Financial statements are mandatory documentation for any business activity. When businesses collaborate, they need to become familiar with each other's reporting. It is on the basis of its study that decisions are made regarding the possibility and form of cooperation with the enterprise.

With progressive globalization, interaction is growing not only between enterprises, but also between countries, including those with different financial systems. In order for the financial information provided to counterparties to be more complete and transparent, it should be presented in a relatively unified form.

In other words, financiers from different countries must “speak the same language.” This is precisely the reason for the creation of the committee on IFRS - international financial reporting standards.

Let's consider what the purpose of this collection of documents is, what exactly is included in it, and also trace the features of its application in the economy of our country, especially in the light of modern reforms.

What is IFRS: how to explain to a Russian entrepreneur

International Financial Reporting Standards are a set of documents containing regulations for maintaining financial reporting required for external provision, according to uniform principles. This phrase is abbreviated as IFRS (avoid the common misuse of IFRS).

The collection of texts and their interpretations represents the official translation of the original English-language documents issued by the International Accounting Standards Board (IASB), headquartered in the United Kingdom. This Committee is an autonomous private organization whose purpose is to consolidate financial accounting rules and unify them for international application.

To date, 105 countries around the world voluntarily comply with these standards. Of the economically leading states, only 3 do not adhere to this system:

• USA;
• Canada;
• Japan.

A number of other countries, mainly in Latin America and Asia, are in the process of choosing whether to adopt IFRS or the American GAAP system.

REFERENCE! Until the beginning of the 21st century, the set of rules and explanations for accounting was denoted by another abbreviation - IAS (International Accounting Standards). The modern designation of IFRS in English literature is listed as IFRS (International Financial Reporting Standards).

The difference between IFRS and PBU

An approximate analogue for a Russian entrepreneur can be the term “accounting standards”. But the main difference between PBU and IFRS is that the latter lack primary documentation. If PBU dictates the rules of accounting, then IFRS proclaims its principles. We can say that IFRS is the final accounting indicator, which no longer needs to include:

• chart of accounts;
• accounting entries;
• accounting registers;
• documentary support of certain financial transactions;
• another "primary".

It follows that each country can apply the principles of accounting themselves according to its own understanding. But the final result of accounting, which creates the financial “portrait” of the company, must be drawn up according to uniform standards.

Main principle of IFRS

The meaning of IFRS as a unified regulation of monetary accounting is that it is not influenced by international differences: cultural realities, traditions, financial models, legislative norms of different states. Economic laws are objective regardless of how they are applied. That's why fundamental principle of IFRS is the predominance of economic content over form.

This principle allows entrepreneurs in controversial cases to follow its spirit and basic provisions, and not look for ways to circumvent strictly prescribed rules.

Additional principles governing the preparation of financial statements under IFRS:

• accrual principle;
• going concern principle;
• principle of appropriateness, etc.

What is included in IFRS

Today, IFRS is a combination of 44 documents and 25 explanations to them. These texts contain recommendations:

• on the composition of financial statements;
• how to take into account specific objects of attention of accountants;
• what information, where and how exactly to reflect.

The standards change and are updated periodically, so they are subject to regular amendments and revisions. According to the hierarchy, documents within IFRS can be divided into 4 levels.

1. Current IFRS and IAS along with their standard annexes.
2. Clarifications from the IFRS Committee (IFRIC and SIC).
3. Annexes to International Standards not included in the official version.
4. Recommendations for implementation in a specific country.

Who in Russia should adhere to IFRS

In the practice of domestic entrepreneurship, the preparation of reports in accordance with IFRS requirements is regulated by Federal Law of the Russian Federation No. 208-FZ “On Consolidated Financial Statements” dated July 27, 2010.

According to the text of this act, it is necessary to provide systematic data regarding the dynamics and financial results of the activities of organizations, or, as they are designated in international terminology, groups. The law of the Russian Federation includes the following groups:

• banking organizations;
• insurance companies (except for compulsory health insurance companies);
• mortgage firms;
• commercial pension funds;
• investment companies;
• joint-stock companies with shares owned by the state (according to the list of the Government of the Russian Federation);
• companies whose securities are listed in official quotations.

BESIDES, knowledge of IFRS standards is required for the following categories:

• accountants;
• auditors;
• economic consultants;
• teachers of economic disciplines of higher educational institutions.

For whom IFRS is not mandatory?

The following are not subject to the Federal Law on consolidated reporting, since their activities do not enter the international market:

• state-owned companies;
• summary reports of municipal institutions;
• consolidated reporting of budgetary organizations.

Domestic problems in the implementation of IFRS

Since 1998, Russia has had a program to reform accounting and bring it into compliance with IFRS.

The law adopted in 2010 obligated the processing of financial statements according to IFRS for the categories of organizations listed in it, starting in 2012. The adoption or suspension of a particular standard on the territory of the Russian Federation is accepted by the Ministry of Finance of the Russian Federation. It is on the Ministry of Finance website that IFRS texts in Russian are available for wide study.

Some difficulties associated with the implementation of IFRS in the Russian Federation emerged with the beginning of practical work on their application, mainly in audit practice. You can arrange them in several directions:

1. Difficulties in translation. The text in Russian provided on the Ministry of Finance website, unfortunately, is not entirely perfect as a translation. To translate a standard from official English into Russian, the work of representatives of the IFRS Committee is needed, after which the translation must be discussed by experts. Therefore, changes to IFRS in translation appear with a long delay.
2. Inconsistency with the basic de facto principle. Despite the fact that Russian reporting standards also proclaim the priority of content over form, in practice it is not always observed. In domestic documentation, the very methods of documenting financial transactions are extremely strictly regulated. This makes it difficult to transform domestic accounting results into those required by IFRS.
3. Different approach to assets and liabilities. In our country, property assets are classified slightly differently than is customary according to international standards. In addition, when forming a financial indicator, a market valuation of the asset is needed, which will not always be fair in modern Russian realities.
4. Legal discrepancies. Accounting of any state is always included in its legislative framework; it cannot be in conflict with regulatory documents. You also cannot use terminology other than that provided, for example, in the Tax Code and other laws. This creates some difficulties when interacting with other norms. It is extremely difficult, if not impossible, to correct such a legislative stalemate at this stage.
5. Expanding the circle of information. IFRS standards provide for a larger volume of disclosed information, including about persons on whom financial indicators depend, than is customary in the Russian Federation.

Introduction

In recent years, the content of financial statements, the procedure for their preparation and presentation have undergone significant changes. The most obvious of these changes is driven by the ongoing transition of companies around the world to IFRS. In many regions, IFRS has been used for several years, and the number of companies planning such a transition is constantly increasing. The latest information on countrywide adoption of national accounting standards to IFRS can be found at pwc.com/usifrs using the Interactive IFRS adoption by country map.

Recently, the degree of influence of political events on IFRS has increased significantly. The Greek debt situation, problems in the banking sector and attempts by politicians to resolve these issues have led to increased pressure on standard setters, who are expected to make changes to standards, especially those governing the accounting of financial instruments. It is unlikely that this pressure will go away, at least in the near future. The International Accounting Standards Board (IASB) is actively working to address these issues, so we can expect more changes to the standards to continue over the coming months and even years.

Accounting principles and application of IFRS

The IASC Board has the power to adopt IFRSs and approve interpretations of these standards.

