fs presentation, changes, errors

8/8/2019 FS Presentation, Changes, Errors

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ObjectivesObjectives To ensure:

Consistency: Comparability between entitys financial statements of

previous periods

Comparability: Vis a vis financial statements of other entities

Sets out: Overall requirements for presentation; Guidelines for their structure; and Minimum requirements for their content

Exposure Draft AS 1 (Revised) issued by ICAI recently pursuant to the

decision to converge with IFRS, based on IAS 1 (Revised 2007). Current

AS 1 deals only with Disclosure of Accounting Policies

Revised IAS 1 is effective for annual periods beginning on or after 1January 2009.


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Fair presentation and compliance with IFRSsFair presentation and compliance with IFRSs

Financial statements to fairly present financial position,

performance and cash flows essentially requiring faithfulrepresentation of:

Effects of transactions Other events and Conditions

In accordance with the Framework Application of IFRSs, with additional disclosures as

necessary, is presumed to result in fair presentation Where FS comply with IFRSs, an explicit and unreserved

statement thereof to be made in the notes

Inappropriate accounting policies are not rectified bydisclosure or by notes or by explanatory material

Unless financial statements comply with all IFRSs, SICs and IFRICs,

they shall not be described as complying with IFRSs

Recognition, Measurement & Disclosure are the three fundamentals of

the reporting framework


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The key changesThe key changes from previous version offrom previous version of IAS1:IAS1: Owner changes in equity to be presented in the statement of

changes in equity, separately from non-owner changes inequity (Other Comprehensive Income). In respect ofOCI: Income tax relating to each component to be disclosed. Reclassification adjustments relating to components also

to be disclosed Share of equity accounted..

Presentation of Dividends Dividends to owners and related amounts per share to be

presented in the Statement of Changes in Equity or in thenotes.

The terms Balance sheet" and Cash Flow statement" are

replaced with Statement ofFinancial Position" andStatement ofCash Flows. SORIE no more relevant.

New disclosure requirements for puttable instruments andobligations arising on liquidation


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Components ofComplete set of financial statementsComponents ofComplete set of financial statements Statement of financial position Statement of comprehensive income ## Statement of changes in equity, Statement ofCash flows Notes, comprising a summary of significant accounting

policies and other explanatory information A statement of financial position as at the beginning of

the earliest comparative period when an entity either Applies an accounting policy retrospectively Makes a retrospective restatement of items in its

financial statements Reclassifies items in its financial statements

## May be presented in a single statement or P & L components

presented in a separate income statement immediately before OCI


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Some DefinitionsSome Definitions Profit or Loss

total of income less expenses, excluding the components of othercomprehensive income. Other Comprehensive Income

Changes in revaluation surplus (IAS 16 and IAS 38) Actuarial gains and loss on defined benefit plans (IAS 19, para 93A) Gains and losses from translating financial statements of foreign

operation (IAS 21) Gains and losses on re-measuring AFS financial assets (IAS 39) Effective portion of gains and losses on hedging instruments in a

cash flow hedge (IAS 39) Total Comprehensive Income

is the change in equity during a period resulting from transactionsand other events, other than those changes resulting fromtransactions with owners in their capacity as owners.

comprises all components of profit or loss and of othercomprehensive income


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SomeSome Definitions (Definitions (conticonti..)..)

Impracticable: Applying a requirement is impracticable when the entity cannotapply it after making every reasonable effort to do so.

Material Omissions or misstatements of items Items which individually or collectively, influence the economic

decisions which users make on the basis of the financial

statements Reclassification Adjustments

amounts reclassified to profit or loss in the current period thatwere recognised in other comprehensive income in the currentor previous periods.


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General principlesGeneral principles

Accrual basis of accounting Accrual basis of accounting, except for cash flow

information.

