Strategic Business Reporting

1. Equity-settled

The company gives the employee shares or share options.

The company recognises:

Dr Employee expense
Cr Equity

measure at the fair value of the equity instruments at grant date.

NO SUBSEQUENT REMEASUREMENT OF FV

2. Cash-settled

The company gives the employee cash based on the company's share price/value.

The company recognises:

Dr Employee expense
Cr Liability

The liability is measured at fair value and remeasured at every reporting date and at settlement.

The modification is treated as a completely separate contract if:

1. Additional goods/services are distinct, AND
2. The additional price reflects their stand-alone selling price (with appropriate adjustments if applicable).

The original contract is untouched, and the new machines are accounted for under the new contract.

--

If the modification doesn't meet both conditions above, ask:

Are the remaining goods/services distinct from those already transferred?

If YES → treat the modification as if:

Old contract is terminated + new contract is created.

This is a prospective adjustment.

--

If the remaining goods/services are not distinct from what has already been transferred, they form part of one single performance obligation that is already partially satisfied.

→ Treat the modification as part of the original contract.

→ Adjust revenue using a cumulative catch-up adjustment.

• information to help assess reporting entity's future net cash flows
• mgmt stewardship of the entity's assets

• when it is relevant
• when it offers a faithful presentation of the entity's underlying transactions
  • free from material errors

immaterial errors do not need to be corrected to ensure complaince with IFRS Standards, however correcting all errors lowers the risk that cumulative errors will become material

IAS 2

Lower of:

Cost

NRV

you receive payment in advance but you still have to deliver

recognise a contract liability for amounts which relate to the future

recognise a deferred tax asset based on the contract liability amount / temporary taxable difference

Inventories

Biological assets measured at FV - cost to sell

Inv property measured at FV

Certain financial assets IFRS 9

Liability = contractual obligation to deliver cash

Based on IAS 32, a contract which may be settled as equity iinstruments is a liability if:

• conversion option is not a derivative, will result in issue of VARIABLE AMOUNT OF SHARES
• conversion is a derivative, but will NOT result in exchange of fixed number of shares / cash
• NO FIXED FOR FIXED!!!!

Classify as liability, measure at AC or FVTPL, recognise interest expense in financing section

If the conversion results in an issue of a fixed umber of ordinary shares, it is a compound financial instrument

1. Account for liability: PV of future cashflows discounted at EIR

2.Equity = nominal - Liability

Liability +Finance charge (EIR) - Cash payment

MPM = subtotal of income & expenses which is used in public communications outside financial statements and which complements IFRS Accounting standards

If it meets definition as MPM, information about all MPMs must be disclosed in a note to the FS

• why mgmt finds it useful
• how it is calculated
• reconciliation to closest IFRS subtotal
• Tax & NCI effect of reconciliation item

An MPM CANNOT be an IFRS Defined subtotal:

• Operating profit/loss
• Profit/loss before financing & income taxes

Explicitly excluded from MPM

• Gross profit
• profit from continuing operations
• Profit before tax

Cash equivalent s0 Short-term, highly liquid investments that are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value

Cash comprises cash on hand and demand deposits.

IAS 38 Intanginle Assets

Digital assets appear to meet the definition of an intangible asset (IAS 38): “An identifiable non-monetary asset without physical substance.”

• An asset is identifiable if it is separable or arises from contractual or other legal rights.
• An asset is separable if it is capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, identifiable asset or liability.

As there is so much judgement and uncertainty involved in the recognition and measurement of digital assets, disclosure is required to inform users in their economic decision-making.

• IAS 8 Basis of Presentation of Financial Statements requires disclosure of management’s judgements made regarding its accounting for holdings of assets, in this case cryptocurrencies or tokens.
• IAS 10 Events after the Reporting Date requires disclosure of any material non-adjusting events. This would include whether changes in the fair value of digital assets after the reporting period are of such significance that non-disclosure could influence the economic decisions of users.

• Application of standards is VOLUNTARY - adopted by listed/private companies
• IFRS S1: General requirements for disclosure of sustainability related financial information
• IFRS S2: Climate-related disclosures

1. Governance
   1. Governance processes used to monitor & manage sustainability related risks & opportunities
2. Strategy
   1. approach to managing sustainabiity related risk & opportunities
3. Risk mmt
   1. process used to identify, assess and monitor risk & opportunities
4. Metrics and targets
   1. entity's performance in relation to sustainability related risks & opportunities incl. progress towards any targets set

Include Opportunities for all of the above

1. same fundamental (relevance, faithful presentation) & qualitative characteristics
2. same enhancing qualitative characteristics
3. same definition of materiality
   1. information is material if omitting, misstting or obscuring information could reasonably be expected to influence decisions that the primary users of general purpose financial reports make on the basis of those reports
4. same primary users
5. same reporting period for sustainabikity reporting as for FS = 12 months

• effect on financial positioin, performance and cashflow in current period
• anticipated effect in short mediuma and long term
• info about resilience of the entity's strategy & business model to climate related changes
• include climate related scenario analysis = what if analysis
• ALWAYS INCLUDE OPPORTUNITIES

1. Physical risks
   1. result from weather related events such as floods/droughts
   2. e.g rising temperatures can lead to rising sea levels & loss of biodiversity
2. Transition risks
   1. resulting from move towards lower-carbon economy -> changing laws&regulations = high compliance costs