It is assumed that IFRS should be applied by profit-oriented enterprises.

The financial statements of such enterprises provide information about the results of operations, financial position and cash flows that are useful to a wide range of users in their financial decision-making process. These users include shareholders, creditors, employees and society as a whole. A complete set of financial statements includes the following:

• balance sheet (statement of financial position);
• statement of comprehensive income;
• description of accounting policies;
• notes to financial statements.

The concepts underlying IFRS accounting practices are set out in the Conceptual Framework for Financial Reporting published by the IASB in September 2010 (the “Framework”). This document replaces the Framework for the Preparation and Presentation of Financial Statements (“Framework”). The concept includes the following sections:

• The objectives of preparing general purpose financial statements, including information about the economic resources and liabilities of the reporting entity.
• Reporting entity (this section is currently being amended).
• Qualitative characteristics of useful financial information, namely relevance and fair presentation of information, as well as expanded qualitative characteristics, including comparability, verifiability, timeliness and understandability.

The remaining sections of the 1989 Framework for the Preparation and Presentation of Financial Statements (currently being amended) include the following:

• underlying assumptions, going concern principle;
• elements of financial statements, including those relevant to the assessment of financial position (assets, liabilities and equity) and to the assessment of performance (income and expenses);
• recognition of the elements of financial statements, including the likelihood of future benefits, reliability of measurement and recognition of assets, liabilities, income and expenses;
• Evaluating elements of financial statements, including historical cost measurement issues and alternatives;
• concept of capital and maintenance of capital value.

In relation to the sections of the Framework that are being amended, the IASB issued a draft reporting entity standard and a discussion paper on the remaining sections of the Framework, including the elements of financial statements, recognition and derecognition, differences between equity and liabilities, measurement, presentation and disclosure. Fundamental concepts (such as business model, unit of account, going concern, and capital maintenance).

First application of IFRS – IFRS 1

When moving from national accounting standards to IFRS, an enterprise must be guided by the requirements of IFRS 1. This standard applies to the first annual financial statements of an enterprise prepared in accordance with the requirements of IFRS, and to interim statements presented in accordance with the requirements of IFRS (IAS) 34 “Interim financial statements” for part of the period covered by the first financial statements under IFRS. The standard also applies to establishments on “re-first use”. The main requirement is full application of all IFRSs in force at the reporting date. However, there are several optional exemptions and mandatory exceptions associated with the retrospective application of IFRS.

Exemptions affect standards for which the IASB considers that applying them retrospectively would be too difficult to implement or would result in costs that would outweigh any benefit to users. Exemptions are optional.

Any or all of the exemptions may apply, or none of them may apply.

Optional exemptions apply to:

• business combinations;
• fair value as deemed cost;
• accumulated differences when converted into another currency;
• combined financial instruments;
• assets and liabilities of subsidiaries, associates and joint ventures;
• classifications of previously recognized financial instruments;
• transactions involving share-based payments;
• fair value measurements of financial assets and financial liabilities upon initial recognition;
• insurance contracts;
• reserves for liquidation activities and environmental restoration as part of the cost of fixed assets;
• rent;
• concession agreements for the provision of services;
• borrowing costs;
• investments in subsidiaries, jointly controlled entities and associates;
• receiving assets transferred by clients;
• repayment of financial obligations with equity instruments;
• severe hyperinflation;
• joint activities;
• stripping costs.

The exceptions cover areas of accounting where retrospective application of IFRS requirements is not considered appropriate.

The following exceptions are mandatory:

• hedge accounting;
• estimated estimates;
• derecognition of financial assets and liabilities;
• non-controlling interests;
• classification and valuation of financial assets;
• embedded derivatives;
• government loans.

Comparative information is prepared and presented on the basis of IFRS. Almost all adjustments resulting from the initial adoption of IFRS are recognized in retained earnings at the beginning of the first IFRS reporting period.

Reconciliations are also required for certain items due to the transition from national standards to IFRS.

Presentation of financial statements – IAS 1

brief information

The purpose of financial statements is to provide information that is useful to users in making economic decisions. The purpose of IAS 1 is to ensure that the presentation of financial statements is comparable both with the financial statements of an entity for previous periods and with the financial statements of other entities.

Financial statements should be prepared on a going concern basis unless management either intends to liquidate the entity or cease trading, or is forced to do so because there are no realistic alternatives. Management prepares the financial statements on an accrual basis, except for cash flow information.

There is no set format for financial statements. However, a minimum amount of information must be disclosed in the basic financial statements and the notes thereto. The application guidance for IAS 1 contains examples of acceptable formats.

The financial statements disclose relevant information for the prior period (comparatives) unless IFRS or its interpretation permits or requires otherwise.

Statement of financial position (balance sheet)

The statement of financial position reflects the financial position of an enterprise at a particular point in time. Given the minimum information presentation and disclosure requirements, management may exercise its judgment regarding the form of presentation, including whether a vertical or horizontal format can be used, what classification group should be presented, and what information should be primarily disclosed. report and notes.

The balance sheet must contain at least the following items:

• Assets: fixed assets; investment property; intangible assets; financial assets; investments accounted for using the equity method; biological assets; Deferred tax assets; current income tax assets; stocks; trade and other receivables, and cash and cash equivalents.
• Equity: Issued capital and reserves attributable to the owners of the parent, as well as non-controlling interests represented in equity.
• Liabilities: deferred tax liabilities; liabilities for current income tax; financial obligations; reserves; trade and other accounts payable.
• Assets and liabilities held for sale: the total of assets classified as held for sale and assets included in disposal groups classified as held for sale; liabilities included in disposal groups classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

Current and non-current assets and current and non-current liabilities are reported as separate classification groups unless presentation based on liquidity provides reliable and more relevant information.

Statement of comprehensive income

The statement of comprehensive income reflects the results of an enterprise's operations for a specific period. Businesses can choose to report this information in one or two reports. When presented in a single statement, the statement of comprehensive income must include all items of income and expense and each component of other comprehensive income, all components classified by their nature.

When preparing two statements, all components of profit or loss are shown in the income statement followed by the statement of comprehensive income. It begins with the total amount of profit or loss for the reporting period and reflects all components of other comprehensive income.

Items that must be reflected in the statement of profit or loss and other comprehensive income

The income statement section of the statement of comprehensive income should, at a minimum, include the following items:

• revenue;
• financing costs;
• the enterprise's share of the profit or loss of associates and joint ventures accounted for using the equity method;
• tax expenses;
• The amount of after-tax profit or loss from discontinued operations, including after-tax gains or losses recognized at fair value less costs to sell (or on the disposal of) the assets or disposal group(s) that constitute the discontinued operation.

Additional line items and headings are included in this report when such presentation is appropriate to an understanding of the entity's financial performance.

Essential articles

The nature and amounts of significant items of income and expenses are disclosed separately. Such information may be presented in the report or in the notes to the financial statements. Such income/expenses may include costs associated with restructuring; writedown of inventories or the value of fixed assets; accrual of claims, as well as income and expenses associated with the disposal of non-current assets.

Other comprehensive income

In June 2011, the IASB published Presentation of Items of Other Comprehensive Income (Amendments to IAS 1). These amendments separate items of other comprehensive income into those that will subsequently be reclassified to profit or loss and those that will not be reclassified. These amendments are effective for annual reporting periods beginning on or after 1 July 2012.