Materiality and Aggregation

Each material class of similar items is presented separately Dissimilar items are presented separately, unless they are

immaterial

Consistency of presentation The presentation and classification of items ofFS shall be

retained from period to period unless A significant change in operations (acquisition/disposal) or a

financial statements review makes a differentpresentation/classification more appropriate

A standard or interpretation requires a change

In such case, comparative information is also reclassified


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Offsetting Assets-liabilities, income-expenditures are not offset unless

required or permitted by a standard or interpretation Measuring assets net of valuation allowance is not offsetting Revenue to be shown net of trade discounts/volume rebates

For transactions incidental to generating revenue, incomeand related expenses are netted off Gain/loss on disposal of non-current assets Third-party reimbursement of an expense provided

Unless material, gains/losses from group of similar

transactions are reported net FE gain/loss, or gain/loss on financial instruments

General principles (contd)General principles (contd)


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Frequency of reporting

An entity shall present a complete set of financial statements(including comparative information) at least annually.

When an entity changes the end of its reporting period andpresents financial statements for a period longer or shorterthan one year, an entity shall disclose, in addition to theperiod covered by the financial statements:

the reason for using a longer or shorter period, and the fact that amounts presented in the financial statements are not

entirely comparable.

General principles (contd)General principles (contd)


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Going concernGoing concern

Management to make going concern assessment Financial statements prepared on going concern basis

unless management intends to liquidate entity, or to ceasetrading, or has no realistic alternative but to do so

Material uncertainties that cast significant doubt as to

going concern shall be disclosed If financial statements are not prepared on going concern

basis, that fact is disclosed, along with basis on which theyare prepared, and the reason why entity is not regarded asgoing concern

For going concern judgement To look at least 12 mths into future Degree of consideration depends on facts of each case


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Comparative informationComparative information

Comparative information shall be disclosed for

all amounts reported in current years financial statements for narrative/descriptive information relevant to

understanding of currentFS

If previous period narrative information remains relevant alsoin current period, it is disclosed in current period.

When presentation/classification is amended, comparativesare reclassified, unless impracticable. To disclose

Nature of reclassification Amount of each item or class of items reclassified

Reason for reclassification When impracticable to reclassify comparatives, to disclose

Reason for not reclassifying Nature of adjustment to be made if amounts had been

reclassified


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Structure and

Content


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IntroductionIntroduction

Distinction made between particular disclosures onthe face of the FS and other disclosures either onthe face of the FS or in the notes

Cash flow information is presented in accordance

with IAS 7 Where other standards prescribe disclosures, they

may be made either on the face of the financialstatements, unless specified in this standard or

any other standard.


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Identification of the financial statementsIdentification of the financial statements

Financial Statements (each component thereof) to beclearly identified and distinguished from other informationin the same published document

Entity shall display prominently the following informationtoenhance understandability of the financial statements :

the name of the reporting entity or other means of identification,and any change in that information from the end of the precedingreporting period;

whether the financial statements are of an individual entity or agroup of entities;

the date of the end of the reporting period or the period covered

by the set of financial statements or notes; the presentation currency, as defined in IAS 21; and the level of rounding used in presenting amounts in the financial

statements (thousands or millions or billions etc)


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Information to be presented in the statement of financial positionInformation to be presented in the statement of financial position

PPE

Investment property Intangible assets Financial assets (excluding

next 3 bullets) Investments accounted for

using equity method Trade and other receivables Cash & cash equivalents Biological assets Inventories Assets classified as held for

sale (IFRS 5)

Financial liabilities (excludingnext 2 bullets)

Trade and other payables Provisions Current tax assets/liabilities Deferred tax assets/liabilities Liabilities classified as held for

sale (IFRS 5) Minority interests, presented

within equity Issued capital and reserves

attributable to equity holdersof the parent

The standard does not prescribe the order or format in which an entity

presents the items. Para 54 lists items that are sufficiently different in

nature or function to warrant a separate presentation.


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Information to be presented in the statement of financial positionInformation to be presented in the statement of financial position

When an entity presents current and non-current assets,and current and non-current liabilities, as separateclassifications in its statement of financial position, itshallnot classify deferred tax assets (liabilities) as current assets(liabilities).

Entity shall present additional line items, headings andsubtotals in the statement of financial position to enhanceunderstanding of the financial position.

