2013 Ifrs Introduction - Final

for Accounting Professionals
IFRS INTRODUCTION
www.bankir.ru/technology/vestnik/uchebnye-posobiya-po-msfoeng
2013
[Type text]
IFRS WORKBOOKS
(1 million downloaded)
Welcome to the EU Tacis IFRS Workbooks sixth (2013) edition!
This is the tenth anniversary of the first edition in 2003. The
changes from the 2012 edition are minimal, with no new
standard issued in the past year. Major changes are anticipated
to IFRS 9, IFRS 4, IAS 17 and IAS 18. Exposure drafts
(proposals) have been issued, but have not yet been
incorporated into the standards. To the books, we have added
an article: IFRS- grabbing the tiger by the tail which has been
published by bankir.ru in Russian. This article covers IFRS
teaching issues for each standard and a number of opinions
and discussion points.
The set of books provides a book for every standard, plus three
books on consolidation. Financial instrument bookkeeping is
covered in IAS 32/39 (book 3) and in IFRS 9. IFRS 7 is
complemented by FINREP, which illustrates practical use and
presentation formats. An introduction to IFRS and
transformation models from Russian accounting to IFRS
complete the set.
Each workbook is a combination of Information, Examples,
Self-Test Questions and Answers.
Thanks are due to those who made these publications possible
and to you, our readers, for your continued support. I would like
to express my gratitude to: Igor Sykharev and Tatiana
Trifonova of the Ministry of Finance who provided a link from
the Ministrys site. Gulnara Makhmutova and Adel Valeev
provided the updated Russian texts and editing. Marina Korf
and Yulia Ykhanova of bankir.ru provided help, advice and
space on its website. Sergey Dorozhkov and Elina Buzina of
Association of Russian Bankers Institute of Banking

http://www.ibdarb.ru/msfo.php ran excellent IFRS courses on all
standards which enabled us to test this material and learn new
insights from them and the participants. Please join us there for
the best consolidation course in Russia.
World Bank courses for the Bank of Tanzania (BOT) provided
new IFRS and banking insights: thanks to Albert Mkenda BOT
and my colleague Benson Mahenya among many others. IFRS
assistance to the Bank of Mongolia (BOM) with
PricewaterhouseCoopers (thanks to Ekaterina Nekrasova,
Jelena Pesic and Vladislav Kononenko) provided exposure to
Mongolian commercial bank reporting and blending IFRS with
bank prudential ratios. Oyungerel Gonchig, Project Manager
at World Bank, Mongolia, and our counterparts at BOM:
Oyuntsatsral Banid, Bunchinsuren Dagva, Borkhuu
Gotovsuren, Batmaa Ochirbat and Gantsetseg Myagmarjay
contributed to a memorable project.
On the back page are notes covering copyright details and the
history of the series.
Please tell your friends and colleagues where to find our books.
We hope that you find them useful.
Robin Joyce
Professor of the Chair of International Banking and
Finance,
Financial University under the Government of the
Russian Federation
Professor, Russian Academy of National Economy and
Public Administration under the President of the
Russian Federation
Visiting Professor of the Siberian Academy of Finance

and Banking
Moscow, Russia
2013
CONTENTS
An Introduction to IFRS.................................................................3
1.1 Scope.....................................................................................3
Grouping of IFRS..........................................................................4
1.2 Introductory Standards...........................................................4
1.3 Foundation Standards............................................................4
1.4 Property, Plant and Equipment Standards.............................5
1.5 Special Case 1 Standards......................................................5
1.6 Remuneration Standards.......................................................5
1.7 Listed Company Standards....................................................5
1.8 Special Case 2 Standards......................................................5
1.9 Disclosure Standards.............................................................5
1.10
Banking Standards.............................................................5
1.11
Industry Specific Standards................................................5
1.12
Consolidation Standards....................................................5
1.13 Additional Publications..........................................................5