An entity must report reclassification adjustments for components of other comprehensive income.

An entity may present the components of other comprehensive income either (a) net of tax effects, or (b) before related tax effects, showing the total tax on those items as a separate amount.

Statement of changes in equity

The following items are reflected in the statement of changes in equity:

• total comprehensive income for the period, showing separately the totals attributable to the owners of the parent and to non-controlling interests;
• for each component of equity, the effect of retrospective application or retrospective restatement recognized in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors;
• For each component of equity, a reconciliation of the carrying amount at the beginning and end of the period, disclosing separately changes due to:
  • items of profit or loss;
  • items of other comprehensive income;
  • transactions with owners acting in that capacity, separately reflecting contributions made by owners and distributions to owners, as well as changes in ownership interests in subsidiaries that do not result in a loss of control.

An entity must also present the amount of dividends recognized as distributions to owners during the period and the corresponding amount of dividends per share.

Cash flow statement

The statement of cash flows is discussed in a separate chapter on the requirements of IAS 7.

Notes to the financial statements

Notes are an integral part of the financial statements. The notes contain information that supplements the amounts disclosed in the individual financial statements. They include a description of accounting policies, as well as significant estimates and judgments, disclosure of information about equity and financial instruments with an obligation to repurchase classified as equity.

Accounting Policies, Changes in Accounting Estimates and Errors – IAS 8

An enterprise applies its accounting policies in accordance with the requirements of IFRS, which are applicable to the specific conditions of its activities. However, in some situations, standards provide a choice; There are also other situations in which IFRSs do not provide accounting guidance. In such situations, management must select the appropriate accounting policy independently.

Management, based on its professional judgment, develops and applies accounting policies to ensure that information is objective and reliable. Reliable information has the following characteristics: truthful presentation, content over form, neutrality, prudence and completeness. In the absence of IFRS standards or their interpretations that can be applied in specific situations, management should consider applying the requirements provided in IFRS to address the same or similar issues, and only then consider definitions, recognition criteria, methodologies for measuring assets, liabilities, income and expenses established in the Conceptual Framework for Financial Reporting. In addition, management may consider the most recent determinations of other accounting standard setters, other additional accounting literature, and accepted industry practices to the extent consistent with IFRSs.

Accounting policies must be applied consistently across similar transactions and events (unless a standard requires or specifically requires otherwise).

Changes in accounting policies

Changes in accounting policies resulting from the adoption of a new standard are accounted for in accordance with the transition provisions (if any) established under that standard. Unless a special transition procedure is specified, the policy change (mandatory or voluntary) is reflected retrospectively (that is, by adjusting opening balances) unless this is not practicable.

Issue of new/revised standards that are not yet effective

Standards are usually published ahead of their application dates. Prior to this date, management discloses in the financial statements that a new/revised standard relevant to the entity's activities has been issued but is not yet effective. Disclosure is also required regarding the likely impact of the first application of the new/revised standard on the entity's financial statements based on available data.

Changes in accounting estimates

An entity reviews its accounting estimates periodically and recognizes changes in them by recording the results of the changes in estimates prospectively in profit or loss for the reporting period affected (the period in which the changes in estimates occur and future reporting periods), unless when changes in estimates result in changes in assets, liabilities or equity. In such a case, recognition is achieved by adjusting the value of the related assets, liabilities or equity in the reporting period in which the changes occur.

Errors

Errors in financial statements can result from incorrect actions or misinterpretation of information.

Errors identified in a subsequent period are errors of previous reporting periods. Material prior year errors identified in the current period are adjusted retrospectively (that is, by adjusting the opening figures as if the prior period's statements had been free of errors in the first place), unless this is not practicable.

Financial instruments

Introduction, Objectives and Scope

Financial instruments are subject to the following five standards:

• IFRS 7 Financial Instruments: Disclosures, which covers disclosure of information about financial instruments;
• IFRS 9 Financial Instruments;
• IFRS 13 Fair Value Measurement, which provides information on fair value measurements and related disclosure requirements for financial and non-financial items;
• IAS 32 Financial Instruments: Presentation, which covers the distinction between liabilities and equity and offsets;
• IAS 39 Financial Instruments: Recognition and Measurement, which contains recognition and measurement requirements.

The purpose of the above five standards is to establish requirements for all aspects of the accounting for financial instruments, including the distinction between liabilities and equity, offsetting, recognition, derecognition, measurement, hedge accounting and disclosure.

The standards have a wide scope of application. They apply to all types of financial instruments, including accounts receivable, accounts payable, investments in bonds and shares (excluding interests in subsidiaries, associates and joint ventures), loans and derivative financial instruments. They also apply to certain contracts for the purchase or sale of non-financial assets (such as commodities) that can be settled net in cash or another financial instrument.

Classification of financial assets and financial liabilities

The way financial instruments are classified in IAS 39 determines the method of subsequent measurement and the method of accounting for subsequent changes in measurement.

Before the entry into force of IFRS 9, accounting for financial instruments classifies financial assets into the following four categories (as per IAS 39): financial assets measured at fair value through profit or loss; investments held to maturity; loans and receivables; financial assets available for sale. When classifying financial assets, the following factors must be taken into account:

• Are the cash flows generated by the financial instrument constant or variable? Does the instrument have a maturity date?
• Are the assets held for sale? Does management intend to hold the instruments to maturity?
• Is the financial instrument a derivative or does it contain an embedded derivative?
• Is the instrument quoted on an active market?
• Has management classified the instrument into a specific category since recognition?

Financial liabilities are measured at fair value through profit or loss if they are designated as such (subject to various conditions), are held for trading or are derivative financial instruments (unless the derivative financial instrument is a contract of financial guarantees or if it is designated as a hedging instrument and operates effectively). Otherwise, they are classified as “other financial liabilities.”

Financial assets and liabilities are measured at fair or amortized cost, depending on their classification.

Changes in value are recognized either in the income statement or in other comprehensive income.

Reclassification of financial assets from one category to another is permitted in limited cases. Reclassification requires disclosure of information on a number of items. Derivative financial instruments and assets that have been designated as 'at fair value through profit or loss' under the fair value option are not eligible for reclassification.

Types and main characteristics

Financial instruments include various assets and liabilities such as accounts receivable, accounts payable, loans, finance lease receivables and derivative financial instruments. They are recognized and measured in accordance with IAS 39, disclosed in accordance with IFRS 7 and fair value measurements are disclosed in accordance with IFRS 13.

Financial instruments represent the contractual right or obligation to receive or pay cash or other financial assets. Non-financial items have a more indirect, non-contractual relationship to future cash flows.

A financial asset is cash; the contractual right to receive cash or another financial asset from another enterprise; a contractual right to exchange financial assets or financial liabilities with another entity on terms potentially advantageous to the entity, or it is an equity instrument of another entity.

A financial liability is a contractual obligation to transfer cash or another financial asset to another entity, or an obligation to exchange financial instruments with another entity on terms that are potentially unfavorable to the entity.

An equity instrument is a contract that confirms the right to a residual interest in the assets of a business that remains after deducting all its liabilities.

A derivative financial instrument is a financial instrument whose value is determined on the basis of a relevant price or price index; it requires little or no initial investment; settlements on it are carried out in the future.