Additionally, line items are included when the size, nature or function of an item

or aggregation of similar items warrants a separate presentation;and

Line items are included due to the nature of the entity and itstransactions. For example, a financial institution

Judgement for showing additional items separately based on Nature and liquidity of assets

Function of the assets within the entity

Amounts, nature and timing of liabilities


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Current/noncurrent distinctionCurrent/noncurrent distinction Assets and liabilities to be separately classified under current and

noncurrent based on the realisation and settlement, respectively,within its normal operating cycle.

Allowed alternative based on liquidity , if it provides informationthat is more reliable and relevant (eg for financial institutions)

It is permitted to present some items using the current-

noncurrent classification and others using the liquidity basedclassification (eg where an entity has diverse operations) Where amounts recoverable / to be settled in < 12 months and >

12 months are combined then, under either method, it is requiredto disclose the amount recoverable / to be settled within and after12 months

An operating cycle is the time between acquisition of assets forprocessing and their realisation into cash or cash equivalents,which may be more than 12 months


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Whatare currentand noncurrentassets?Whatare currentand noncurrentassets? An asset is classified as current if it satisfies ANY of the

following criteria: expected to be realised in, or is intended for sale or

consumption in, the entitys normal operating cycle held primarily for the purpose of being traded expected to be realised within 12 months after balance sheet

date It is cash or a cash equivalent (unless it is restricted for > 12

months) All other assets are classified as noncurrent Noncurrent assets include tangible, intangible or long-term

financial assets such descriptions may be used as long as

the meaning is clear The same normal operating cycle applies to the classificationof all Assets/Liabilities.


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Whatare currentand noncurrent liabilities?Whatare currentand noncurrent liabilities?

A liability is classified as current if it satisfies ANY of thefollowing criteria expected to be settled in the entitys normal operating cycle held primarily for the purpose of being traded due to be settled within 12 months after balance sheet date

The entity does not have an unconditional right to defersettlement of the liability for at least 12 months after balancesheet date

All other liabilities are classified as non-current Some current liabilities (trade payables, employee accruals)

are part of working capital used in a normal operating cycleand are treated as current, even though payable after 12mths

What about funded working capital limits renewed annually in India ?


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Whatare currentand noncurrent liabilities?Whatare currentand noncurrent liabilities? Financial liabilities are current, if to be settled within 12

months, even if The original term was for > 12 mths A refinance or rescheduling agreement is completed after

balance sheet date and before the FS are authorised for issue

If under an existing loan facility, an entity expects / has thediscretion to refinance or roll over an obligation for > 12

months, it is noncurrent If as a result of payment default before B/S date a long

term obligation becomes callable, it is current even if afterB/S date lender agrees not to demand payment

If following happen between B/S date and before the FS areauthorised for issue, they qualify for disclosure as non-adjusting events under IAS 10 (Events after B/S Date)

Refinancing an long term obligation Rectification of breach of an long term loan agreement Receipt from lender of a period of grace to rectify breach of

an long term loan agreement


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Information to be presented either on the face ofInformation to be presented either on the face of

the Statement of financial positionthe Statement of financial position oror in the Notesin the Notes Further sub-classifications of the line items, suitably

classified, may be presented either in the statement offinancial position or in the notes (schedules), classified in amanner appropriate to the entitys operations.

Disclosures vary for each item e.g.

Items ofPPE are disaggregated into classes per IAS 16 (PPE) Receivables are disaggregated into amounts receivable from

trade customers, related parties, prepayments and otheramounts

Inventories are classified per IAS 2 (Inventories) like

merchandise, product supplies, materials, WIP, finishedgoods.. Provisions are disaggregated into those for employee

benefits and other items Contributed equity and reserves are disaggregated into

different classes like paid in capital, share premium,reserves.


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For each class of share capital Number of shares authorised Number of shares issued and fully paid, and issued and not

fully paid Par value per share, or that shares have no par value

Reconciliation of number of shares outstanding at beginningand at end of the period

Rights, preferences and restrictions attaching to a class,including restrictions on distribution of dividends andrepayment of capital

Shares in the entity held by the entity (treasury) or by itssubsidiaries or associates Shares reserved for issue under options and contracts for the

sale of shares, including terms and amounts

Description of the nature and purpose of each reservewithin equity

Information to be presented either on the face ofInformation to be presented either on the face of

the Statement of financial positionthe Statement of financial position oror in the Notesin the Notes


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Statement ofComprehensive IncomeStatement ofComprehensive Income

Entity shall present all items of income and expense, ineither

Single statement ofComprehensive Income; or In two statements viz.