2
Overview of the Standards.....................................................6

2.1 Introductory Group................................................................6
2.2 Foundation Group..................................................................7
2.3 Property, Plant and Equipment Group...................................8
Special Case 1 Group...........................................................11
Remuneration Group............................................................11
Listed Company Group........................................................12
Special Case 2 Group..........................................................13
Disclosure Group..................................................................14
Banks Group.........................................................................14
Industry Specific Group........................................................15
10 Consolidation Standards......................................................16
11 Additional Publications.........................................................17
11.1
Transformation..................................................................17
The themes chosen recognise that some standards, such as
Impairment interact with a range of other standards.
An Introduction to IFRS
1.1
Financial reporting standards have two main aims:
Scope
These notes are an unofficial guide to IFRS and introduce the

series, IFRS Workbooks for Accounting Professionals. The main
objective is to help you navigate the IFRS standards by
grouping them by theme.
The secondary purpose is to highlight how our publications can
assist in learning IFRS. For each Standard there is a workbook
to download comprising text, examples, multiple-choice
questions and answers on our website
www.bankir.ru/technology/vestnik/uchebnye-posobiya-pomsfoeng.
The architecture of IFRS must be taken as a whole. Financial

statements prepared under IFRS must use all of the required
applicable standards to be IFRS compliant.
IFRS can be grouped by theme rather than date of publication
as published by IASB.
-disclosure
-timing of profit
All standards identify the disclosure of information required
according to those aims. IAS 24 Related Parties, IAS 32
Financial Instruments and IFRS 8 Operating Segments are only
about disclosure.
Most other standards prescribe the timing of recognition of
revenue, costs or both, and therefore the timing of the
recognition of profit. They may prescribe that revenue, costs or
both (and therefore, profit) are recognised in a single specific
period, or are spread over more than one period.
Note: IFRS 9-13 have an effective date of 2013. The standards
they replace are listed here and supported by our books as the
older standards can be used until 2013.
PRINCIPLE, STANDARD, POLICY, PROCEDURE

RELATIONSHIPS
PRINCIPLES are guiding concepts.
STANDARDS
ARE WRITTEN GUIDELINES FOR THE TREATMENT

OF VARIOUS TYPES OF FUNCTIONS AND ACTIVITIES. THEY APPLY
TO ALL COMMERCIAL BANKS. STANDARDS INCLUDE ACCEPTABLE
ALTERNATIVES
FOR
APPROPRIATE
ACCOUNTING
UNDER
INTERNATIONAL FINANCIAL REPORTING STANDARDS.
POLICIES discuss specific accounting for certain types of

assets and activities. They apply to all commercial banks.
Policies indicate, where applicable, which method of accounting
is required when alternatives exist.
PROCEDURES give detailed instruction on the handling of
specific transactions arising from activities or in accounting for
assets or liabilities. They are written by individual banks for
internal use. A number of separate procedures are typically
necessary to cover all the various activities associated with
accounting for one type of function.
Grouping of IFRS
The standards are grouped into eleven themes as follows:
1.2 Introductory Standards
The Conceptual Framework for Financial Reporting
Main Financial Statements and Accounting Policies:
IAS 1: Presentation of Financial Statements
IAS 7: Statements of Cash Flows
IAS 8: Accounting Policies, Changes in Accounting Estimates
and Errors
1.3 Foundation Standards

IAS 18: Revenue
IAS 2: Inventories
IAS 37: Provisions, Contingent Liabilities and Contingent Assets
IAS 12: Income Taxes
1.4 Property, Plant and Equipment Standards
IAS 16: Property, Plant and Equipment
IAS 36: Impairment of Assets
IAS 40: Investment Property
IAS 17: Leases
IAS 38: Intangible Assets
IAS 11: Construction Contracts
IAS 23: Borrowing Costs
IAS 20: Accounting for Government Grants and Disclosure of
Government Assistance
IFRS 5: Non-current Assets Held for Sale and Discontinued
Operations
1.5 Special Case 1 Standards
IAS 21: The Effects of Changes in Foreign Exchange Rates
1.6 Remuneration Standards
IAS 19: Employee Benefits
IAS 26: Accounting and Reporting by Retirement Benefit Plans
IFRS 2: Share-based Payment
1.7 Listed Company Standards
IFRS 8: Operating Segments
IAS 34: Interim Financial Reporting
IAS 33: Earnings per Share
1.8 Special Case 2 Standards
IAS 29: Financial Reporting in Hyperinflationary Economies
IFRS 1: First-time Adoption of International Financial Reporting

Standards
1.9 Disclosure Standards

IAS 24: Related Party Disclosure.
IAS 10: Events after the Reporting Date
The Conceptual Framework for Financial Reporting
1.10 Banking Standards

