FinanceSkul - Invidious

IAS 23 – Borrowing Costs:

Start
│
├─> Step 1: Are borrowing costs incurred?
│ └─ YES → Includes:
│ • Interest on loans (short/long-term)
│ • Finance charges from leases (IFRS 16)
│ • Amortisation of discounts/premiums
│ • Exchange differences on borrowings (if viewed as interest)
│
├─> Step 2: Is the borrowing cost directly attributable to a qualifying asset?
│ └─ YES → Capitalise
│ └─ NO → Expense immediately in Profit or Loss
│
│ Definition: Qualifying Asset = Takes substantial time to get ready for use/sale
│ • Examples:
│ ✔ Manufacturing plant
│ ✔ Power plant
│ ✔ Investment property under construction
│ ✔ Self-constructed inventory (e.g. wine aging)
│ ✘ Not qualifying: Stocks routinely produced, ready-for-use assets, assets purchased completed
│
├─> Step 3: When to Start Capitalisation?
│ Capitalisation starts when:
│ ✔ Expenditures for the asset are incurred
│ ✔ Borrowing costs are being incurred
│ ✔ Activities to prepare the asset are in progress
│
│ Journal Entry:
│ Dr Qualifying Asset (e.g. PPE, Investment Property) .......... xxx
│ Cr Finance Costs Capitalised / Interest Payable .............. xxx
│
├─> Step 4: When to Suspend Capitalisation?
│ └─ Suspend during extended periods of intentional inactivity
│ • Not for routine delays or normal construction gaps
│
├─> Step 5: When to Stop Capitalisation?
│ ✔ When asset is ready for intended use or sale
│ ✔ Even if not yet used
│
├─> Step 6: Specific vs General Borrowings
│ ├─ a) Specific Borrowing (e.g. construction loan)
│ │ → Capitalise actual interest cost on loan
│ │
│ │ Journal Entry:
│ │ Dr Asset Under Construction ................................. xxx
│ │ Cr Interest Payable / Cash .................................. xxx
│ │
│ └─ b) General Borrowing (e.g. bonds or loans for overall financing)
│ → Capitalise using Weighted Average Capitalisation Rate
│
│ Formula:
│ Capitalisation Rate = Weighted average of borrowing costs on general debt
│ Capitalised Borrowing Cost = Expenditure × Rate × Time
│
│ Journal Entry:
│ Dr Asset Under Construction ................................... xxx
│ Cr Borrowing Costs Capitalised / Interest Payable ............. xxx
│
├─> Step 7: Foreign Currency Borrowings (link to IAS 21)
│ ├─ Include exchange differences to the extent they are regarded as interest adjustment
│ └─ Excess FX loss → Expense in P/L (IAS 21)
│
├─> Step 8: Disclosure Requirements (IAS 23.26–27)
│ • Amount of borrowing costs capitalised
│ • Capitalisation rate used
│ • Accounting policy applied
│
├─> Step 9: Special Cases
│ ├─ IFRS 16 Leases: Interest portion of lease liability qualifies if asset is a qualifying asset
│ ├─ IFRS 15 Contract Assets: Borrowing cost can be capitalised if client pays late and time is substantial
│ ├─ Change in estimate (IAS 8): If capitalisation should have started/stopped earlier → adjust prospectively
└─ End