Statement of profit or loss (separate income statement) Statement beginning with profit or loss and displaying components of

OCI Entity shall recognize all items of income and expenses in a

period in statement of profit or loss, unless permitted by thestandard

Examples where a standard permits otherwise

The correction of errors, and the effect of changes in accountingpolicies (IAS 8) Revaluation surpluses (IAS 16) Gains/losses arising in translating FS of a foreign operation (IAS 21) Gains/losses on remeasuring AFS financial assets (IAS 39)


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Information to be presented on the face of theInformation to be presented on the face of the

Statement ofComprehensive IncomeStatement ofComprehensive Income Revenue Finance cost Share of profit or loss of associates or JVs accounted for

using the equity method Tax expense A single amount comprising the total of: (1) post-tax P/L of

discontinued operations, and (2) the post-tax gain/lossrecognised on the measurement to fair value (less cost tosell) or on disposal of the assets or disposal group(s)constituting the discontinued operation

Profit or loss Each component ofOCI classified by nature (excl next item) Share ofOCI of associates and joint ventures accounted for

using equity method

Total comprehensive income


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Statement ofComprehensive IncomeStatement ofComprehensive Income

An entity shall disclose the following items in thestatement of comprehensive income as allocationsof profit or loss for the period:

profit or loss for the period attributable to: Non-controlling interest, and owners of the parent.

total comprehensive income for the period attributable to: Non-controlling interest, and owners of the parent.


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Statement ofComprehensive IncomeStatement ofComprehensive Income Additional line items, headings, subtotals are presented on

face ofStatement ofComprehensive Income when suchpresentation is relevant to an understanding of the entitysfinancial performance

An entity shall not present any items of income and

expenditure as extraordinary items either in the StatementofComprehensive Income or a separate income statement(if presented) or in the notes


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Information to be presented either in the StatementInformation to be presented either in the Statement

ofComprehensive Income or in the notesofComprehensive Income or in the notes When items of income and expense are material,

their nature and amount shall be disclosedseparately

Circumstances requiring separate disclosure:

Write-down of inventory to NRV, or ofPPE to recoverableamount, as well as reversals of such write-downs

Restructurings of the activities of an entity, and reversalsof any provisions for the costs of restructuring

Disposals of items ofPPE Disposals of investments Discontinued operations Litigation settlements Other reversals of provisions


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AnalysisAnalysis

An entity presents an analysis of expenses, recognised inprofit or loss, using a classification based on either thenature of expenses or their function within the entity,whichever provides information that is reliable and morerelevant

Expenses are sub-classified to highlight components offinancial performance that may differ in terms of

frequency, potential for gain or loss and predictability Entities classifying expenses by function disclose additional

information on the nature of expenses, including

depreciation and amortisation expense and employeebenefits expense


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Classification by natureClassification by nature

ExampleRevenue X

Other income X

Changes in inventories ofFG and WIP X

Raw materials and consumables used X

Employee benefit expense X

Depreciation and amortisation expense X

Other expenses X

Total expenses (X)

Profit X


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Classification by function or cost of sales methodClassification by function or cost of sales method

Example

Revenue X

Cost of sales (X)

Gross profit X Other income X

Distribution costs (X)

Administrative costs (X)

Other expenses (X)Profit X


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Statement of

Changes in Equity/OCI


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statement of changes in equitystatement of changes in equity Total comprehensive income for the period, showing separately

the total amounts attributable to owners of the parent and to noncontrolling interest;

For each component of equity, the effects of retrospectiveapplication accounting policies or retrospective restatement of

corrections of errors recognised in accordance with IAS 8 For each component of equity, a reconciliation between the

carrying amount at the beginning and the end of the periodseparately disclosing each change from:

Transactions with owners in that capacity

Contributions by and distributions to owners & ownership interest changesin subsidiaries (with no control change)

The entity shall present in the statement or in the notes theamount of dividends recognised as distributions to owners duringthe period, and the related amount per share.