IAS 32: Financial Instruments: Disclosure and Presentation
IAS 39: Financial Instruments: Recognition and Measurement
IFRS 7: Disclosure in the Financial Statements of Banks and
Similar Financial Institutions
IFRS 9: Financial Instruments
IFRS 13: Fair Value Measurement
Overview of the Standards

2.1
Introductory Group
This framework document deals with:

(i)
(ii)
(iii)
(iv)
the objective of financial statements;

the qualitative characteristics that determine the
usefulness of information in financial statements;
the definition, recognition and measurement of the
elements from which financial statements are
constructed; and
concepts of capital and capital maintenance.
1.11 Industry Specific Standards

IAS 41: Agriculture
IFRS 4: Insurance Contracts
IFRS 6. Exploration for and evaluation of mineral resourses
It specifies that IFRS accounts are prepared using the accrual

concept and that financial statements are normally prepared on
the assumption that an undertaking is a going concern, and will
continue in operation for the foreseeable future.
1.12 Consolidation Standards

IAS 27: Separate Financial Statements
IAS 28: Investments in Associates
IAS 31: Interests in Joint Ventures
IFRS 3: Business Combinations
IFRS 10: Consolidated Financial Statements
IFRS 11: Joint Arrangements
IFRS 12: Disclosure of Interests in Other Entities
The Framework document is a comprehensive overview of the

foundations of IFRS, and is referred to by the IASB in its
deliberations on new standards and amendments to existing
standards.
1.13 Additional Publications
Main Financial Statements and Accounting Policies

IAS 1: Presentation of Financial Statements
+
IAS 7: Statements of Cash Flows
RAS to IFRS Transformation
As well as financial performance, financial statements also

show the results of managements stewardship of resources
and must provide information on:
(i)
assets;
(ii)
liabilities;
(iii)
equity;
(iv)
income and expenses, including gains and losses;
(v)
other changes in equity; and
(vi)
cash flows.
A complete set of financial statements comprises:
(i)
a
balance
sheet
(Statement
of
Financial
Performance);
(ii)
an income statement;
(iii)
a statement of changes in equity showing either:
(iv)
all changes in equity, or
(v)
changes in equity (not normal buying and selling);
(vi)
a statement of cash flows; and
(vii) notes, comprising a summary of significant
accounting policies, and other explanatory notes.
IAS 1 AND IAS 7 cover the primary presentation issues of IFRS
financial statements and specify the information that needs to
be included in those statements.
IAS 7 requires the disclosure of information on changes in cash
and cash equivalents by means of a cash flow statement.
IAS 7 classifies cash flows into:
(i)
operating,
(ii)
investing and
(iii)
financing activities.
Foreign currency cash flows are covered, as are Acquisitions
and Disposals of Subsidiaries and Other Business Units.
IAS 8: Accounting Policies, Changes in Accounting

Estimates and Errors
An undertaking shall disclose in the summary of significant
policies:
(i) the measurement bases used in the financial statements;
and
(ii) the other policies used that are relevant to an understanding
of the financial statements.
IAS 8 prescribes the criteria for selecting and changing
accounting policies, and disclosing the effects of estimates and
errors.
Accounting policies are rules and practices applied in
presenting financial statements.
A change in accounting estimate is an adjustment of the
carrying amount of an asset or a liability or the consumption of
an asset.
Changes in estimates result from new information, or new
developments and are not corrections of errors.
Prior-period errors are omissions or misstatements in the
financial statements of prior-periods.Information that was
available, and should have been taken into account, is
classified as an error.
Errors include
(i)
(ii)
(iii)
calculation error;
incorrect application of accounting policies;
oversights or misinterpretations; and
(iv)
fraud.
(ii)
Retrospective application is applying a new policy as if that

policy had always been applied.
Retrospective restatement is restating financial statements as if
a prior-period error had never occurred.
Retrospective application and restatement may be new to some
of our readers. Our workbook on IAS 8 provides guidance and
examples.
2.2
Foundation Group
IAS 18: Revenue