10 months ago (edited) | [YT] | 8

IAS 41 – Agriculture

Start
│
├─> Step 1: Is the item an agricultural activity?
│ ✔ Yes, if:
│ • Management of biological transformation of living animals/plants
│ • Harvesting or sale of produce
│ • Examples: Cattle farming, forestry, vineyards, aquaculture, maize fields
│
├─> Step 2: Classify the asset
│ ├─ Biological Asset (BA)
│ │ • Living plant or animal
│ │ • Examples: cattle, goats, poultry, wheat crops, grapevines
│ └─ Agricultural Produce (AP)
│ • Harvested from biological asset
│ • Examples: milk, wool, harvested grapes, timber
│
├─> Step 3: Recognition Criteria
│ ✔ Entity controls asset due to past event
│ ✔ Future economic benefits are probable
│ ✔ Fair value or cost can be reliably measured
│ → If all met → Recognise as asset
│
├─> Step 4: Initial Measurement
│ At Fair Value Less Costs to Sell (FVLCTS)
│ Fair Value = Market price in active market
│ Costs to sell = Transport, commissions, taxes
│
│ Journal Entry (initial):
│ Dr Biological Asset (FVLCTS) ...................... xxx
│ Cr Cash / Payable / Other Income .................. xxx
│
│ Even if no cash changes hands — value change is income!
│
├─> Step 5: Subsequent Measurement
│ ✔ Still at FVLCTS
│ ✔ Changes in fair value go to P&L immediately
│
│ Journal Entry (FV gain):
│ Dr Biological Asset ............................... xxx
│ Cr Gain on Revaluation (P&L) ...................... xxx
│
│ Journal Entry (FV loss):
│ Dr Loss on Revaluation (P&L) ...................... xxx
│ Cr Biological Asset ............................... xxx
│
├─> Step 6: At the Point of Harvest
│ ✔ Reclassify biological asset → agricultural produce
│ ✔ Agricultural produce is now inventory (IAS 2)
│ ✔ Value at FVLCTS at date of harvest (fair value becomes cost)
│
│ Journal Entry:
│ Dr Inventory (IAS 2) ............................... xxx
│ Cr Biological Asset ................................ xxx
│
│ From this point forward: follow IAS 2 (Inventory) rules
│
├─> Step 7: Exceptions – Use Cost Model
│ ✔ If FV cannot be measured reliably:
│ • Use cost less accumulated depreciation and impairment
│ • Only allowed at initial recognition if no market, no estimates
│
│ Journal Entry:
│ Dr Biological Asset (at cost) ..................... xxx
│ Cr Cash / Payables ................................. xxx
│
├─> Step 8: Government Grants (link with IAS 20)
│ ✔ Unconditional grants → recognise in income when receivable
│ ✔ Conditional grants → recognise when conditions met
│
│ Journal Entry:
│ Dr Receivable / Bank ............................... xxx
│ Cr Grant Income (P&L) ............................... xxx
│
├─> Step 9: Disclosures (IAS 41.39–57)
│ ✔ Descriptions of BA
│ ✔ Reconciliation of BA carrying amounts
│ ✔ Fair value method, assumptions, valuation hierarchy
│ ✔ Biological risks (e.g., disease, climate)
│ ✔ Restrictions on sale or use of BA
└─ End

10 months ago | [YT] | 5

IAS 40 – Investment Property

Start
│
├─> Step 1: Does the property meet the definition?
│ ✔ Investment property is:
│ • Land or building (or part of it)
│ • Held to earn rental income, or for capital appreciation, or both
│ ✘ NOT for:
│ • Use in production/supply of goods/services (IAS 16)
│ • Administrative purposes (IAS 16)
│ • Sale in ordinary course of business (IAS 2)
│
├─> Step 2: Identify ownership or control
│ ├─ Owned property → IAS 40 applies directly
│ └─ Leased property:
│ ✔ If lease is right-of-use and held for investment (IFRS 16) → IAS 40 applies
│ ✔ Finance leases of investment property → IAS 40
│ ✔ Operating lease given out (lessor) → lessor applies IAS 40
│
├─> Step 3: Recognition Criteria
│ ✔ Future economic benefits are probable
│ ✔ Cost can be reliably measured
│ → If yes, recognise as investment property
│
│ Journal Entry:
│ Dr Investment Property .................................. xxx
│ Cr Bank / Payables ....................................... xxx
│
├─> Step 4: Choose the Measurement Model (Irrevocable per property)
│ Choose in accounting policy:
│ ├─ (A) Fair Value Model
│ │ • Measure at fair value at each reporting date
│ │ • Changes go to Profit or Loss
│ │
│ │ Journal Entry (gain):
│ │ Dr Investment Property ............................. xxx
│ │ Cr Fair Value Gain (P/L) ............................ xxx
│ │
│ │ Journal Entry (loss):
│ │ Dr Fair Value Loss (P/L) ............................ xxx
│ │ Cr Investment Property .............................. xxx
│ │
│ └─ (B) Cost Model
│ • Carry at cost less accumulated depreciation and impairment
│ • Apply IAS 16 depreciation rules
│ • Disclose fair value in notes even if cost model used
│
│ Journal Entry (depreciation):
│ Dr Depreciation Expense ............................ xxx
│ Cr Accumulated Depreciation – Investment Property .. xxx
│
├─> Step 5: Transfers to/from Investment Property (IAS 40.57–61)
│ ✔ Only permitted when use or intention changes
│ ├─ Examples:
│ │ • PPE → Investment Property (owner-occupied → rental)
│ │ • Inventory → Investment Property (stop selling → start renting)
│ │ • Investment Property → PPE (stop renting → owner use)
│
│ At transfer date:
│ ├─ From IAS 16 or IAS 2 to IAS 40:
│ │ • Use carrying amount at date of change
│ │ • Reclassify (no revaluation)
│ │ Journal Entry:
│ │ Dr Investment Property .............................. xxx
│ │ Cr PPE / Inventory .................................. xxx
│ └─ From IAS 40 to IAS 16:
│ • FV becomes deemed cost under IAS 16
│
├─> Step 6: Disposal of Investment Property
│ ✔ Derecognise when sold or permanently withdrawn
│ ✔ Gain/loss = Proceeds – Carrying amount → P/L
│
│ Journal Entry (gain):
│ Dr Bank .................................................. xxx
│ Cr Investment Property .................................... xxx
│ Cr Gain on Disposal (P/L) ................................. xxx
│
│ Journal Entry (loss):
│ Dr Bank .................................................. xxx
│ Dr Loss on Disposal (P/L) ................................. xxx
│ Cr Investment Property .................................... xxx
│
├─> Step 7: Disclosures (IAS 40.74–79)
│ ✔ Whether FV or cost model is used
│ ✔ If FV model used:
│ • Methods and assumptions for FV
│ • Rental income and direct operating expenses
│ • Restrictions on sale/use
│ ✔ If cost model used:
│ • Depreciation method and rates
│ • Gross carrying amount and accumulated depreciation
│ • Fair value of property disclosed in notes
└─ End