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Retrospective adjustments and retrospectiveRetrospective adjustments and retrospective

restatementsrestatements IAS 8 requires retrospective adjustments to effect changes

in accounting policies, to the extent practicable IAS 8 also requires that restatements to correct errors are

made retrospectively, to the extent practicable

Retrospective adjustments and retrospective restatementsare generally made to the balance of retained earnings These adjustments are disclosed for each prior period and

the beginning of the period


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OtherComprehensive Income for the periodOtherComprehensive Income for the period

An entity shall disclose the amount of income taxrelating to each component of othercomprehensive income, including reclassificationadjustments, either in the statement ofcomprehensive income or in the notes.

An entity may present components of othercomprehensive income either:

net of related tax effects, or before related tax effects with one amount shown for

the aggregate amount of income tax relating to those

components.

An entity shall disclose reclassification adjustmentsrelating to components of other comprehensiveincome.


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Accounting Policies &

Notes


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StructureStructure The notes shall:

Present information about the basis of preparation of thefinancial statements and the specific accounting policiesused

Disclose the information required by IFRSs that is notpresented in the statement of position, statement of

comprehensive income, statement of changes in equity,or statement of cash flows

Provide additional information that is not presented inthe financial statements, but is relevant to anunderstanding of any of them.

Each item in the statement of position, statement ofcomprehensive income, statement of changes in equity, orstatement of cash flows is cross-referenced to any relatedinformation in the notes

Notes are, as far as practicable, presented in a systematic

manner (see next slide)


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Normal order of presentationNormal order of presentation

Statement of compliance with IFRSs A summary of significant accounting policies applied Supporting information for items presented on the face of

the statement of financial position, statement ofcomprehensive income, statement of changes in equity and

of cash flows, in the order in which each statement andeach line item is presented; and

Other disclosures, including: Contingent liabilities (IAS 37), and unrecognised

contractual commitments Non-financial disclosures, e.g. the entitys financial risk

management objectives and policies (IFRS 7)


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Normal order of presentationNormal order of presentation

In some circumstances, it may be necessary ordesirable to vary the ordering of specific itemswithin the notes

Eg, information on changes in FV recognised in profit orloss may be combined with information on maturities offinancial instruments, although the former disclosuresrelate to the income statement and the latter relate tothe balance sheet

Nevertheless, a systematic structure for the notes

is retained as far as practicable Notes regarding the basis of preparation of

financial statements and significant accountingpolicies may be presented as a separatecomponent of the financial statements


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Disclosure ofaccounting policiesDisclosure ofaccounting policies

An entity shall disclose in the summary ofsignificant accounting policies:

The measurement basis (or bases) used in preparingthe financial statements (Eg historical cost, current cost,NRV, FV or recoverable amount)

The other accounting policies used that are relevant toan understanding of the financial statements


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Disclosure ofaccounting policiesDisclosure ofaccounting policies Consideration whether disclosure would assist users in

understanding how transactions, other events and conditions arereflected in the reported financial performance and financialposition

Disclosure of particular accounting policies especially whenalternatives are provided in standards and interpretations e.g.

Disclosure of whether a venturer recognises its interest in a jointlycontrolled entity using proportionate consolidation or the equitymethod (IAS 31 Interests in JVs)

Some standards specifically require disclosure of particularaccounting policies, including choices made by managementbetween different policies they allow e.g.

IAS 16 PPE, requires disclosure of the measurement bases used forclasses of property, plant and equipment

IAS 23 Borrowing Costs, requires disclosure of whether borrowingcosts are recognised immediately as an expense or capitalised aspart of the cost of qualifying assets


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Each entity considers the nature of its operations and thepolicies that the users of its financial statements wouldexpect to be disclosed for that type of entity e.g.