Revenue is income that is derived from ordinary activities of the
firm. (See also IAS 17, 28, 39 & 41+ IFRS 9 which complement
IAS 18 in respect of revenue.)
Income comprises revenue and gains.
The timing of recognition of revenue is a key issue of the
standard.
materials to be used in the production process or

provision of services.
In the case of the provision of services, inventories include the

cost of unbilled services (similar to work in progress).
Valuation of inventory at cost, fair value and net realisable value
are all discussed in the workbook.
IAS 37: Provisions, Contingent Liabilities and Contingent
Assets
IAS 37 sets out recognition criteria and measurement bases for
provisions, contingent liabilities and contingent assets and
specify the information to be disclosed in the notes to the
financial statements.
Provisions are used to provide for future liabilities that are
uncertain.
Contingent assets are uncertain cash inflows that may be
received.
Revenue will be recognised when it is probable that future

economic benefits will be secured, and the benefits can be
measured.
Contingent liabilities (e.g. guarantees and warranties) do not

appear on balance sheets, but need to be disclosed in financial
statements to enable users to have a complete picture of the
undertakings financial position.
IAS 2: Inventories
IAS 12: Income Taxes
Inventories are:
IAS 12 prescribes the accounting treatment for income taxes,

and the tax consequences of:
(i)
assets that are held for sale, or being prepared for

sale,
(i)
(ii)
transactions of the current period; and

the future liquidation of assets and liabilities.
IAS 40: Investment Property

If liquidation of those assets and liabilities will make future tax
payments larger or smaller, IAS 12 generally requires recording
of a deferred tax liability (or deferred tax asset).
IAS 12 also covers:
(i)
recognition of deferred tax assets arising from unused
tax losses or unused tax credits,
(ii)
presentation of income taxes, and
(iii)
disclosure of information relating to income taxes.
2.3
Property, Plant and Equipment Group
IAS 16: Property, Plant and Equipment

The main issues in accounting for property, plant and
equipment are:
(i)
the recognition of the assets;
(ii)
the determination of their carrying amounts;
(iii)
the depreciation charges; and
(iv)
impairment losses to be recognised.
Investment property can be:

(i)
(i)
(ii)
(iii)
land, or
a building, or
part of a building, or
both land and building.
It is held by the owner (or by the lessee, under a finance lease)

to earn rent, or for capital appreciation, or both.
It does not include property:
(i)
(ii)
(iii)
for use in the production, supply of goods, services;

or
for administrative purposes; or
for sale in the ordinary course of business.
IAS 17: Leases
IAS 36: Impairment of Assets
Leases involve the owner of an asset renting it to others for

payment.
The objective of IAS 36 is to prescribe the procedures to ensure

that assets are carried at no more than their recoverable
amount and the disclosures that must be made.
Long-term rentals (finance leases) have seen dramatic growth

over the last 50 years.
An asset is described as impaired when its carrying amount

exceeds the recoverable amount (amount to be recovered
through use or sale).
IAS 17 addresses this issue by accounting for finance leases in

a similar manner as the purchase of an asset, matched by a
loan for the same amount.
The asset appears on the balance sheet even though the
lessee does not own it.
IAS 36 requires the recording of an impairment loss.
Short-term rental agreements are mostly accounted for as

operating leases in the same way as rental payments are
booked.
Operating leases are treated as expense items in the income
statement.
Regular reviews of costs and revisions of estimates are

necessary throughout the contract.
IAS 38: Intangible Assets

IAS 38 requires an undertaking to record an intangible asset
only if:
(i)
(ii)
future benefits of
the asset will flow to the
undertaking; and
the cost of the asset can be measured.
This requirement applies whether an intangible asset is

acquired externally or generated internally.
IAS 38 includes additional recognition criteria for internallygenerated intangible assets.
After initial recognition, IAS 38 requires an intangible asset to
be measured at:
(i)
(ii)
contract revenue and contract costs are key issues of the

standard.
An effective internal financial budgeting and reporting system,
which is kept up-to-date at all times, is required to control
construction contracts.
cost, less any accumulated amortisation and any

accumulated impairment losses; or
revalued amount, less any accumulated amortisation,
and any accumulated impairment losses.
IAS 11: Construction Contracts

The start and finish of construction contracts often falls into
different accounting periods. Thus, the timing of recognition of
Construction contracts include:

(i)
(ii)
services related to the construction, such as project

managers and architects;
contracts for demolition, or restoration, of assets and
the restoration of the environment.
IAS 23: Borrowing Costs

Borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset form part of the
cost of that asset.
Other borrowing costs are recognised as an expense.
A qualifying asset is one that takes a long time to prepare for its
intended sale or use.
Examples of Qualifying Assets:
1. Inventories that require a long time to bring them to a
saleable condition.
2. Manufacturing plants.
3. Power-generation facilities
10
4. Investment properties.
5. Intangible assets
IAS 21: The Effects of Changes in Foreign Exchange Rates
IAS 20: Accounting for Government Grants and Disclosure

of Government Assistance
IAS 20 covers accounting and disclosure of government grants
and similar assistance that transfers resources to qualifying
firms. The firms qualify by past or future compliance with the
grant conditions.
Grants exclude assistance that cannot be reasonably valued,
and transactions with government which are in the normal
course of trade.
Incentives such as free technical assistance, marketing advice
and the provision of guarantees are excluded form accounting
unless there is a direct cost.
IFRS 5: Non-current Assets Held for Sale and Discontinued
Operations
IFRS 5 sets out requirements for the classification,
measurement and presentation of non-current assets held for
sale.
Special Case 1 Group
Transactions in foreign currencies, investments and liabilities in

foreign currencies are covered, as are financial statements of
foreign operations.
The standard sets out how to recognise and record income,
expenditure, assets and liabilities denominated in a foreign
currency and how gains and losses are recognised.
4 Remuneration Group
Providing guidance on remuneration, these standards are of
specific interest to those involved in private pension schemes
and the use of shares and share options to pay staff and others.
IAS 19: Staff Benefits
IAS 19 identifies, and provides guidance on the accounting for,
five categories of staff benefits:
(i)
short-term staff benefits, such as salaries and social

security contributions, paid annual leave and paid
sick leave, profit-sharing and bonuses payable within
twelve months and non-cash benefits such as
medical care, housing, cars and free or subsidised
goods or services for current staff;
(ii)
post-employment benefits such as pensions, other

retirement benefits, post-employment life insurance
and post-employment medical care;
IFRS 5 arises from the IASBs consideration of the U.S. based

FASB Statement No. 144 and addresses two areas:
(i)
(ii)
the classification, measurement and presentation of

assets held for sale;
the classification and presentation of discontinued
operations.
11
(iii)
other long-term staff benefits, including long-service

or sabbatical leave, jubilee or other long-service
benefits, long-term disability benefits and, if they are
payable twelve months or more after the end of the
period, profit-sharing, bonuses and deferred
compensation;
(iv)
termination benefits;
(v)
equity compensation benefits.
5 Listed Company Group

These three standards are compulsory only for companies
listed on stock exchanges, or mandatory under national
accounting regulations. For other companies these standards
are recommended.
IFRS 8: Operating Segments
IAS 26: Accounting and Reporting by Retirement Benefit

Plans
IAS 26 should be applied in the reports of private retirement
benefit (pension) plans where such reports are prepared.
As undertakings become larger, understanding how they

operate:
- in different markets,
- with different products and services and
- providing to a growing range of clients
IFRS 2: Share-based Payment
becomes more difficult, unless additional detail is provided.
IFRS 2 covers settlements made in an entitys own equity

instruments or in cash, if the amount payable depends on the
price of the entitys shares (or other equity instruments, such as
options).
Information about components of an undertaking, the products

and services that it offers, its foreign operations, and its major
clients is useful for understanding and making decisions about
the undertaking as a whole. Users observe that the evaluation
of the prospects for future cash flows is the central element of
investment and lending decisions.
Estimates are required of the number of options, or other

instruments, expected to be exercised.
Such estimates are complex to calculate where performance
criteria, such as earnings targets, are involved. Specialist
valuation skills are likely to be required in order to determine the
amounts to be reported in the financial statements.
The evaluation of prospects requires assessment of the

uncertainty that surrounds both the timing and the amount of
the expected cash flows to the undertaking, which in turn affect
potential cash flows to the investor or creditor.
Users also observe that uncertainty results in part from factors
related to the products and services an undertaking offers and
the geographic areas in which it operates.
12
Different segments will generate dissimilar streams of cash

flows to which are attached disparate risks and which bring
about unique values. Thus, without disaggregation, there is no
sensible way to predict the overall amounts, timing, or risks of a
complete undertakings future cash flows.
The additional detail should:
(1) increase the number of reported segments and provide
more information;
(2) enable users to see an undertaking through the eyes of
management;
(3) enable an undertaking to provide timely segment information
for external interim reporting with relatively low incremental
cost;
(4) enhance consistency with the management discussion and
analysis or other annual report disclosures; and
(5) provide various measures of segment performance.
Knowledge of the structure of an undertakings internal
organisation is valuable in itself because it highlights the risks
and opportunities that management believes are important.
Segments based on the structure of an undertakings internal
organisation have at least three other significant advantages:
1. An ability to see an undertaking through the eyes of
management enhances a users ability to predict actions
or reactions of management that can significantly affect
the undertakings prospects for future cash flows.
2. As information about those segments is generated for