Financial liabilities and capital

The classification of a financial instrument by its issuer as either a liability (debt instrument) or equity (equity instrument) can have a significant impact on solvency ratios (for example, debt-to-equity ratio) and a company's profitability. This may also affect compliance with special terms of loan agreements.

The key characteristic of an obligation is that, in accordance with the terms of the contract, the issuer must (or may be required to) pay the holder of such an instrument cash or transfer other financial assets, that is, it cannot avoid this obligation. For example, a bond issue on which the issuer is obligated to pay interest and subsequently repay the bonds in cash is a financial liability.

A financial instrument is classified as equity if it establishes a right to an interest in the issuer's net assets after deducting all its liabilities or, in other words, if the issuer is not contractually obligated to pay cash or transfer other financial assets. Common shares, for which any payment is at the discretion of the issuer, are an example of equity financial instruments.

In addition, the following classes of financial instruments may be recognized as equity (subject to certain conditions for such recognition):

• putable financial instruments (for example, shares of cooperative members or some shares in partnerships);
• instruments (or their respective components) obliging the holder of the instrument to pay an amount proportionate to a share of the company's net assets only on the liquidation of the company (for example, certain types of shares issued by fixed-term companies).

The issuer's division of financial instruments into debt and equity is based on the essence of the instrument established by the contract, and not on its legal form. This means that, for example, redeemable preference shares, which are economically similar to bonds, are accounted for in the same way as bonds. Therefore, redeemable preference shares are classified as a liability rather than as equity, even though they are legally shares of the issuer.

Other financial instruments may not be as simple as those discussed above. In each specific case, a detailed analysis of the characteristics of the financial instrument according to the relevant classification criteria is necessary, especially taking into account the fact that some financial instruments combine elements of both equity and debt instruments. The financial statements present the debt and equity components of such instruments (for example, bonds convertible into a fixed number of shares) separately (the equity component is represented by an option to convert if all qualifying conditions are met).

The presentation of interest, dividends, income and losses in the income statement is based on the classification of the relevant financial instrument. Thus, if the preferred share is a debt instrument, the coupon is recorded as interest expense. Conversely, a coupon that is paid at the option of the issuer on an instrument treated as an equity instrument is recorded as a distribution of capital.

Recognition and derecognition

Confession

The recognition rules for financial assets and liabilities are usually not complex. An entity recognizes financial assets and liabilities when it becomes a party to a contractual relationship.

Derecognition

Derecognition is the term used to determine when a financial asset or liability is removed from the balance sheet. These rules are more difficult to apply.

Assets

A company holding a financial asset can raise additional funds to finance its activities by using the existing financial asset as collateral or as the main source of funds from which debt payments will be made. The derecognition requirements of IAS 39 determine whether the transaction is a sale of financial assets (in which case the entity derecognises them) or a receipt of asset-backed financing (in which case the entity recognizes a liability for the proceeds).

This analysis can be quite simple. For example, it is obvious that a financial asset is written off from the balance sheet after its unconditional transfer to a third party independent of the enterprise without any additional obligations to compensate it for the risks associated with the asset and without preserving the rights to participate in its profitability. Conversely, derecognition is unacceptable if the asset has been transferred, but, in accordance with the terms of the contract, all risks and potential returns from the asset remain with the enterprise. However, in many other cases, the interpretation of the transaction is more complex. Securitization and factoring transactions are examples of more complex transactions for which the issue of write-off from the balance sheet requires careful consideration.

Liabilities

An enterprise can stop recognizing (write off the balance sheet) a financial liability only after its repayment, that is, when the liability is paid, canceled or terminated due to its expiration, or when the borrower is released from the obligations by the lender or by law.

Valuation of financial assets and liabilities

In accordance with IAS 39, all financial assets and financial liabilities are measured at fair value on initial recognition (plus transaction costs in the case of a financial asset or financial liability not carried at fair value through profit or loss). The fair value of a financial instrument is the transaction price, that is, the fair value of the consideration given or received. However, in some circumstances the transaction price may not reflect fair value. In such situations, it is appropriate to determine fair value based on publicly available data from current transactions in similar instruments or on the basis of technical valuation models using only data from observable markets.

The measurement of financial instruments after initial recognition depends on their initial classification. All financial assets are subsequently measured at fair value, except for loans and receivables and held-to-maturity assets. In exceptional cases, equity instruments whose fair value cannot be measured reliably are also not revalued, as are derivatives related to those unquoted equity instruments that must be settled by delivery of those assets.

Loans and receivables and held-to-maturity investments are measured at amortized cost.

The amortized cost of a financial asset or financial liability is determined using the effective interest method.

Available-for-sale financial assets are measured at fair value with changes in fair value recognized in other comprehensive income. However, for available-for-sale debt instruments, interest income is recognized in profit or loss using the effective interest method. Dividends on available-for-sale equity instruments are recognized in profit or loss when the holder's right to receive them is established. Derivatives (including embedded derivatives that are subject to separate accounting) are measured at fair value. Gains and losses arising from changes in their fair value are recognized in the income statement, except for changes in the fair value of hedging instruments in cash flow hedges or net investment hedges.

Financial liabilities are measured at amortized cost using the effective interest method unless they are designated as liabilities at fair value through profit or loss. There are some exceptions in the form of loan commitments and financial guarantee agreements.

Financial assets and financial liabilities designated as hedged items may require additional adjustments to their carrying amounts in accordance with hedge accounting provisions (see section on hedge accounting).

All financial assets, other than those measured at fair value through profit or loss, are assessed for impairment. If there is objective evidence that a financial asset is impaired, an identified impairment loss is recognized in the income statement.

Derivatives embedded in the host contract

Some financial instruments and other contracts combine derivative and non-derivative financial instruments in a single contract. The part of the contract that is a financial derivative is called an embedded derivative.

The specificity of such an instrument is that some of the cash flows of the contract change in a similar way to stand-alone derivative financial instruments. For example, the par value of a bond may change simultaneously with fluctuations in a stock market index. In this case, the embedded derivative is a debt derivative based on the relevant stock index.

Embedded derivatives that are not “closely related” to the host contract are separated and accounted for as stand-alone derivatives (that is, measured at fair value through profit or loss). Embedded derivatives are not “closely related” if their economic characteristics and risks are not the same as those of the host contract. IAS 39 provides many examples to help determine whether this condition is met or not.

Analyzing contracts for potential embedded derivatives is one of the most challenging aspects of IAS 39.

Hedge accounting

Hedging is an economic transaction involving the use of a financial instrument (usually a derivative) aimed at reducing (partially or completely) the risks of the hedged item. So-called hedge accounting allows the timing of recognition of gains and losses for a hedged item or hedging instrument to be changed so that they are recognized in the income statement in the same accounting period, to reflect the economics of the hedge.

To apply hedge accounting, an entity must ensure that the following conditions are met: (a) at the inception of the hedge, the hedging relationship between the hedging instrument and the qualifying hedged item is formally identified and documented, and (b) at the inception of the hedge and throughout the life of the hedge, it must be demonstrated that the hedge is highly effective .

There are three types of hedging relationships:

• Fair value hedge is a hedge of exposure to changes in the fair value of a recognized asset or liability or a firm commitment;
• cash flow hedge is a hedge of exposure to changes in future cash flows associated with a recognized asset or liability, a firm commitment or a more probable forecast transaction;
• hedging of net investments - hedging of currency risk in relation to net investments in foreign activities.