An entity subject to income taxes would be expected todisclose its accounting policies for income taxes, including

those applicable to deferred tax liabilities and assets When an entity has significant foreign operations or

transactions in foreign currencies, disclosure of accountingpolicies for the recognition of foreign exchange gains andlosses would be expected

When business combinations have occurred, the policiesused for measuring goodwill and non-controlling interest aredisclosed


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An accounting policy may be significant because of thenature of the entitys operations, even if amounts forcurrent and prior periods are not material

It is also appropriate to disclose each significant accountingpolicy that is not specifically required by IFRSs, but is

selected and applied in accordance with IAS 8


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Disclosure ofaccounting policiesDisclosure ofaccounting policies -- judgementsjudgements

An entity discloses the judgements, apart from thoseinvolving estimations, that management has made in theprocess of applying the entitys accounting policies and thathave the most significant effect on the amounts recognised inthe FS

Examples of judgements: Whether financial assets are held-to-maturity investments When substantially all the significant risks and rewards of

ownership of financial assets and lease assets aretransferred to other entities

Whether, in substance, particular sales of goods arefinancing arrangements and therefore do not give rise torevenue

Whether the substance of the relationship between theentity and a special purpose entity indicates that the

special purpose entity is controlled by the entity


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Disclosure ofaccounting policiesDisclosure ofaccounting policies judgementsjudgements

Some of the judgements to be disclosed are required byother standards eg

IAS 27 requires an entity to disclose the reasons whythe entitys ownership interest does not constitutecontrol, in respect of an investee, that is not a

subsidiary, even though more than half of its voting orpotential voting power is owned directly or indirectlythrough subsidiaries

IAS 40 requires disclosure of the criteria developed bythe entity to distinguish investment property from

owner-occupied property and from property held forsale in the ordinary course of business, whenclassification of the property is difficult


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Disclosure ofaccounting policiesDisclosure ofaccounting policies assumptions andassumptions andestimation uncertaintyestimation uncertainty

An entity discloses information about the key assumptionsconcerning the future, and other key sources of estimationuncertainty at the end of the reporting period, that have asignificant risk of causing a material adjustment to thecarrying amounts of assets and liabilities within the next

financial year In respect of those assets and liabilities, the notes shall

include details of: Their nature Their carrying amount as at the end of the reporting

period Assumptions: eg

risk adjustment to cash flows or discount rates used toarrive at recoverable value ofPPE

future changes in salaries to calculate long term

employee benefit liabilities

Di l f ti li iDi l f ti li i


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The key assumptions and other key sources of estimationuncertainty to be disclosed are estimates that requiremanagements most difficult, subjective or complexjudgements

These disclosures are not required for assets or liabilities

with a significant risk that their carrying amounts mightchange materially within the next financial year if, at end ofthe reporting period, they are measured atFV


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Such disclosures are presented in a manner that helpsusers ofFS to understand the managements judgements

about the future and estimation uncertainty eg Nature of the assumption or other estimation uncertainty Sensitivity of carrying amounts to the methods, assumptions

and estimates underlying their calculation, including thereasons for the sensitivity

The expected resolution of an uncertainty, and the range ofreasonably possible outcomes within the next financial yearin respect of the carrying amounts of the A/L affected

An explanation of changes made to past assumptionsconcerning those A/L, if the uncertainty remains unresolved

Budget information or forecasts are not disclosed


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When it is impracticable to disclose the extent of the possibleeffects of a key assumption or another key source of estimationuncertainty at the end of the reporting period, the entity discloses

that it is reasonably possible, based on existing knowledge,that outcomes within the next financial year that are differentfrom assumptions could require a material adjustment to thecarrying amount of the assets/liabilities (A/L) affected

In all cases, the nature and carrying amount of the specificA/L (or class of A/L) affected by the assumption are disclosed

Some of these disclosures are specifically required by otherstandards e.g.