managements use, the incremental cost of providing
information for external reporting should be relatively low.
3. Practice has demonstrated that the term industry is
subjective. Segments based on an existing internal
structure should be less subjective.
IAS 34: Interim Financial Reporting
IAS 34:
(i)
(ii)
defines the minimum content of an interim financial

report; and
identifies the recognition and measurement principles
that should be applied in an interim financial report.
The notes to interim financial reports include primarily an

explanation of the events, and changes, that are significant to
an understanding of the changes in financial position, and
performance, since the last annual reporting date.
Virtually none of the notes to the annual financial statements
are repeated, or updated in the interim report.
IAS 33: Earnings per Share
The objective of IAS 33 is to prescribe principles for the
calculation and presentation of earnings per share. This is to
improve comparisons between different undertakings in the
same reporting period, and between different reporting periods
for the same undertaking.
Earnings per share (earnings / number of shares) as a measure
of performance has its limitations, as accounting policies for
determining earnings may differ.
13
(ii)
The focus of IAS 33 is on determining the number of shares
used in the EPS calculation, which may not be immediately
clear (for example where options exist).
6
Special Case 2 Group
IAS 29: Financial Reporting in Hyperinflationary Economies

IAS 29 is based on current purchasing power principles and
requires that financial statements, prepared in the currency of a
hyperinflationary economy, be stated in terms of the value of
money at the reporting balance sheet date.
(iii)
(iv)
identifying outstanding balances between an

undertaking and related parties;
identifying when the disclosures should be made; and
determining what disclosures should be made.
Related party relationships are a normal feature of business

throughout the world. The related party relationships can have
an impact on the profit, or loss, of an undertaking.
Transactions with related parties may be made on different
terms or prices than would have been made with unrelated
parties.
IAS 10: Events after the Reporting Period
This straightforward requirement needs an understanding of

complex economic concepts, a thorough knowledge of the
enterprises financial and operating patterns and a detailed
series of procedures to implement.
IFRS 10 details the post-balance-sheet events, when they

should be recognised and how they should be recorded and
disclosed.
IFRS 1: First-time Adoption of International Financial

Reporting Standards
Post-balance-sheet events happen in the period starting

immediately after the balance sheet date and ending at the date
of approval of the financial statements by the shareholders.
IFRS 1 sets out the requirements for first time adopters of IFRS.
The standard allows companies to avoid some of the need for
reconstructing old records by providing exemptions from other
standards.
7
There are 4 main types of material post-balance-sheet event in

this period:
(i)
dividends declared in the period should be noted, but

not shown as a liability, at the balance sheet date.
(ii)
if the company can no longer be considered a goingconcern during this period, the financial statements
should not be prepared on a going-concern basis.
Disclosure Group
IAS 24: Related Party Disclosure.

The standard will be applied in:
(i)
identifying
related
transactions;
party
relationships
and
14
(iii)
(iv)
events that were unknown or unclear at the balance

sheet date, will cause the financial statements to be
adjusted.
conditions that arose after the balance sheet date
should not adjust the financial statements, but should
be suitably noted.
Banks Group
IFRS 7, IFRS 9,, IFRS 13, IAS 32 and IAS 39 must be applied
to financial instruments in any company reporting under IFRS.
Financial instruments are used extensively in banking but only
to a limited extent in enterprises.
IFRS 7: Disclosure in the Financial Statements of Banks
and Similar Financial Institutions
IAS 32: Financial Instruments: Disclosure and Presentation

IAS 39: Financial
Measurement
Instruments:
Recognition
and
These two standards are primarily used by financial institutions

and specify disclosure, presentation, recognition and
measurement of financial instruments.
Our approach to these 2 complex, comprehensive standards is
to provide
4 detailed workbooks on different stages of accounting for
financial instruments:
Initial Recognition.
De-recognition.
Subsequent Recognition.
IFRS 7 requires banks to provide disclosures in their financial

statements that enable users to evaluate:
Hedge Accounting.
(i)
the significance of financial instruments for the banks

financial position and performance;
We are also producing an Explanations of Terminology to

provide more detail.
(ii)
the nature and extent of risks arising from financial

instruments to which the bank is exposed during the
period and at the reporting date; and
IFRS 9 is superseding IAS 39. IFRS 13 comprehensively covers