10 months ago | [YT] | 7

IAS 38 – Intangible Assets

Start
│
├─> Step 1: Does the asset meet the definition of an intangible asset?
│ ✔ Identifiable (either separable or from contractual/legal rights)
│ ✔ Non-monetary
│ ✔ Without physical substance
│ ✔ Controlled by the entity
│ ✔ Expected future economic benefits
│
│ Examples:
│ • Patents
│ • Trademarks
│ • Copyrights
│ • Licenses
│ • Software (acquired or internally generated)
│ • Customer lists, franchises (if acquired)
│
│ ✘ Excludes:
│ • Internally generated goodwill
│ • Brands, mastheads, publishing titles developed in-house
│
├─> Step 2: Was it acquired or internally generated?
│
│ ├─ (A) Acquired Intangibles:
│ │ ✔ Recognise at cost
│ │ ✔ Include purchase price + directly attributable costs
│ │
│ │ Journal Entry:
│ │ Dr Intangible Asset ........................... xxx
│ │ Cr Bank / Payable .............................. xxx
│ │
│ └─ (B) Internally Generated:
│ → Apply R&D rules (see below)
│
├─> Step 3: Internally Generated Intangibles – Research vs Development
│
│ Research Phase: Discovery, feasibility studies, exploration
│ ✘ Expense immediately → No intangible asset
│
│ Journal Entry:
│ Dr Research Expense (P/L) ....................... xxx
│ Cr Bank / Payables ............................... xxx
│
│ Development Phase: Application, design, testing, pilot models
│ ✔ Capitalise if ALL SIX criteria are met:
│ 1. Technical feasibility
│ 2. Intention to complete
│ 3. Ability to use/sell
│ 4. Future economic benefits (e.g., market, usefulness)
│ 5. Availability of resources
│ 6. Reliable measurement of costs
│
│ Journal Entry:
│ Dr Intangible Asset – Development ................ xxx
│ Cr Bank / Payables / Salaries ..................... xxx
│
├─> Step 4: Choose Measurement Model (After Recognition)
│ ✔ Must apply consistently to each class of intangibles
│
│ ├─ (A) Cost Model
│ │ • Carry at cost less amortisation & impairment
│ │ • Default and most common method
│ │
│ └─ (B) Revaluation Model
│ • Only if active market exists (rare)
│ • Carry at FV at revaluation date minus subsequent amortisation
│ • Surplus → OCI (revaluation reserve); Loss → P&L unless reserve exists
│
│ Journal Entry (revaluation gain):
│ Dr Intangible Asset ............................ xxx
│ Cr Revaluation Surplus (OCI) .................... xxx
│
│ Journal Entry (revaluation loss):
│ Dr Loss (P/L) / OCI ............................. xxx
│ Cr Intangible Asset ............................. xxx
│
├─> Step 5: Determine Useful Life
│ ├─ Finite life → Amortise over useful life
│ │ • Straight-line unless another method more appropriate
│ │ • Review annually
│ │
│ │ Journal Entry:
│ │ Dr Amortisation Expense ........................ xxx
│ │ Cr Accumulated Amortisation ..................... xxx
│ │
│ └─ Indefinite life → No amortisation, but test annually for impairment (IAS 36)
│ • Examples: trademarks, perpetual licences
│
├─> Step 6: Review for Impairment (IAS 36)
│ ✔ Annual test for:
│ • Indefinite life intangibles
│ • Intangibles not yet available for use
│ ✔ Finite life intangibles → test when indicators exist
│
│ Journal Entry (if impaired):
│ Dr Impairment Loss (P/L) ............................. xxx
│ Cr Intangible Asset / Acc. Impairment ................ xxx
│
├─> Step 7: Derecognition
│ ✔ When disposed of or no future economic benefit expected
│ ✔ Gain or loss → Profit or Loss
│
│ Journal Entry (disposal):
│ Dr Bank / Receivable ................................. xxx
│ Dr Loss on Disposal (if any) ......................... xxx
│ Cr Intangible Asset .................................. xxx
│
├─> Step 8: Disclosures (IAS 38.118–128)
│ ✔ Useful lives, amortisation methods
│ ✔ Gross carrying amount and accumulated amortisation
│ ✔ Reconciliation of opening to closing carrying amount
│ ✔ Intangibles with indefinite lives
│ ✔ Significant impairment losses
│ ✔ R&D expense separately disclosed
└─ End