IAS 37 requires disclosure of assumptions concerning futureevents affecting classes of provisions

IAS 32 requires disclosure of assumptions applied inestimating FVs of financial A/L measured atFV

IAS 16 requires disclosure of assumptions applied in

estimating FVs of revalued items ofPPE

Disclosure ofaccounting policiesDisclosure ofaccounting policies assumptionsassumptionsand estimation uncertaintyand estimation uncertainty


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Disclosure ofaccounting policiesDisclosure ofaccounting policies capitalcapital

An entity shall disclose information that enables users of itsfinancial statements to evaluate the entitys objectives,policies and processes for managing capital

Following disclosures are made qualitative information about its objectives, policies and

processes for managing capital, including (but notlimited to): a description of what it manages as capital when an entity is subject to externally imposed

capital requirements, the nature of those

requirements and how those requirements areincorporated into the management of capital

how it is meeting its objectives for managing capital

Di l f ti li iDi l f ti li i it lit l


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Disclosure ofaccounting policiesDisclosure ofaccounting policies capitalcapital

Following disclosures are made (cont/d) S

ummary quantitative data about what it manages as capital Some entities regard some financial liabilities (eg someforms of subordinated debt) as part of capital; otherentities regard capital as excluding some components ofequity (eg components arising from cash flow hedges)

Any changes in the above from the previous period Whether during the period it complied with any externally

imposed capital requirements to which it is subject When the entity has not complied with such externally

imposed capital requirements, the consequences of such non-compliance

These disclosures shall be based on the information providedinternally to the entitys key management personnel


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Hold on..Hold on..


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Departure from IFRSDeparture from IFRS

In the extremely rare circumstances in which managementconcludes that compliance with a requirement in a standardor an interpretation would be so misleading that it wouldconflict with the objective ofFS set out in the Framework,

the entity shall depart from that requirement giving thedisclosures below if the relevant regulatory frameworkrequires, or otherwise does not prohibit, such a departure

Pg 247 of 2007 Annual Report


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Departure from IFRS(Departure from IFRS(contdcontd))

Disclosures to be made that management has concluded that the FS present fairly the

entitys financial position, financial performance and cash flows that it has complied with applicable standards and interpretations,

except that it has departed from a particular requirement to achievea fair presentation

the title of the standard or interpretation from which the entity has

departed, the nature of the departure, including the treatment thatthe standard or interpretation would require, the reason why thattreatment would be so misleading in the circumstances that it wouldconflict with the objective of financial statement set out in theFramework, and the treatment adopted

for each period presented, the financial impact of the departure on

each item in the financial statement that would have been reportedin complying with the requirement


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When assessing whether complying with a specific

requirement in a standard or an interpretation would be somisleading that it would conflict with the objective offinancial statements set out in the Framework, managementconsiders

why the objective of financial statements is not achieved in the

particular circumstances; and how the entitys circumstances differ from those of other entities

that comply with the requirement.

If other entities in similar circumstances comply with the

requirement, there is a rebuttable presumption that the

entitys compliance with the requirement would not be somisleading that it would conflict with the objective of

financial statements set out in the Framework


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When an entity had departed from arequirement of a standard or aninterpretation in a prior period, and thatdeparture affects the amounts recognised in

the financial statements for the currentperiod, it shall make the last two disclosuresbelow

RefSociete Generale 2008 Report

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Fair presentation and compliance with IFRSsFair presentation and compliance with IFRSs

Departure from IFRS and regulatory framework In the extremely rare circumstances in which management

concludes that compliance with a requirement in a standardor an interpretation would be so misleading that it wouldconflict with the objective of financial statements set out in

the Framework, and the relevant regulatory frameworkprohibits such departure from the requirement, the entityshall, to the maximum extent possible, reduce the perceivedmisleading aspects of compliance by disclosing:

the title of the IFRS in question,

the nature of the requirement, and the reason for managements conclusion and for each period presented, the adjustments to each item

in the financial statements that management hasconcluded would be necessary to achieve a fair

presentation.


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New (read onerous)Disclosure

requirements


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Additional Disclosure RequirementsAdditional Disclosure Requirements

Re Puttable Instruments -136 A(a) summary quantitative data about the amount classified as equity;(b) its objectives, policies and processes for managing its obligationto repurchase or redeem the instruments when required to do soby the instrument holders, including any changes from theprevious period;

(c) the expected cash outflow on redemption or repurchase of thatclass of financial instruments; and(d) information about how the expected cash outflow on redemptionor repurchase was determined.