For a fair value hedge, the hedged item is adjusted for the amount of income or expense attributable to the risk being hedged. The adjustment is recognized in the income statement where it will offset the related gain or loss on the hedging instrument.

Gains and losses on a cash hedge instrument that is determined to be effective are initially recognized in other comprehensive income. The amount included in other comprehensive income is the lower of the fair value of the hedging instrument and the hedged item. Where the hedging instrument has a higher fair value than the hedged item, the difference is recognized in profit or loss as an indication of hedge ineffectiveness. Deferred income or expenses recognized in other comprehensive income are reclassified to profit or loss when the hedged item has an impact on the income statement. If the hedged item is the forecast acquisition of a non-financial asset or liability, the entity has the option of either adjusting the carrying amount of the non-financial asset or liability for the hedging gain or loss at the time of acquisition, or retaining the deferred hedging gain or loss in equity and reclassifying it to profit or loss. loss when the hedged item will affect profit or loss.

The accounting for hedges of a net investment in a foreign operation is similar to the accounting for cash flow hedges.

Information disclosure

Recently, there have been significant changes in the concept and practice of risk management. New methods have been developed and implemented to assess and manage the risks associated with financial instruments. These factors, coupled with significant volatility in financial markets, have created a need to obtain more relevant information, provide greater transparency about an entity's exposure to risks associated with financial instruments, and obtain information about how an entity manages those risks. Users of financial statements and other investors require such information to make judgments about the risks to which an entity is exposed from financial instruments and the associated returns.

IFRS 7 and IFRS 13 set out the disclosure requirements that users need to assess the significance of financial instruments in relation to an entity's financial position and financial performance and to understand the nature and extent of the risks associated with those instruments. Such risks include credit risk, liquidity risk and market risk. IFRS 13 also requires disclosure of the three-level fair value hierarchy and some specific quantitative information about financial instruments at the lowest level of the hierarchy.

Disclosure requirements do not only apply to banks and financial institutions. They apply to all businesses that own financial instruments, even simple ones such as borrowing, accounts receivable and payable, cash and investments.

IFRS 9

In November 2009, the IASB published the results of the first part of a three-phase project to replace IAS 39 with the new standard IFRS 9 Financial Instruments. This first part is devoted to the classification and measurement of financial assets and financial liabilities.

In December 2011, the Board amended IFRS 9 and changed the effective date of application of the standard for annual periods beginning on or after 1 January 2013 to 1 January 2015 on or after that date. However, in July 2013, the Board tentatively decided to further defer the mandatory application of IFRS 9 and that the mandatory application date should remain open until the impairment, classification and measurement requirements are finalized. Early adoption of IFRS 9 is still permitted. The application of IFRS 9 in the EU has not yet been approved. The Board also made changes to the transition provisions by providing relief from the restatement of comparative information and introducing new disclosure requirements to help users of financial statements understand the implications of moving to the IFRS 9 classification and measurement model.

Below is a summary of the key requirements of IFRS 9 (as currently issued).

IFRS 9 replaces the multiple classification and measurement models of financial assets in IAS 39 with a single model that has only two classification categories: amortized cost and fair value. The classification under IFRS 9 is determined by the business model adopted by the entity to manage the financial assets and the contractual characteristics of the financial assets.

A financial asset is measured at amortized cost if two conditions are met:

• The purpose of the business model is to hold a financial asset to collect contractual cash flows;
• The contractual cash flows represent solely payments of principal and interest.

The new standard removes the requirement to separate embedded derivatives from financial assets. The standard requires a hybrid (complex) contract to be classified as a single entity at either amortized cost or fair value unless the contractual cash flows are solely payments of principal and interest. Two of the three existing fair value measurement criteria cease to apply under IFRS 9 because the fair value-based business model requires fair value accounting and hybrid contracts that do not meet the contractual cash flow criteria in their entirety, are classified as at fair value. The remaining fair value election condition in IAS 39 is carried over to the new standard, meaning management can still designate a financial asset on initial recognition as at fair value through profit or loss. , if this significantly reduces the number of accounting discrepancies. The designation of assets as financial assets at fair value through profit or loss will remain irrevocable.

IFRS 9 prohibits reclassification from one category to another, except in rare circumstances when there is a change in the entity's business model.

There is specific guidance for contractual instruments that offset credit risk, which is often the case with investment tranches in securitizations.

The classification principles of IFRS 9 require that all equity investments be measured at fair value. However, management may elect to recognize realized and unrealized gains and losses arising from changes in the fair value of equity instruments other than those held for trading in other comprehensive income. IFRS 9 removes the option of accounting for unquoted shares and derivatives at cost, but provides guidance on when cost may be considered an appropriate measure of fair value.

The classification and measurement of financial liabilities under IFRS 9 is unchanged from IAS 39 unless an entity elects to measure the liability at fair value through profit or loss. For such liabilities, changes in fair value attributable to changes in the level of own credit risk are recognized separately in other comprehensive income.

Amounts in other comprehensive income that are attributable to own credit risk are not transferred to the income statement even if the liability is derecognized and the related amounts are realized. However, this standard allows intra-equity transfers.

As before, where derivatives embedded in financial liabilities are not closely related to the host contract, entities will be required to separate them and account for them separately from the host contract.

Foreign currencies – IAS 21, IAS 29

Many businesses have relationships with foreign suppliers or customers or operate in foreign markets. This leads to two main accounting features:

• The operations (transactions) of the enterprise itself are denominated in foreign currency (for example, those that are carried out jointly with foreign suppliers or customers). For financial reporting purposes, these transactions are expressed in the currency of the economic environment in which the entity operates (“functional currency”).
• The parent enterprise may operate abroad, for example through subsidiaries, branches or associates. The functional currency of foreign operations may be different from the functional currency of the parent and therefore the accounts may be in different currencies. Because it would not be possible to aggregate measures expressed in different currencies, the results of foreign operations and measures of financial position are translated into a single currency, the currency in which the group's consolidated financial statements are presented (“presentation currency”).

The recalculation procedures applicable in each of these situations are summarized below.

Translation of foreign currency transactions into the entity's functional currency

A foreign currency transaction is translated into the functional currency at the exchange rate at the date of the transaction. Assets and liabilities denominated in foreign currencies, which represent cash or amounts of foreign currencies to be received or paid (so-called cash or monetary balance sheet items), are translated at the end of the reporting period at the exchange rate prevailing on that date. The exchange differences thus arising on monetary items are recognized in profit or loss for the period. Non-monetary balance sheet items that are not remeasured at fair value and that are denominated in a foreign currency are measured in the functional currency at the exchange rate prevailing on the date of the transaction. If a non-monetary balance sheet item has been revalued to its fair value, the exchange rate at the date the fair value was determined is used.

Recalculation of financial statements in the functional currency into the reporting currency

The values ​​of assets and liabilities are translated from the functional currency into the reporting currency using the exchange rate prevailing at the reporting date at the end of the reporting period. Income statement amounts are translated at the exchange rate prevailing on the dates of the transactions or at the average exchange rate if it approximates actual exchange rates. All resulting exchange differences are recognized in other comprehensive income.