10 months ago | [YT] | 6

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IAS 37 – Provisions, Contingent Liabilities & Contingent Assets

Start
│
├─> Step 1: Is there a present obligation (legal or constructive)?
│ ✔ Legal obligation: from law, contract, regulation
│ ✔ Constructive obligation: from valid past practice, published policies, or specific statements
│ ✘ If no obligation → No provision or contingent liability → Stop
│
├─> Step 2: Did the obligation arise from a past event?
│ ✔ Event must have occurred before reporting date (obligating event)
│ ✘ Future obligations → Not recognised
│
├─> Step 3: Is it probable that outflow of economic benefits will be required?
│ ✔ "Probable" = More likely than not (>50%)
│ ✘ If not probable → Contingent Liability (disclose only)
│
├─> Step 4: Can the amount be reliably estimated?
│ ✔ Yes → Recognise as provision
│ ✘ No → Contingent Liability (disclose only)
│
├─> Step 5: If all above are YES → Recognise Provision
│
│ 🔹 Journal Entry (general form):
│ Dr Expense (e.g., Warranty/Legal/Restructuring) .......... xxx
│ Cr Provision (Liability) .................................. xxx
│
├─> Step 6: Measurement of Provision
│ ✔ Best estimate of expenditure to settle obligation
│ ✔ Use expected value (if many outcomes) or most likely value (if one outcome)
│ ✔ If time value of money is material → Discount to present value
│ • Use pre-tax discount rate reflecting current market & risk
│
│ 🔹 Journal Entry (discounting):
│ Dr Finance Cost (unwind) .................................. xxx
│ Cr Provision ............................................... xxx
│
├─> Step 7: Review Provision at each reporting date
│ ✔ Adjust to reflect current best estimate
│ ✔ Reverse if outflow is no longer probable
│
│ 🔹 Journal Entry (reversal):
│ Dr Provision .............................................. xxx
│ Cr Reversal of Provision (Income) ......................... xxx
│
├─> Step 8: If obligation possible, not probable → Contingent Liability
│ ✔ Disclose in notes
│ ✔ Do not recognise in FS
│ ✘ Unless outflow is remote → then ignore entirely
│
├─> Step 9: If inflow of economic benefit is probable (asset side)?
│ ✔ Contingent Asset → Do not recognise
│ ✔ Only disclose if inflow is probable
│ ✔ Only recognise when virtually certain
│
│ 🔹 Journal Entry (when virtually certain):
│ Dr Receivable / Asset ..................................... xxx
│ Cr Other Income / Gain ..................................... xxx
└─ End