Fair Value.
(iii)
how the entity manages those risks.
There are specified minimum disclosures on credit risk, liquidity

risk and market risk.
Industry Specific Group
IAS 41: Agriculture

IAS 41 should be applied to the following agricultural activities:
(i)
biological assets;
15
(ii)
(iii)
agricultural produce at the point of harvest; and

certain government grants.
Agricultural activity includes:

(i)
(ii)
(iii)
(iv)
(v)
livestock,
forestry,
cropping,
cultivation, and
aquaculture (including fish farming).
In each case, living animals and plants perform a biological

transformation that takes place in a managed environment.
Management is the key issue that differentiates agricultural
activity from other activities such as sea fishing or harvesting
virgin forest neither of which are classified as agricultural
activities.
The extent of change in the biological asset can be measured in
a wide variety of ways, ripeness, dimensions, fat content, etc.
Biological transformation results in:
(i)
(ii)
Change in the asset through an increase or decrease

in quantity, or quality.
Additional assets may result from procreation or
agricultural produce (cereals, legumes, beef, milk).
IFRS 4: Insurance Contracts

IFRS 4 specifies the financial reporting for insurance contracts
for issuers of such contracts.
In particular, IFRS 4 requires:
(i)
certain improvements to accounting, and
(ii)
disclosure that identifies and explains the amounts in

an insurers financial statements, particularly in
relation to:
a. amounts arising from insurance contracts and
timing; and
b. uncertainty of cash flows.
IFRS 6. Exploration for and evaluation of mineral resources

IFRS 6 is an interim solution, pending development of a
comprehensive solution, to help companies deal with the IAS 16
and IAS 38 scope exclusions.
10 Consolidation Standards
These consolidation standards are for business groups and
specify the techniques for combining the financial statements of
the members of the group into a single consolidated set of
financial statements, and list the required disclosures.
IFRS 3: Business Combinations
IFRS 3 is the latest standard relating to consolidated accounts.
It includes a number of important changes to previous practice,
outlined below, but must be read in conjunction with IAS 27, 28
and 31.
Accounting
Business combinations within the scope of IFRS 3 are
accounted for using the purchase method.
16
The acquirer records the acquirees identifiable assets, liabilities

and contingent liabilities at their fair values at the acquisition
date and also records goodwill, which is subsequently tested for
impairment.
Negative goodwill
Assets acquired and assumed:
IAS 27: Consolidated and Separate Financial Statements

IAS 28: Investments in Associates
IAS 31: Interests in Joint Ventures
Recognition
If there is an existing restructuring liability per IAS 37, it is
included in the goodwill calculation.
If fair values can be measured reliably, the acquirer must record
separately the acquirees contingent liabilities, at the acquisition
date, as part of allocating the cost of a business combination.
If the contingent liabilities cannot be measured, they are not
included in the allocation of cost.
Measurement
IFRS 3 requires that negative goodwill must be credited to

income by the acquirer immediately.
We have produced workbooks Consolidation 1+2+3 to cover

these standards, focussed on the practical techniques required
to consolidate financial statements.
IAS 27 still covers Separate Financial Statements, while the
consolidation has moved to IFRS 10. IFRS 11 covers joint
arrangements.
11 Additional Publications
11.1 Transformation
IFRS 3 requires the acquirees identifiable assets, liabilities and

contingent liabilities to be measured initially at their fair values,
at the acquisition date.
Any minority interest in the acquiree is the minoritys proportion
of the net fair values.
Goodwill
IFRS 3 requires goodwill to be measured after initial recognition
at cost, less any accumulated impairment losses.
Goodwill is not amortised, but must be tested for impairment
annually, or more frequently.
RAS to IFRS Transformation

The purpose of this workbook is to examine the process and
adjustments necessary to transform a trial balance based on
Russian Accounting Standards (RAS) into a set of IFRS
financial statements comprising Income Statement and Balance
Sheet.
The workbook has been designed around a series of the most
common adjustments covering the main aspects of
transformation.
These are presented in the form of 17 separate companies
each of which requires 2/5 adjustments. Each company uses
17
the same opening, unadjusted, RAS based trial balance which

is then adjusted in accordance with the 2/5 entries required.
Adjustments from all of the seventeen companies are brought
together in a summary that reflects all of the adjustment made
in the individual companies.
IFRS WORKBOOKS (History and