The financial statements of a foreign entity whose functional currency is the currency of a hyperinflationary economy are first restated for changes in purchasing power in accordance with IAS 29. All financial statements are then translated into the group's presentation currency using period-end exchange rates.

Insurance contracts - IFRS 4

Insurance contracts are contracts in which the insurer assumes significant insurance risk from another party (the policyholder), agreeing to pay compensation to the latter if the occurrence of an insured event negatively affects the policyholder. The risk transferred under the contract must be an insurance risk, that is, any risk other than financial.

Accounting for insurance contracts is covered by IFRS 4, which applies to all companies that enter into insurance contracts, regardless of whether the company has the legal status of an insurance company or not. This standard does not apply to the accounting of insurance contracts by policyholders.

IFRS 4 is an interim standard until the end of the second phase of the IFRS project on accounting for insurance contracts. It allows companies to continue to apply their accounting policies to insurance contracts if those policies meet certain minimum criteria. One such criterion is that the amount of liability recognized for insurance liability is subject to testing for the adequacy of the amount of the liability. This test considers current estimates of all contractual and related cash flows. If the liability adequacy test indicates that the recognized liability is inadequate, then the deficiency in the liability is recognized in the income statement.

Selecting an accounting policy based on IAS 37 Provisions, Contingent Liabilities and Contingent Assets is appropriate for an insurer that is not an insurance company and where the country's generally accepted accounting principles (GAAP) do not provide specific requirements for accounting for insurance contracts (or the relevant country GAAP requirements apply only to insurance companies).

Because insurers may continue to use their country's GAAP accounting policies for measurement, disclosures are particularly important for presenting insurance contracting activities. IFRS 4 provides two basic principles for presentation.

Insurers must disclose:

• information that identifies and explains the amounts recognized in their financial statements and arising from insurance contracts;
• information that enables users of their financial information to understand the nature and extent of risks arising from insurance contracts.

Revenue and construction contracts – IAS 18, IAS 11 and IAS 20

Revenue is measured at the fair value of the consideration received or expected to be received. If the nature of the transaction indicates that it involves separately identifiable elements, then revenue is determined for each element of the transaction based generally on fair value. The moment of revenue recognition for each element is determined independently if it complies with the recognition criteria discussed below.

For example, when selling a product with the subsequent condition of its service, the amount of revenue due under the contract must first of all be distributed between the element of sale of the product and the element of provision of maintenance services. Revenue from the sale of a product is then recognized when the revenue recognition criteria for the sale of the product are met, and revenue from the provision of services is recognized separately when the revenue recognition criteria for that element are met.

Revenue – IAS 18

Revenue from the sale of a product is recognized when the entity has transferred significant risks and rewards associated with the product to the buyer and does not engage in management of the asset to the extent that ownership and control would normally be involved, and when it is highly probable that flow to the company of the economic benefits expected from the transaction, and the ability to reliably measure revenues and costs.

When services are provided, revenue is recognized if the results of the transaction can be measured reliably. To do this, the stage of completion of the contract at the reporting date is established using principles similar to those applied to construction contracts. The results of a transaction are considered to be reliably estimated if: the amount of proceeds can be measured reliably; there is a high probability of economic benefits flowing to the company; it is possible to reliably determine the stage of completion at which the contract is being executed; The costs incurred and expected to complete the transaction can be reliably measured.

• the company is liable for unsatisfactory performance of the product sold, and such liability goes beyond the scope of the standard warranty;
• the buyer has the right, under certain conditions specified in the purchase and sale agreement, to refuse the purchase (return the goods), and the company does not have the opportunity to assess the likelihood of such a refusal;
• Goods shipped are subject to installation and installation services are an essential part of the contract.

Interest income is recognized using the effective interest method. Income from royalties (paid for the use of intangible assets) is reflected on an accrual basis in accordance with the terms of the contract during the period of its validity. Dividends are recognized in the period in which the shareholder's right to receive them is established.

IFRIC 13 Customer Loyalty Programs provides clarity on the treatment of incentives provided to customers when they purchase goods or services, such as frequent flyer reward programs or customer loyalty programs offered by supermarkets. The fair value of payments received or debt from the sale is allocated between incentive points and other components of the sale.

IFRIC 18 Accounting for Assets Received from Customers provides clarity on the accounting for items of property, plant and equipment transferred to an entity by a customer in exchange for connecting the customer to its network or providing the customer with continued access to supplied goods and services. IFRIC 18 is most applicable to utility businesses, but may also apply to other transactions, such as where a customer transfers ownership of an item of property, plant and equipment as part of an outsourcing portion of an agreement.

Construction contracts - IAS 11

A construction contract is an agreement concluded for the purpose of constructing an object or a set of objects, including contracts for the provision of services directly related to the construction of the object (for example, supervision by an engineering organization or design work by an architectural bureau). These are typically fixed-price or cost-plus contracts. When determining the amount of revenue and expenses under construction contracts, the percentage of completion method is used. This means that revenue, expenses, and, consequently, profit are reflected as the work under the contract is completed.

If the outcome of the contract cannot be reliably estimated, revenue is recognized only to the extent that costs incurred are expected to be recovered; Contract costs are expensed as incurred. If it is highly probable that the total contract costs will exceed the total contract revenues, the expected loss is expensed immediately.

IFRIC 15 Construction Agreements provides clarity on whether IAS 18 Revenue or IAS 11 Construction Contracts should be applied to specific transactions.

Government Grants – IAS 20

Government grants are recognized in the financial statements when there is reasonable assurance that the company will be able to ensure full compliance with all conditions of the grant and that the grant will be received. Government subsidies to cover losses are recognized as income and are reflected in profit or loss for the period, along with the related expenses that they are intended to compensate, depending on the company's compliance with the conditions for the provision of a government subsidy. They are either mutually reduced by the amount of the corresponding costs or reflected in a separate line. The period of recognition in profit or loss will depend on the satisfaction of all conditions and obligations under the grant.

Government grants related to assets are reflected on the balance sheet either by reducing the carrying amount of the subsidized asset or as deferred revenue. In the profit and loss account, the government subsidy will be reflected either in the form of reduced depreciation charges or as income received on a systematic basis (over the useful life of the subsidized asset).

Operating segments - IFRS 8

Consistent with segment guidance, entities are required to disclose information that enables users of financial statements to evaluate the nature and financial performance of the business and economic conditions from management's perspective.

Although many enterprises manage their financial and business activities using some level of “segmented” data, the disclosure requirements apply (a) to enterprises that have registered or listed equity or debt instruments, and (b) to enterprises that are in the process of registering or obtaining admission to quotation of debt or equity instruments on the public market. If an entity that does not meet any of these criteria elects to disclose segmented information in the financial statements, the information can be designated as “segment” only if it meets the segment requirements presented in the guidance. These requirements are outlined below.

Determining the operating segments of an enterprise is a key factor in assessing the level of disclosure by segment. Operating segments are components of an enterprise, determined by analyzing information from internal reports, that are regularly used by the enterprise's operating decision maker to allocate resources and evaluate performance.

Reportable segments are individual operating segments or a group of operating segments for which segment information is required to be separately presented (disclosed). The combination of one or more operating segments into a single reportable segment is permitted (but not required) if certain conditions are met. The main condition is that the operating segments under consideration have similar economic characteristics (for example, profitability, price dispersion, sales growth rates, etc.). Determining whether multiple operating segments can be combined into a single reportable segment requires the exercise of significant judgment.