10 months ago | [YT] | 7

IFRS 7: Financial Instruments: Disclosures

Start
│
├─> Step 1: Does the entity hold financial instruments?
│ ✔ Examples:
│ – Trade receivables/payables
│ – Loans, bonds, derivatives, equity investments
│ – Lease receivables (IFRS 16)
│ ✔ If YES → Apply IFRS 7
│ ✔ If NO → Not applicable
│
├─> Step 2: Disclose Financial Instruments by Class
│ ✔ By category per IFRS 9:
│ – Amortised cost
│ – Fair value through profit or loss (FVTPL)
│ – Fair value through OCI (FVOCI)
│ ✔ Group by class (e.g. "loans and receivables", "derivatives")
│
├─> Step 3: Disclose Accounting Policies
│ ✔ Basis for:
│ – Classification
│ – Measurement (e.g. amortised cost, fair value)
│ – Derecognition rules
│ – Impairment under expected credit loss model (IFRS 9)
│
├─> Step 4: Fair Value Disclosure (IFRS 13 link)
│ ✔ For financial instruments measured at fair value:
│ – Show fair value hierarchy (Level 1, 2, 3)
│ – Significant assumptions used
│ – Sensitivity analysis (for Level 3)
│ ✔ For those not at fair value, disclose carrying amount vs fair value
│
├─> Step 5: Quantitative Disclosures
│ ✔ Carrying amounts by category
│ ✔ Gains/losses:
│ – From derecognition (e.g. sale of bond)
│ – From impairment (ECLs)
│ – From fair value changes (FVTPL)
│ ✔ Interest income/expense
│ ✔ Fee income/expense
│ ✔ Collateral held or pledged
│
├─> Step 6: Risk Disclosures (IFRS 7.31–42)
│ ✔ Three main risks:
│ (A) Credit Risk
│ (B) Liquidity Risk
│ (C) Market Risk (currency, interest rate, price)
│
│ ├─ (A) Credit Risk:
│ │ ✔ Maximum exposure (before collateral)
│ │ ✔ Collateral and other credit enhancements
│ │ ✔ Aging of receivables
│ │ ✔ ECL movement table (3-stage model from IFRS 9)
│
│ ├─ (B) Liquidity Risk:
│ │ ✔ Maturity analysis of liabilities
│ │ ✔ Include undiscounted cash flows
│ │ ✔ Breakdown of committed lines of credit
│
│ └─ (C) Market Risk:
│ ✔ Sensitivity analysis for:
│ – Interest rate
│ – Foreign exchange
│ – Equity price
│ ✔ Show % effect on P&L or OCI
│
├─> Step 7: Hedge Accounting Disclosures (if used)
│ ✔ Hedge relationships (type: fair value, cash flow, net investment)
│ ✔ Hedged items and instruments
│ ✔ Effectiveness testing (qualitative and quantitative)
│ ✔ Risk management strategy
│
├─> Step 8: Additional Requirements (if applicable)
│ ✔ Transfer of financial assets (e.g. factoring, securitisation)
│ ✔ Offsetting disclosures (link to IAS 32)
│ ✔ Defaults and breaches of loan covenants
└─ End

10 months ago | [YT] | 5

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IAS 36: — Impairment of Assets