Copyright)
(1 million downloaded)
This is the latest
English produced
(2003-2009) and
appeared on the
Federation.
version of the legendary workbooks in Russian and

by 3 TACIS projects, sponsored by the European Union
led by PricewaterhouseCoopers. They have also
website of the Ministry of Finance of the Russian
Each workbook is a self-standing short course designed for approximately

three hours of study. Although the workbooks are part of a series, each one
is independent of the others. Each workbook is a combination of
Information, Examples, Self-Test Questions and Answers. A basic
knowledge of accounting is assumed, but if any additional knowledge is
required this is mentioned at the beginning of the section.
Having written the first three editions, we continue to update them and
provide them to you free to download. Please tell your friends and
colleagues. Relating to the first three editions and updated texts, the
copyright of the material contained in each workbook belongs to the
European Union and according to its policy may be used free of charge for
any non-commercial purpose. The copyright and responsibility of later
books and the updates are ours. Our copyright policy is the same as that of
the European Union.
We wish to especially thank Elizabeth Appraxine (European Union) who
administered these TACIS projects, Richard J. Gregson (Partner,
PricewaterhouseCoopers) who led the projects and all friends at bankir.ru
for hosting the books.
TACIS project partners included Rosexpertiza (Russia), ACCA (UK),
Agriconsulting (Italy), FBK (Russia), and European Savings Bank Group
(Brussels).
The workbooks cover all standards of IFRS based accounting. They are
intended to be practical self-instruction aids that professional accountants
can use to upgrade their knowledge, understanding and skills.
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for Accounting Professionals

Association of Russian Bankers Institute of Banking

Visiting Professor of the Siberian Academy of Finance

Industry Specific Standards................................................5

1.13 Additional Publications..........................................................5

Overview of the Standards.....................................................6

Special Case 1 Group...........................................................11

Listed Company Group........................................................12

Special Case 2 Group..........................................................13

Industry Specific Group........................................................15

Financial reporting standards have two main aims:

These notes are an unofficial guide to IFRS and introduce the

The architecture of IFRS must be taken as a whole. Financial

PRINCIPLE, STANDARD, POLICY, PROCEDURE

ARE WRITTEN GUIDELINES FOR THE TREATMENT

POLICIES discuss specific accounting for certain types of

1.3 Foundation Standards

IFRS 1: First-time Adoption of International Financial Reporting

1.9 Disclosure Standards

The Conceptual Framework for Financial Reporting

1.10 Banking Standards

Overview of the Standards

This framework document deals with:

the objective of financial statements;

1.11 Industry Specific Standards

It specifies that IFRS accounts are prepared using the accrual

1.12 Consolidation Standards

The Framework document is a comprehensive overview of the

1.13 Additional Publications

Main Financial Statements and Accounting Policies

RAS to IFRS Transformation

As well as financial performance, financial statements also

IAS 8: Accounting Policies, Changes in Accounting

Retrospective application is applying a new policy as if that

IAS 18: Revenue

materials to be used in the production process or

In the case of the provision of services, inventories include the

Revenue will be recognised when it is probable that future

Contingent liabilities (e.g. guarantees and warranties) do not

IAS 12: Income Taxes

IAS 12 prescribes the accounting treatment for income taxes,

assets that are held for sale, or being prepared for

transactions of the current period; and

IAS 40: Investment Property

Property, Plant and Equipment Group

IAS 16: Property, Plant and Equipment

Investment property can be:

It is held by the owner (or by the lessee, under a finance lease)

for use in the production, supply of goods, services;

IAS 17: Leases

IAS 36: Impairment of Assets

Leases involve the owner of an asset renting it to others for

The objective of IAS 36 is to prescribe the procedures to ensure

Long-term rentals (finance leases) have seen dramatic growth

An asset is described as impaired when its carrying amount

IAS 17 addresses this issue by accounting for finance leases in

IAS 36 requires the recording of an impairment loss.

Short-term rental agreements are mostly accounted for as

Regular reviews of costs and revisions of estimates are

IAS 38: Intangible Assets

This requirement applies whether an intangible asset is

contract revenue and contract costs are key issues of the

cost, less any accumulated amortisation and any

IAS 11: Construction Contracts