For all disclosed segments, an entity is required to provide measurement of profit or loss in a format reviewed by the highest level of management, and to disclose measurement of assets and liabilities if these measures are also regularly reviewed by management. Other segment disclosures include revenues generated from customers for each group of similar products and services, revenues by geographic region and by dependence on major customers. Entities must disclose other, more detailed measures of activity and use of resources by reportable segments if those measures are reviewed by the entity's chief operating decision maker. Reconciliation of the total values ​​of the indicators disclosed for all segments with the data in the main forms of financial statements is required for data on revenue, profit and loss and other material items, the verification of which is carried out by the highest body of operational management.

Employee benefits – IAS 19

The accounting for employee benefits, particularly pension liabilities, is a complex issue. Often the amount of liabilities of defined benefit plans is significant. Liabilities are long-term in nature and difficult to estimate, so determining the expense for the year is also difficult.

Employee benefits include all forms of payments made or promised by a company to an employee for his or her work. The following types of employee benefits are distinguished: wages (including salary, profit sharing, bonuses, and paid absence from work, such as paid annual leave or additional leave for long service); severance payments, which are compensation payments upon dismissal or reduction of staff, and post-employment benefits (for example, pensions). Employee benefits in the form of share-based payments are discussed in IFRS 2 (Chapter 12).

Post-employment benefits include pensions, life insurance, and post-employment health care. Pension contributions are divided into defined contribution pension plans and defined benefit pension plans.

Recognition and measurement of short-term compensation amounts is straightforward because actuarial assumptions are not required and liabilities are not discounted. However, for long-term forms of compensation, especially post-employment benefit obligations, measurement is more challenging.

Defined Contribution Pension Plans

The approach to accounting for defined contribution pension plans is quite simple: the amount of contributions payable by the employer for the corresponding reporting period is recognized as an expense.

Defined benefit plans

Accounting for defined benefit plans is complex because actuarial assumptions and valuation techniques are used to determine the current liability and expense accrual. The amount of expense recorded for a period is not necessarily equal to the amount of pension contributions made during that period.

The liability recognized in the balance sheet for a defined benefit plan is the present value of the benefit liability less the fair value of plan assets adjusted for unrecognized actuarial gains and losses (see below for the corridor recognition principle).

To calculate the liability for defined benefit plans, the benefit valuation model specifies estimates (actuarial assumptions) of demographic variables (such as employee turnover and mortality rates) and financial variables (such as future increases in wages and health care costs). The estimated payout amount is then discounted to its present value using the projected unit credit method. These calculations are usually carried out by professional actuaries.

In companies that fund defined benefit plans, plan assets are measured at fair value, which, in the absence of market prices, is calculated using the discounted cash flow method. Plan assets are strictly limited, and only those assets that meet the definition of a plan asset can be offset against the defined benefit obligations of the plan, ie the balance sheet shows a net deficit (liability) or surplus (asset) of the plan.

Plan assets and the defined benefit liability are remeasured at each reporting date. The income statement reports changes in the amount of surplus or deficit, excluding contributions to the plan and payments made under the plan, business combinations and restatements of profit and loss. The revaluation of profits and losses includes actuarial gains and losses, gains on plan assets (less amounts included in net interest on the net defined benefit liability or asset), and any change in the impact of the asset limit (excluding amounts in interest on the net liability or asset of the defined benefit plan). The results of the revaluation are recognized in other comprehensive income.

The amount of pension expense (income) to be recognized in profit or loss consists of the following components (unless their inclusion in the cost of assets is required or permitted):

• cost of services (present value of remuneration earned by current employees for the current period);
• net interest expense (recovery of the discount on the defined benefit obligation and the expected return on plan assets).

Service cost includes “current service cost”, which is the increase in the present value of the defined benefit obligation resulting from employee service in the current period, “past service cost” (as defined below and including any gain or any loss resulting from a cut-off ), as well as any profit or any loss on the basis of calculations.

Net interest on the net defined benefit liability (asset) is defined as “the change in the net defined benefit liability (asset) for a period that arises over time” (IFRS 19 para. 8). Net interest expense can be viewed as the sum of expected interest income on plan assets, interest expense on the defined benefit obligation (representing the reversal of the discount on the plan obligation) and interest attributable to the impact of the asset ceiling (IFRS 19 para. 124).

Net interest on the net defined benefit liability (asset) is calculated by multiplying the amount of the net defined benefit liability (asset) by the discount rate. This will use those values ​​that were established at the beginning of the annual reporting period, taking into account any changes in the net liability (asset) under the defined benefit plan that occurred during the period as a result of contributions and payments made (IFRS 19, paragraph 123 ).

The discount rate applicable to any financial year is the appropriate high quality corporate bond yield (or government bond yield as appropriate). Net interest on the net liability (asset) of a defined benefit plan can be considered to include expected interest earnings on plan assets.

Past service cost is the change in the present value of a defined benefit obligation for employee services provided in prior periods resulting from a change in plan (introduction, termination or modification of a defined benefit plan) or curtailment (a significant reduction in the number of employees included in the plan). Generally, past service costs should be expensed in the event of a plan amendment or sequestration. Gains or losses on settlements are recognized in the income statement when settlements are made.

IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Relationship provides guidance on estimating the amount that can be recognized as an asset when the plan's assets exceed its liability. within a defined benefit plan, resulting in a net surplus. The Interpretation also explains how an asset or liability may be affected by a statutory or contractual minimum funding requirement.

Share-based payment – ​​IFRS 2

IFRS 2 applies to all share-based payment contracts. A share-based payment agreement is defined as: “an agreement between a company (or another group company, or any shareholder of any group company) and another party (including an employee) which gives the other party the right to receive:

• cash or other assets of the company in an amount determined by reference to the price (or value) of the equity instruments (including shares or share options) of the company or another company in the group, and
• equity instruments (including shares or share options) of the company or another company of the group.”

Share-based payments are most widely used in employee benefit plans such as stock options. In addition, companies can thus pay for other expenses (for example, the services of professional consultants) and the acquisition of assets.

The measurement principle of IFRS 2 is based on the fair value of the instruments used in the transaction. Both the valuation and accounting of awards can be challenging due to the need to apply complex models for calculating the fair value of options and the variety and complexity of benefit plans. In addition, the standard requires the disclosure of a large amount of information. The amount of a company's net income is typically reduced as a result of the standard, especially for companies that make extensive use of share-based compensation as part of their employee compensation strategy.

Share-based payments are recognized as an expense (asset) over the period in which all specified vesting conditions under the share-based payment agreement must be satisfied (called the vesting period). Equity-settled share-based payments are measured at fair value on the grant date to account for employee benefits, and, if the parties to the transaction are not employees of the company, at fair value on the date the assets received are recognized and services. If the fair value of the goods or services received cannot be measured reliably (for example, in the case of compensation of employees or in circumstances that prevent the goods and services from being accurately identified), the entity records the assets and services at the fair value of the equity instruments granted. In addition, management must consider whether any unidentifiable goods and services have been received or are expected to be received, as these also need to be measured in accordance with IFRS 2. Share-based share-settled payments are not subject to remeasurement thereafter. how fair value is determined at the vesting date.

Accounting for cash-settled share-based payments is different: the entity must measure such compensation at the fair value of the liability incurred.