Start
│
├─> Step 1: Is the asset within the scope of IAS 36?
│ ✔ Includes:
│ • PPE (IAS 16)
│ • Intangible assets (IAS 38)
│ • Goodwill (IFRS 3)
│ • Right-of-use assets (IFRS 16)
│ • Investments in subsidiaries/joint ventures (IAS 27)
│ ✘ Excludes:
│ • Inventory (IAS 2)
│ • Deferred tax (IAS 12)
│ • Financial assets (IFRS 9)
│ • Biological assets (IAS 41)
│
├─> Step 2: Is there any indication of impairment at reporting date?
│ ✔ For all assets → test only if there is indication
│ ✔ For:
│ • Goodwill
│ • Intangibles with indefinite useful life
│ • Intangibles not yet available for use
│ → Test annually, even with no indicator
│
├─> Step 3: Determine the asset's **Recoverable Amount**
│ ✔ Recoverable Amount = Higher of:
│ • Fair Value Less Costs of Disposal (FVLCOD)
│ • Value in Use (VIU)
│
│ Fair Value Less Costs of Disposal:
│ • Market-based
│ • Based on active market, recent transactions
│
│ Value in Use:
│ • Present value of future cash flows from asset/CGU
│ • Based on:
│ - Reasonable and supportable assumptions
│ - Pre-tax cash flows
│ - Pre-tax discount rate (market-based)
│
├─> Step 4: Compare Carrying Amount vs Recoverable Amount
│ ✔ If Carrying Amount > Recoverable Amount → Impairment Loss
│ ✔ If Carrying Amount ≤ Recoverable Amount → No impairment
│
├─> Step 5: Recognise Impairment Loss
│
│ Journal Entry:
│ Dr Impairment Loss (P&L or OCI depending on asset) ....... xxx
│ Cr Asset / Accumulated Impairment ......................... xxx
│
│ If asset previously revalued under IAS 16/38 → Loss goes to OCI, then revaluation reserve (to extent available)
│ Otherwise, loss goes to Profit or Loss
│
├─> Step 6: Allocation of Impairment — If CGU
│ ✔ When asset does not generate independent cash flows → test as part of Cash Generating Unit (CGU)
│ ✔ Allocate impairment:
│ 1. First to Goodwill (if any)
│ 2. Then pro-rata to other CGU assets
│ ✘ Do NOT reduce asset below:
│ • Fair value less costs of disposal (if known)
│ • Value in use (if determinable)
│ • Zero
│
├─> Step 7: Goodwill Impairment Testing
│ ✔ Always tested annually
│ ✔ Allocate goodwill to CGU or group of CGUs
│ ✔ Recoverable amount of CGU < Carrying amount → Impair goodwill first
│
│ 🔹 Journal Entry (full goodwill impaired):
│ Dr Impairment Loss – Goodwill ......................... xxx
│ Cr Goodwill ........................................... xxx
│
├─> Step 8: Reversal of Impairment (excluding goodwill)
│ ✔ Possible only if external/internal indicators show reversal
│ ✔ Reassess recoverable amount
│ ✔ Reversal limited to what carrying amount would have been
│ (had no impairment occurred)
│
│ 🔹 Journal Entry:
│ Dr Asset / Accumulated Impairment .................... xxx
│ Cr Reversal of Impairment Loss (P&L) .................. xxx
│
├─> Step 9: Disclosures (IAS 36.126–137)
│ ✔ For each class of asset/CGU impaired:
│ • Impairment loss recognised or reversed (P&L or OCI)
│ • Events causing the loss/reversal
│ • Description of CGU (if applicable)
│ • Key assumptions (discount rate, growth)
└─ End

10 months ago | [YT] | 7

IAS 34 – Interim Financial Reporting

Start
│
├─> Step 1: Is the entity required or choosing to publish interim financials?
│ ✔ Listed entities or regulated sectors → Required (e.g., stock exchange rules)
│ ✔ Voluntary → IAS 34 applies if interim report is prepared in compliance
│
├─> Step 2: What type of interim financial statements will be presented?
│ ├─ (A) Condensed interim financial statements (most common)
│ │ ✔ Includes minimum line items per IAS 34
│ │ ✔ Shorter than full annual FS
│ └─ (B) Complete set of financial statements (IAS 1 compliant)
│
├─> Step 3: What components must be included (IAS 34.8)?
│ ✔ Condensed or full:
│ 1. Condensed Statement of Financial Position
│ 2. Condensed Statement of Profit or Loss and OCI
│ 3. Condensed Statement of Changes in Equity
│ 4. Condensed Statement of Cash Flows
│ 5. Selected explanatory notes
│
├─> Step 4: Determine Reporting Period
│ ✔ Typically quarterly or half-yearly
│ ✔ Statement of financial position:
│ • End of current interim period
│ • End of previous full year
│ ✔ Income statements (P/L, OCI, equity, cash flows):
│ • Current interim period and year-to-date
│ • Comparative prior interim period and YTD
│
├─> Step 5: Recognition & Measurement Principles
│ ✔ Use same accounting policies as in annual FS (IAS 34.28)
│ ✔ Apply policy consistently across periods and segments
│ ✔ Measure on year-to-date basis → Not quarterly isolation
│ ✔ Revenue & costs must not be anticipated or deferred if not allowed at year-end
│
│ Example: Don’t defer maintenance expenses in Q1 to later quarters unless allowed under IAS 16 at year-end
│
├─> Step 6: Apply Materiality Judgment
│ ✔ Materiality is assessed relative to interim period data, NOT annual
│ ✔ Even small amounts can be material if they influence economic decisions for that quarter
│ ✔ Don’t ignore non-recurring items or seasonal effects
│
├─> Step 7: Disclosures (IAS 34.15–17)
│ ✔ Explain events & transactions significant to understanding the interim results:
│ • Write-downs of inventories / impairments
│ • Restructuring costs
│ • Dividends
│ • Seasonal revenues or expenses
│ • Acquisition/disposal of subsidiaries
│ • Fair value changes (IFRS 9, 13)
│ • Tax expense changes
│ • Segment reporting updates
│
│ ✔ Also disclose:
│ • Change in accounting policies (e.g. new IFRS)
│ • Events after reporting date (see IAS 10)
│ • Contingent liabilities & commitments (IAS 37)
│
├─> Step 8: Tax Expense – Estimate it
│ ✔ Interim tax = estimated annual effective tax rate × pre-tax profit YTD
│ ✔ Do not calculate tax on standalone quarterly profits
│
├─> Step 9: Going Concern & Consistency
│ ✔ Same going concern assessment as annual FS
│ ✔ Do not change recognition/measurement rules without justification
│
└─ End

