ²c ²c ²c ²c ²c â ”g ´ Hi Ü ²‡ ´‡ ´‡ ´‡ ´‡ ´‡ ´‡ $ ͉ í‹ ´ ؇ Ö $j ²c ²c $j $j ؇ |™ Ö Ö ²c ²c í‡ |™ |™ |™ $j ê Ö ²c Ö ²c ²‡ |™ $j ²‡ |™ $ |™  œ ¦ j 0 Ö Ö –| ²c îY À$I 6Âê ”T ~V o @* 2p ¤ –| ˆ 0 3ˆ Öp À ¡Œ N™ . IAS 38 does not apply to financial assets, insurance contracts, mineral rights and the exploration for and extraction of minerals and similar non-regenerative resources. INTERNATIONAL STANDARDS ON AUDITING AND QUALITY CONTROL CONTENTS PART I. Accrue deferred tax asset for nearly all deductible temporary differences if it is probable a tax benefit will be realised. Revaluations (allowed alternative): Revaluations should be made with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair value at the balance sheet date. "Treasury stock method" to compute dilution of options and warrants. In parent company accounts, associates can be reported at equity or as long-term investments (cost or revalued amounts). The Standard includes requirements for identifying an impaired asset, measuring its recoverable amount, recognising or reversing any resulting impairment loss, and disclosing information on impairment losses or reversals of impairment losses. Summary of IAS 20 Grants should not be credited directly to equity. support for global accounting standards. Specific minimum line items for income and expenses are prescribed. Board Statement October 1989At its meeting in October 1989, the Board of IASC approved the following statement to be added to IAS 15, Information Reflecting the Effects of Changing Prices:"The international consensus on the disclosure of information reflecting the effects of changing prices that was anticipated when IAS 15 was issued has not been reached. For an acquisition, assets and liabilities should be recognised if it is probable that an economic benefit will flow and if there is a reliable measure of cost or fair value. Disclosure requirements include (for each major contract or class of contracts): Amount of contract revenue recognised. However, this Standard does not deal with processing of agricultural produce after harvest. Accounting for acquired intangible assets. IPSAS Explained provides a concise summary of the International Public Sector Accounting Standards for practitioners needing to maintain compliance with ever-changing practices. The IAS are developed from the IASB. For hedges of forecasted transactions that result in the recognition of an asset or liability, the gain or loss on the hedging instrument will adjust the basis (carrying amount) of the acquired asset or liability. The enterprise measures all its other investment property at fair value. Further disclosure is required if impairment losses recognised or reversed are material to the financial statements of the reporting enterprise as a whole; and on first adoption of IAS 36, the requirements should be applied prospectively only, that is, prior periods will not be restated. In these circumstances, an enterprise uses the present value of expected net cash flows from the asset discounted at a current market-determined pre-tax rate in determining fair value; a gain or loss arising on initial recognition of biological assets and from the change in fair value less estimated point-of-sale costs of biological assets should be included in net profit or loss for the period in which it arises; a gain or loss arising on initial recognition of agricultural produce should be included in net profit or loss for the period in which it arises; the Standard does not establish any new principles for land related to agricultural activity. An enterprise that chooses the cost model should disclose the fair value of its investment property. A short summary of this paper. The effect of acquisitions and disposals of subsidiaries during the period. IAS 16: Property, Plant and EquipmentIAS 16, Property, Plant and Equipment, became effective on 1 January 1995.In July 1997, IAS 16 was amended by HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=952" IAS 1: Presentation of Financial Statements.In April and July 1998, various paragraphs of IAS 16 were revised to be consistent with HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=966" IAS 22: Business Combinations, HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=980" IAS 36: Impairment of Assets, and HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=981" IAS 37: Provisions, Contingent Liabilities and Contingent Assets. If an active market does not exist, an enterprise uses market-determined prices or values (such as the most recent market transaction price) when available; in some circumstances, market-determined prices or values may not be available for an asset in its current condition. important developments are taking place in the European Union, where the &. All companies use the projected unit credit method (an accrued benefit method) to measure their pension expense and pension obligation. In the latter case, the shorter of useful life and lease term should be used. A financial liability is derecognised if the debtor is legally released from primary responsibility for the liability (or part thereof) either judicially or by the creditor. Amount of revenue from exchanges of goods or services. How similar are the two sets of standards? A correction of a fundamental error should be treated as a prior period adjustment (benchmark) or recognised in current profit or loss (allowed alternative). In such cases, the enterprise measures that investment property using the benchmark treatment in IAS 16 until the disposal of the investment property. Negative goodwill in excess of the fair values of the non-monetary assets acquired should be recognised as income immediately. Expected losses should be recognised immediately. Int. Write-down against net profit or loss for impairment or uncollectibility if recoverable amount