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Updates in Financial Reporting Standards

The document lists updates made to several International Financial Reporting Standards (IFRS). Key changes include: - IFRS 3 narrowed the definition of a business to focus on providing goods/services to customers rather than returns to shareholders. It also clarified the minimum requirements for an acquired set of activities/assets to qualify as a business. - IAS 1 and IAS 8 aligned the definition of 'material' across standards and clarified that information is material if its omission could reasonably influence user decisions. This may reduce disclosure requirements and allow more flexibility in financial statement presentation. - Other standards like IFRS 7, IFRS 9, IFRS 15, and IFRS 16 were also

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Shane Cabingan
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524 views9 pages

Updates in Financial Reporting Standards

The document lists updates made to several International Financial Reporting Standards (IFRS). Key changes include: - IFRS 3 narrowed the definition of a business to focus on providing goods/services to customers rather than returns to shareholders. It also clarified the minimum requirements for an acquired set of activities/assets to qualify as a business. - IAS 1 and IAS 8 aligned the definition of 'material' across standards and clarified that information is material if its omission could reasonably influence user decisions. This may reduce disclosure requirements and allow more flexibility in financial statement presentation. - Other standards like IFRS 7, IFRS 9, IFRS 15, and IFRS 16 were also

Uploaded by

Shane Cabingan
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Updates in Financial Reporting Standards

List of Financial Reporting Standards


IFRS 1 First-time Adoption of International Financial Reporting Standards
IFRS 2 Share-based Payment
IFRS 3 Business Combinations
IFRS 4 Insurance Contracts
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
IFRS 6 Exploration for and Evaluation of Mineral Resources
IFRS 7 Financial Instruments: Disclosures
IFRS 8 Operating Segments
IFRS 9 Financial Instruments
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IFRS 14 Regulatory Deferral Accounts
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
IFRS 17 Insurance Contracts

IAS 1 Presentation of Financial Statements


IAS 2 Inven tories
IAS 7 Statement of Cash Flows
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
IAS 10 Events after the Reporting Period
IAS 12 Income Taxes
IAS 16 Property, Plant and Equipment
IAS 19 Employee Benefits
IAS 20 Accounting for Government Grants and Disclosure of Government Assistance
IAS 21 The Effects of Changes in Foreign Exchange Rates
IAS 23 Borrowing Costs
IAS 24 Related Party Disclosures
IAS 26 Accounting and Reporting by Retirement Benefit Plans
IAS 27 Separate Financial Statements
IAS 28 Investments in Associates and Joint Ventures
IAS 29 Financial Reporting in Hyperinflationary Economies
IAS 32 Financial Instruments: Presentation
IAS 33 Earnings per Share
IAS 34 Interim Financial Reporting
IAS 36 Impairment of Assets
IAS 37 Provisions, Contingent Liabilities and Contingent Assets
IAS 38 Intangible Assets
IAS 40 Investment Property
IAS 41 Agriculture
IFRS 3
Definition of a Business - Amendments to IFRS 3
The IASB issued amendments to the definition of a business in IFRS 3
Business Combinations to help entities determine whether an acquired set of
activities and assets is a business or not. They clarify the minimum
requirements for a business, remove the assessment of whether market
participants are capable of replacing any missing elements, add guidance to
help entities assess whether an acquired process is substantive, narrow the
definitions of a business and of outputs, and introduce an optional fair value
concentration test.
Old Definition- Business
An integrated set of activities and assets that is capable of being conducted
and managed for the purpose of providing a return in the form of
dividends, lower costs or other economic benefits directly to investors or
other owners, members or participants.

New Definition- Business


An integrated set of activities and assets that is capable of being conducted
and managed for the purpose of providing goods or services to customers,
generating investment income (such as dividends or interest) or generating
other income from ordinary activities.

The changes narrow the definition by:


• focusing on providing goods and services to customers
• removing the emphasis from providing a return to shareholders
• removing the reference to ‘lower costs or other economics benefits
Steps to determine if the acquired set of activities and assets is a business

Step 1 Consider whether to apply the concentration test (Optional)


Step 2 Consider what assets have been acquired
Step 3 Consider how the fair value of gross assets acquired is concentrated
Step 4 Consider whether the acquired set of activities and assets has outputs
Step 5 Consider if the acquired process is substantive

What is the optional concentration test?

If substantially all of the fair value of the gross assets acquired is


concentrated in a single identifiable asset or a group of similar identifiable
assets.
Is substantially all of the fair value of the gross assets acquired
concentrated in a single identifiable asset or a group of similar
identifiable assets?
What are the minimum requirements to meet the definition of a
business?

The amendments acknowledge that despite most businesses having outputs,


outputs are not necessary for an integrated set of assets and activities to
qualify as a business. In order to meet the definition of a business, the
acquired set of activities and assets must have inputs and substantive
processes that can collectively significantly contribute to the creation of
outputs.
Is the acquired process substantive?
IAS 1 and IAS 8
Definition of Material - Amendments to IAS 1 and IAS 8
IAS 1 Presentation of Financial Statements and IAS 8 to align the definition
of ‘material’ across the standards and to clarify certain aspects of the
definition.

Old Definition- Materiality


Omissions or misstatements of items are material if they could, individually
or collectively, influence the economic decisions that users make on the basis
of the financial statements.
New Definition- Materiality
Information is material if omitting, misstating or obscuring it could
reasonably be expected to influence the decisions that the primary users of
general purpose financial statements make on the basis of those financial
statements, which provide financial information about a specific reporting
entity.

Practical Impact:
Disclosure- Preparers may be able to reduce the sheer size of financial
statements by more easily justifying that certain disclosures are immaterial to
users of financial statements. More meaningful disclosures may need to be
re-ordered or presented in a more prominent manner due to the additional
guidance on the effects of obscuring information.
Presentation- Immaterial classes of balances and transactions may be
presented together in aggregate, while more meaningful and significant items
may require distinct and separate presentation in the financial statements.
Measurement- Simplifications and practical application of standards to
immaterial balances and transactions may be more easily applied in practice.

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