1. info about climate-related targets
2. info about greenhouse gas emissions
   1. Scope 1 - GHG emissions you have caused
   2. Scope 2 - GHG emissions (indirect) you have bought in (acquired electricity etc)
   3. Scope 3 - any indirect GHG emissions, not in scope 2
      1. difficult to identify = hidden risk
3. disclosure of gross & net targets
4. disclosure of planned use of carbon credits to achieve any net GHG emissions target
5. disclosure o fmeeting or not of the targets & metricts

see screnshot

1. Integrity
   1. straight forward & honest
2. Objectivity
   1. exercise professional judgement without bias
3. Professional competence & due care
   1. attain & maintain professional knowledge
   2. act in accordance with standards
4. Confidentiality
   1. respect confidentiality of information
5. Professional behaviour
   1. comply with relevant laws & regulations
   2. behave in manner consistent with professional responsibility

• Self interest threat
  • you have something to gain personally
• Self review threat
  • You are checking your own previous work
• Advocacy threat
  • You promote or defend the client's interests.
• Familiarity threat
  • You become too close to the client.
• Intimidation Threat
  • Someone pressures or threatens you

be concise & to the point

1. identify relevant facts
2. identify the ethical issues
3. consider which fundamental principles are threatened
4. consider wether mitigants exist within internal procedures
5. weigh up the possibile courses of action and decide on the best course

• entering intro transactions which unrelated parties would not
• setting prices that are lower or higher than normally
• the mere existence of the relationship affecting transactions with other parties

• all transactions between related parties, along with the amount, outstanding balances & coommitments
• Compensation of key management personnel
• related party relationships where control exists must be disclosed

A person that:

• has control or joint control of the reporting entity
• has significant influence
• is a member of KEY MANAGEMENT PERSONNEL

A company:

• If companies are in the same group, they are related parties.
• Parent & Subsidiary
• Associate
• Joint Venture

A party is not automatically a related party just because there is some connection. IAS 24 only treats parties as related if there is control, joint control, significant influence, or key management relationships as defined in the standard.

provide financial information to primary users of FS that is useful for economic decision making, relating to providing resources to the entity

-> decisions depend on expectations about returns:

• future net cash inflow (amount & timing)
• stwardship of economic resources

-> FS must reflect the economic phenomena relating to the events/transactions occured in the period

• if it does not have public accountability
  • if debt & equity instruments are traded in a public market
  • entity manages investments of others
• if it publishes general purpose financial statements for external users

NO SIZE THRESHOLDS

NO PARTIAL USE OF STANDARDS ALLOWED

When the recognition provides relevant information and is a faithful representation (consider possible measurement uncertainty)

FV = price received to sell an asset

Value in use = PV of cashflows expected to be derived from the use of an asset

Current cost = Cost of an equivalent asset

Net realisable value = Amount it could be sold for, net of selling costs

• focus on presentation & disclosure objectives & principles: balance between flexibility to provide relevant info and achieve comparability
• classification on basis of shared characteristics
• aggregation of items that are included in the same classification

Fundamental qualitative characteristics

• Relevance
  • affected by materiality
  • predictive vs confirmatory value
• Faithful representation
  • Neutral, complete, free from error

Enhancing qualitative characteristics

• Comparability
  • throughout time & acriss different entities
• Verifiability
• TImeliness
• Understandability
  • expects reasonable knowledge of business&economic activities & accounting

if omitting, misstating or obscuting information could reasonably be expected to influence decisions

the transaction should be accounted for according to their economic reality, not merely their legal form

IFRS 13 Fair Value does NOT prescribe when an entity should use FV but HOW FV should be used. The definition of FV is based on an exit price, rather than an entry price

all characteristics that a market participant would take into account should be reflected in valuation

definition is market-based

FV including transportation cost bud excluding transaction costs

- transaction costs arenot characteristics of the asset/Liability & are usually expensed as incurred

FV Must reflect highest & best use, considering:

• physically possible
• legally allowed
• financially feasible

1. Level
   1. quoted prices in active markets for identical assets & liabilities which the entity can access
   2. most reliable, must be used whenever possible
2. Level
   1. inputs other than quoted prices that are directly/indirectly obervable
   2. for similar but not identical assets
3. Level
   1. unobservable
   2. when there is minimal or no market activity

IFRS 10: At disposal of a subsidiary, you compare everything you receive with everything you give up

The group loses control and the remaining investment is treated as if you immediately bought it back at FV (Inv in associate)

Cash Proceeds

+ FV remaining interest

- Goodwill (You derecognise)

-Net assets at Disposal

+ NCI at Disposal (= NCI at Acquisition + share of past acquisition profit (=delta Retained earnings))

= Profit on disposal

On disposal you need to remove NCI = remove an equity balance = credit = add back to calculation since we never owned it. Before disposal all assets/liabilities were recognised eventhough we only own part which was shown by NCI. so when we sell, we dont lose all assets/liabilities but only the ones actually belonging to uss

Profit on disposal is an adjustment to operating profit

Control = Subsidiary

• Power over investee
  • Power = Existing rights that give the current ability to direct the relevant activities of the investee
• exposure to variable returns
• ability to use power to affect returns

Significant Influence (Associate - IAS 28 = Equity method)

• you can influence decisions but not make them on your own. E.g. shareholding 20-50% / representation on the board of directors

Equity method = Investment recorded at FV + share of profit from associate