of a financial asset carried at cost exceeds carrying amount Same Reversal of write-down into net profit or loss if fair value recovers. Same Transaction costs are included in the initial measurement of all financial instruments. FASB standards do not require that such an obligation be classified as a liability. Since then, the IASB has amended some IASs and has proposed to amend others, has replaced some IASs with new International Financial Reporting Standards (IFRSs), and has adopted or proposed certain new IFRSs on topics for … If part of a financial asset or liability is sold or extinguished, the carrying amount is split based on relative fair values. The enterprise need not demonstrate an intent to hold originated loans and receivables to maturity. Financial statements for periods after initial disclosure must update those disclosures, including a description of any significant changes in the amount or timing of cash flows relating to the assets and liabilities to be disposed of or settled and the causes of those changes. Individuals who, through ownership, have significant influence over the enterprise and close members of their families. Past service cost should be recognised over the average period until the amended benefits become vested. Financial assets carried at a value in excess of fair value. Present defined benefit obligations net of plan assets. FASB requires option (b) for all enterprises. Investments in other foreign entities Financial statements of other entities should be translated using closing rates for balance sheets and transaction rates (or, in practice, average rates) for income and expenses. Disclosure The Standard includes the following new disclosure requirements for biological assets measured at cost less any accumulated depreciation and any accumulated impairment losses: a separate reconciliation of changes in the carrying amount of those biological assets; a description of those biological assets; an explanation of why fair value cannot be measured reliably; the range of estimates within which fair value is highly likely to lie (if possible); the gain or loss recognised on disposal of the biological assets; the depreciation method used; the useful lives or the depreciation rates used; and the gross carrying amount and the accumulated depreciation at the beginning and end of the period. The International Code of Ethics for Professional Accountants (including International Independence Standards) is effective as of June 15, 2019. However, it neither explains other accounting requirements nor does it reflect the requirements of the Cash Basis IPSAS. For this purpose, an enterprise should take risks and uncertainties into account. It does not establish any new principles for deciding when and how to recognise and measure the income, expenses, cash flows, and changes in assets and liabilities relating to a discontinuing operation. IAS 35: Discontinuing OperationsIAS 35, Discontinuing Operations, was approved by the IASC Board in April 1998 and became effective for annual financial statements covering periods beginning on or after 1 January 1999. IAS 7: Cash Flow StatementsIAS 7, Cash Flow Statements, became effective for financial statements covering periods beginning on or after 1 January 1994.Summary of IAS 7 The cash flow statement is a required basic financial statement. IAS2: InventoriesThe instructions as follow:You are required to research the current critique that exists with respect to the following International Accounting Standard.DO NOT provide a long overview of the Standard itself. The discount rate is the interest rate on high quality corporate bonds of maturity comparable to plan obligations. Finally, a minor wording inconsistency in Appendix A was corrected.In April 2000, HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=985" IAS 40, Investment Property, amended the scope of the Standard. The discount rate should be a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the asset; an impairment loss should be recognised as an expense in the income statement for assets carried at cost and treated as a revaluation decrease for assets carried at revalued amount; an impairment loss should be reversed (and income recognised) when there has been a change in the estimates used to determine an assetVs recoverable amount since the last impairment loss was recognised; the recoverable amount of an asset should be estimated whenever there is an indication that the asset may be impaired. Fundamental Requirement of IAS 36 An impairment loss should be recognised whenever the recoverable amount of an asset is less than its carrying amount (sometimes called "book value"); Other Requirements of IAS 36 the recoverable amount of an asset is the higher of its net selling price and its value in use, both based on present value calculations; net selling price is the amount obtainable from the sale of an asset in an armVs length transaction between knowledgeable willing parties, less the costs of disposal; value in use is the amount obtainable from the use of an asset until the end of its useful life and from its subsequent disposal. In some cases, the International Accounting Standard applicable to an asset may include requirements for additional reviews; in determining value in use, an enterprise should use:(a) cash flow projections based on reasonable and supportable assumptions that reflect the asset in its current condition and represent managementVs best estimate of the set of economic conditions that will exist over the remaining useful life of the asset. A change in accounting policy should be treated retrospectively by restating all prior periods presented and adjusting opening retained earnings (benchmark). International Standard on Quality Control (ISQC) 1, Quality Controls for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements: ISQC 1 Summary: ISQC 1: ISA 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing If a government grant related to a biological asset measured at its fair value less estimated point-of-sale costs is conditional, including where a government grant requires an enterprise not to engage in specified agricultural activity, an enterprise should recognise the government grant as income when the conditions attaching to the government grant are met; if a government grant relates to a biological asset measured at its cost less any accumulated depreciation and any accumulated impairment losses, HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=964" IAS 20: Accounting for Government Grants and Disclosure of Government Assistance, should be applied. A Short Summary of IAS 1 through IAS 41 The following brief presentation of the individual International Accounting Standards (IAS) should provide easy orientation for anyone who encounters an individual standard in the context of their work or who simply wants to obtain a quick overview. It applies, among other things, to expenditures on: advertising, training, start-up, and research and development (R&D) activities. Rather than using their home country's accounting standards in their foreign subsidiaries, multinationals can institute international standards across all geographical units to avoid confusion and increase the system's accuracy and efficiency. Fair values are calculated by reference to intended use by the acquirer. An enterprise might choose to go beyond that and present full financial statements or something in between full and condensed. The carrying amount of an equity-method investment should be reduced to recognise non-temporary impairment. If future related expenses cannot be measured reliably, revenue recognition should be deferred. Hedging, for accounting purposes, means designating a derivative or (only for hedges of foreign currency risks) a non-derivative financial instrument as an offset in net profit or loss, in whole or in part, to the change in fair value or cash flows of a hedged item. Change in revaluation surplus. They are not paid, but the IFRS Foundation The study basically focuses … Accrue unused tax losses and tax credits if it is probable that they will be realised. (a) – same (b) – same (c) – FASB definition requires that the terms of the derivative contract require or permit net settlement. IAS 37: Provisions, Contingent Liabilities and Contingent AssetsIAS 37, Provisions, Contingent Liabilities and Contingent Assets, was approved by the IASC Board in July 1998 and became operative for annual financial statements covering periods beginning on or after 1 July 1999.Summary of IAS 37 IAS 37 requires that: provisions should be recognised in the balance sheet when, and only when: an enterprise has a present obligation (legal or constructive) as a result of a past event; it is probable (i.e. IAS 16 is included in: IAS 17: LeasesIAS 17, Leases, became effective for annual financial statements covering periods beginning on or after 1 January 1999. HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=983" IAS 39, Financial Instruments: Recognition and Measurement deals with this topic.The following SIC Interpretations relate to IAS 21: HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=2022" SIC 7: Introduction of the Euro; HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=2026" SIC 11: Foreign Exchange - Capitalisation of Losses Resulting from Severe Currency Devaluations; and HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=2034" SIC 19: Reporting Currency - Measurement and Presentation of Financial Statements Under IAS 21 and IAS 29. The IAS are issued by the Faster amortisation, including immediate income recognition for all actuarial gains and losses, is permitted if an enterprise follows a consistent and systematic policy. IAS 33: Earnings per ShareIAS 33, Earnings per Share, was approved by the IASC Board in January 1997 and became effective for annual financial statements covering periods beginning on or after 1 January 1998.In 1999, the Standard was amended to replace references to IAS 10, Contingencies and Events Occurring After the Balance Sheet Date, by references to HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=953" IAS 10: Events After the Balance Sheet Date.The following SIC Interpretation relates to IAS 33: HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=2039" SIC 24: Earnings Per Share - Financial Instruments and Other Contracts that May Be Settled in Shares. International Accounting Standards (IASs) were issued by the IASC from 1973 to 2000. Intragroup balances and transactions and resulting unrealised profits must be eliminated. Capitalisation begins when expenditures and borrowing costs are being incurred and construction of the asset is in progress. Recognition and Measurement biological assets should be measured at their fair value less estimated point-of-sale costs, except where fair value cannot be measured reliably; agricultural produce harvested from an enterpriseVs biological assets should be measured at its fair value less estimated point-of-sale costs at the point of harvest. a provision for restructuring costs may only be recognised at the date of acquisition where the restructuring is an integral part of the acquirer's plan for the acquisition and, among other things, the main features of the restructuring plan were announced at, or before, the date of acquisition so that those affected have a valid expectation that the acquirer will implement the plan.Recognition criteria for such a provision are based on those in IAS 37, Provisions, Contingent Liabilities and Contingent Assets, except that IAS 22 requires a detailed formal plan to be in place no later than three months after the date of acquisition