Capital Disclosures Ref guidance Risk Management disclosures IllustrativeAnnual Reports

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Capital DisclosuresCapital Disclosures illusrationillusration

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Changes in AccountingChanges in AccountingPolicies/Estimates &Policies/Estimates &

ErrorsErrors


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Accounting policiesAccounting policies

Specific application: Standard, interpretation, IASBimplementation guidance

No specific application: Management judgementresulting in information that is:

Relevantto eco decision-making needs of users &

Reliable, in that the FS: represent faithfully the financial position,

performance & CFs reflect economic substance (not merely legal form) are neutral (free from bias)

are prudent & are complete in all material respects


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Hierarchy for judgement(in descending order)A

Standards/ interpretations dealing with similar/related issues

Definitions / recognition criteria / measurementconcepts for A/L , I/E in the Framework

B Most recent pronouncements of other standard-

setting bodies that use a similar conceptual

framework Other accounting literature, & Accepted industry practices


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Selected policies must be applied consistently tosimilar transactions Change in accounting policy only if change:

is required by a Standard / Interpretation; or results in the FS providing reliable and more relevant

information Where new standard has transition provision, that is

followed, if not, change is applied retrospectivelyVoluntary changes are applied retrospectively as if

new policy always applied (earlier allowed alternativeremoved)


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EstimatesEstimates

Estimation involves judgements based onlatest available, reliable information

Examples Doubtful receivables Inventory obsolescence FV of financial assets / financial liabilities Useful lives of depreciable assets Warranty obligations


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EstimatesEstimates

An estimate may need revision if circumstances on which estimate was based change, or as a result of new information / more experience

Revision of estimate does not relate to prior periods,and is not the correction of an error

Change in measurement basis applied is a change inpolicy, not a change in estimate

When it is difficult to distinguish if it is a change inpolicy or in estimate, it is treated as change in

estimate


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EstimatesEstimates

Effect of change in estimate is given in P/Lor to A/L/E prospectively

In the period of change eg doubtfulreceivables

In period of change + future periods egchange in useful life ofPPE

Detailed disclosures are prescribed,including nature and amount of change


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ErrorsErrors

Errors can arise in respect of the recognition,measurement, presentation or disclosure of elements ofFS

FS do not comply with IFRSs if they contain eithermaterial errors, or immaterial errors made intentionallyto achieve a particular presentation

Errors are material if they could, individually orcollectively, influence the economic decisions of users

Materiality depends on the size and nature of omission/

misstatement Concept of fundamental error removed; no distinction

between fundamental error and other material errors


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ErrorsErrors

Material prior period errors are correctedretrospectively in the first set ofFSauthorised for issue after discovery by:

Restating prior period comparatives of period

when error occurred, or If error occurred before the earliest periodpresented, restating the O/Bs of A/L/E of theearliest period presented

If period-specific or cumulative effects oferror are impractical to determine,correction is made to O/Bs of A/L/E ofearliest period for which that is practicable


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ErrorsErrors

Correction of prior period error is excluded from P/Lof the period in which the error is discoveredAny information presented about prior periods (eg in

Notes) is restated as far back as is practicable Correction resulting from change in estimate is not

correction of error Detailed disclosures are prescribed, including impact

of opening correction, correction for each prior periodaffected, on each line item as well as on basic and

diluted EPS


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ErrorsErrors

Impracticality in retrospective application /restatement eg Data may not have been collected in the past

period(s) Estimates required for application of new policy in past

period may be difficult

Retrospective accounting requiresdistinguishing information that

Provides evidence of circumstances that then existed

Would have been available when the FS for that priorperiod were authorised for issue

EE


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ErrorsErrors

When it is impossible to distinguish thesetwo types of information, it is impracticableto apply the new policy or correct the errorretrospectively

Hindsight should not be used Eg HTM financial assets of past period cannot

be made AFS just because subsequently theywere notHTM

Eg Estimate of benefit obligation for sick leavecannot reckon impact of severe influenza insubsequent period


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Questions?Questions?

fs presentation, changes, errors

Documents