10 months ago | [YT] | 4

IAS 28: Investments in Associates and Joint Ventures

Start
│
├─> Step 1: Is the investee an associate or joint venture?
│ ✔ Associate: Investor has significant influence
│ – Generally presumed if investor holds ≥20% of voting power
│ – Influence includes: board representation, policy participation, material transactions, info access
│ ✔ Joint venture: Joint control (per IFRS 11), with rights to net assets
│
├─> Step 2: Determine applicable accounting method
│ ✔ In consolidated FS → Use equity method (required)
│ ✔ In separate FS → Choose one:
│ – Cost model (IAS 27)
│ – Fair value through P&L (IFRS 9)
│ – Equity method (allowed by IAS 28 in separate FS)
│
├─> Step 3: Initial Recognition
│ ✔ Record at cost including transaction costs
│
│ Journal Entry (initial):
│ Dr Investment in Associate .................. xxx
│ Cr Cash / Payables .......................... xxx
│
├─> Step 4: Apply the Equity Method
│ ✔ Start with cost
│ ✔ Adjust each period for:
│ – Share of profit or loss (P&L)
│ – Share of OCI (OCI section)
│ – Less: Dividends received
│ – Add/Subtract: Purchase price adjustments (e.g. fair value differences)
│
│ Share of profit:
│ Dr Investment in Associate .................. xxx
│ Cr Share of Profit from Associate (P&L) .... xxx
│
│ 🔹 Dividend received:
│ Dr Cash ...................................... xxx
│ Cr Investment in Associate .................. xxx
│
├─> Step 5: Adjust for fair value of identifiable net assets
│ ✔ At acquisition date:
│ – Compare cost of investment to investor’s share of net assets
│ – The difference = goodwill (included in the investment balance)
│ – Impairment applies to entire investment balance (not separately to goodwill)
│
├─> Step 6: Impairment Test
│ ✔ Test for indicators of impairment under IAS 36
│ ✔ If impaired:
│ Dr Impairment Loss (P&L) .................... xxx
│ Cr Investment in Associate .................. xxx
│ ✔ Impairment loss not reversed
│
├─> Step 7: If investor’s share of losses > investment
│ ✔ Reduce investment to zero
│ ✔ Stop recognizing further losses unless:
│ – Legal or constructive obligation exists
│
│ 🔹 Journal Entry:
│ Dr Share of Loss from Associate ............ xxx
│ Cr Investment in Associate .................. to zero
│ Cr Liability (if obligation exists) .......... balance
│
├─> Step 8: Discontinue equity method if:
│ ✔ Loss of significant influence or joint control
│ ✔ Apply IFRS 9 to retained investment
│
├─> Step 9: Disclosures (via IFRS 12)
│ ✔ Summarized financial information for material associates/JVs
│ ✔ Nature of relationship
│ ✔ Risks and restrictions
│ ✔ Fair value (if quoted)
└─ End

10 months ago | [YT] | 4