or the date when the annual financial statements are approved if sooner (IAS 37 requires the detailed formal plan to be in place at the balance sheet date). IAS 30: Disclosures in the Financial Statements of Banks and Similar Financial InstitutionsIAS 30, Disclosures in the Financial Statements of Banks and Similar Financial Institutions, was approved by the IASC Board in June 1990 and reformatted in 1994. All subsidiaries must be included, unless control is temporary or if there are severe long-term restrictions on the transfer of funds from the subsidiary to the parent. Assets and liabilities may not be offset unless a legal right of offset exists and the offsetting is expected at realisation. Instead, it requires that enterprises follow the recognition and measurement principles in other International Accounting Standards. Summary of IAS 12 Accrue deferred tax liability for nearly all taxable temporary differences. The following should be disclosed for each secondary segment:--revenue (external and intersegment shown separately);--carrying amount of segment assets;--cost to acquire property, plant, equipment, and intangibles;--the basis of inter-segment pricing. Download PDF. From defining what inventory is, recognition, measurement and how to account for this crucial asset in the financial statements. The revised text (IAS 31 (revised 1998)) became effective for annual financial statements covering periods beginning on or after 1 July 1999.In December 1998, certain paragraphs were amended to replace references to IAS 25, Accounting for Investments, by references to HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=983" IAS 39: Financial Instruments: Recognition and Measurement.In March 1999, amendments were made to render IAS 31 consistent with the terminology in HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=981" IAS 37: Provisions, Contingent Liabilities and Contingent Assets.In October 2000, the Standard was amended to ensure consistency with related International Accounting Standards with respect to terminology in HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=983" IAS 39: Financial Instruments: Recognition and Measurement.One SIC Interpretation relates to IAS 31: HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=2028" SIC 13: Jointly Controlled Entities - Non-Monetary Contributions by Venturers. International accounting, which includes ... Below is a summary of the theories that explain foreign direct investment: 1. international trade theory a. An intended or actual sale of a held-to-maturity security due to a non-recurring and not reasonably anticipated circumstance beyond the enterpriseVs control does not call into question the enterpriseVs ability to hold its remaining portfolio to maturity. No substantive changes were made to the original approved text.In 1998, certain paragraphs were amended to replace references to IAS 25, Accounting for Investments, by references to HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=983" IAS 39: Financial Instruments: Recognition and Measurement.In 1999, certain paragraphs were amended to replace references to IAS 10, Contingencies and Events Occurring After the Balance Sheet Date, by references to HYPERLINK "http://www.iasc.org.uk/cmt/0001.asp?s=1050307&sc={40FDE89D-3CAC-43AA-9631-EC6C1476599A}&n=981" IAS 37: Provisions, Contingent Liabilities and Contingent Assets, and conform the terminology used to that in IAS 37. IAS 38 acknowledges that, in rare cases, there may be persuasive evidence that the useful life of an intangible asset will exceed 20 years. IFRS is a set of international accounting standards, which state how particular types of transactions and other events should be reported in financial statements. With respect to derecognition of liabilities, the debtor must be legally released from primary responsibility for the liability (or part thereof) either judicially or by the creditor. The revised Standard (IAS 22 (revised 1998)) became operative for annual financial statements covering periods beginning on or after 1 July 1999.In October 1998, the IASC staff published separately a Basis for Conclusions for IAS 38, Intangible Assets and IAS 22 (revised 1998). However, that presumption can be rebutted only on initial recognition for a biological asset for which market-determined prices or values are not available and for which alternative estimates of fair value are determined to be clearly unreliable. Jointly controlled assets. Never construct segments solely for external reporting purposes. Defined Benefit Plans Current service cost should be recognised as an expense. OPEBs: straight-line unless front-loaded Inside 10% corridor: may ignore. All derivative assets and derivative liabilities, unless they are linked to and must be settled by an unquoted equity whose fair value cannot be measured reliably FASB does not require fair value for any unquoted equity security but their standard does not make an exception from fair value for a derivative that is indexed to an unquoted equity whose fair value cannot be measured reliably Certain derivatives that are embedded in non-derivative instruments Same ...At Cost: ...At Cost: Originated loans and receivables Same Enterprise does not have to demonstrate intent and ability to hold to maturity for originated loans and receivables Same Certain other fixed-maturity investments that the enterprise intends and has the ability to hold to maturity Same Strict tests for held-to-maturity Same An intended or actual sale of a held-to-maturity security due to a non-recurring and not reasonably anticipated circumstance beyond the enterprise's control does not call into question the enterprise's ability to hold its remaining portfolio to maturity. •Relevance– the information may be used to influence economic decisions of users.