The liability is remeasured to its current fair value at each reporting date and at the settlement date, with changes in fair value recognized in the income statement.

Income taxes - IAS 12

IAS 12 only addresses income tax issues, including current tax charges and deferred tax. The current income tax expense for the period is determined by taxable income and expenses accepted as a reduction in the tax base, which will be reflected in the tax return for the current year. The Company recognizes in its balance sheet a liability in respect of current income tax expense for the current and prior periods to the extent of the unpaid amount. Overpayment of current tax is reflected by the company as assets.

Current tax assets and liabilities are determined by the amount that management estimates will be paid to or recovered from the tax authorities in accordance with current or substantive tax rates and regulations. Taxes payable based on the tax base are rarely the same as income tax expense calculated based on accounting profit before taxes. Inconsistencies arise, for example, due to the fact that the recognition criteria for income and expense items set out in IFRS differ from the approach of tax legislation to these items.

Deferred tax accounting is designed to eliminate these discrepancies. Deferred taxes are determined by temporary differences between the tax basis of an asset or liability and its carrying amount in the financial statements. For example, if a positive revaluation of property was carried out and the asset was not sold, a temporary difference arises (the book value of the asset in the financial statements exceeds the acquisition cost, which is the tax base for this asset), which is the basis for accruing a deferred tax liability.

Deferred tax is recognized in full for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting, except when the temporary differences arise because of:

• initial recognition of goodwill (for deferred tax liabilities only);
• does not affect either accounting or taxable profit on the initial recognition of an asset (or liability) in a transaction that is not a business combination;
• investing in subsidiaries, branches, associates and joint ventures (subject to certain conditions).

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply when the related asset is realized or the liability is settled, based on tax rates (and tax laws) enacted or substantively enacted at the reporting date. Discounting of deferred tax assets and liabilities is not permitted.

The measurement of deferred tax liabilities and deferred tax assets is generally required to reflect the tax consequences that would arise based on the manner in which the entity expects to recover or settle the carrying amounts of those assets and liabilities at the end of the reporting period. The proposed method of reimbursing the cost of land plots with an unlimited useful life is a sale transaction. For other assets, the manner in which the entity expects to recover the carrying amount of the asset (through use, sale or a combination of both) is considered at each reporting date. If a deferred tax liability or deferred tax asset arises from an investment property that is measured using the fair value model in accordance with IAS 40, then there is a rebuttable presumption that the carrying amount of the investment property will be recovered through sale.

Management recognizes deferred tax assets for deductible temporary differences only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. The same rule applies to deferred tax assets with respect to the carry forward of tax losses.

Current and deferred income taxes are recognized in profit or loss for the period unless the tax arises from an acquisition of a business or transaction that is accounted for outside profit or loss, either in other comprehensive income or directly in equity in the current or other reporting period. . Tax charges that arise, for example, from changes in tax rates or tax laws, changes in the likelihood of recovery of deferred tax assets, or changes in the expected recovery of assets are recognized in profit or loss unless the charge relates to prior transactions previously reflected in the capital accounts.

Earnings per share - IAS 33

Earnings per share is a metric often used by financial analysts, investors and others to evaluate a company's profitability and stock price. Earnings per share are generally calculated in relation to the company's common shares. Thus, profit attributable to holders of common shares is determined by subtracting from net profit the portion attributable to holders of equity instruments of a higher (preferred) level.

A company whose common shares are publicly traded must disclose both basic and diluted earnings per share in its individual financial statements or in its consolidated financial statements if it is a parent company. In addition, entities that file or are in the process of filing financial statements with a securities commission or other regulatory authority for the purpose of issuing ordinary shares (that is, not for the purpose of a private placement) must also adhere to the requirements of IAS 33.

Basic earnings per share are calculated by dividing earnings (loss) for the period attributable to shareholders of the parent company by the weighted average number of ordinary shares outstanding (adjusted for bonus distributions of additional shares to shareholders and bonus component in the issue of preferential shares ).

Diluted earnings per share are calculated by adjusting earnings (loss) and the weighted average number of common shares for the dilutive effect of conversion of potential common shares. Potential common shares are financial instruments and other contractual obligations that may result in the issuance of common shares, such as convertible notes and options (including employee options).

Basic and diluted earnings per share, both for the entity as a whole and separately for continuing operations, are disclosed uniformly in the statement of comprehensive income (or in the statement of income if the entity presents such a statement separately) for each class of common stock. Earnings per share for discontinued operations are disclosed as a separate line item directly on the same reporting forms or in the notes.

Balance with notes

Intangible assets - IAS 38

An intangible asset is an identifiable non-monetary asset that has no physical form. The identifiability requirement is met when the intangible asset is separable (that is, when it can be sold, transferred, or licensed) or when it results from contractual or other legal rights.

Separately acquired intangible assets

Separately acquired intangible assets are initially recognized at cost. Cost represents the purchase price of the asset, including import duties and non-refundable purchase taxes, as well as any direct costs of preparing the asset for its intended use. The purchase price of a separately acquired intangible asset is considered to reflect the market's expectations of the future economic benefits that can be derived from the asset.

Self-created intangible assets

The process of creating an intangible asset includes a research stage and a development stage. The research stage does not result in the recognition of intangible assets in the financial statements. Development-stage intangible assets are recognized when the entity can simultaneously demonstrate:

• Technical feasibility of development
• its intention to complete the development;
• the ability to use or sell an intangible asset;
• how the intangible asset will create probable future economic benefits (for example, the existence of a market for the products produced by the intangible asset or for the intangible asset itself);
• availability of resources to complete developments;
• its ability to reliably estimate development costs.

Any costs written off as expenses during the research or development stage cannot be reinstated for inclusion in the cost of an intangible asset at a later date when the project meets the criteria for recognition of an intangible asset. In many cases, costs cannot be charged to the cost of an asset and must be expensed as incurred. Costs associated with launching activities and marketing costs do not meet the criteria for asset recognition. The costs of creating brands, customer databases, names of printed publications and headings in them, and goodwill itself are also not subject to accounting as an intangible asset.

Intangible assets acquired in a business combination

If an intangible asset is acquired in a business combination, the recognition criteria are deemed to have been met and the intangible asset will be recognized in the initial accounting for the business combination regardless of whether it was previously recognized in the financial statements of the acquiree or not.

Measurement of intangible assets after initial recognition

Intangible assets are amortized, with the exception of assets with an indefinite useful life. Depreciation is charged on a systematic basis over the useful life of the asset. An intangible asset has an indefinite useful life if an analysis of all relevant factors indicates that there is no foreseeable limitation on the period over which the asset is expected to generate net cash inflows for the entity.

Intangible assets with finite useful lives are tested for impairment only when there is an indication that they may be impaired. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually and whenever there is an indication that impairment may be present.

Property, plant and equipment – ​​IAS 16

An item of property, plant and equipment is recognized as an asset when its cost can be reliably measured and it is probable that future economic benefits associated with it will flow to the company. At initial recognition, property, plant and equipment are measured at cost. Cost consists of the fair value of the consideration paid for the item acquired (less any trade discounts and refunds) and any direct costs of bringing the item to a serviceable condition (including import duties and non-refundable purchase taxes).

Direct costs related to the acquisition of a fixed asset include the costs of site preparation, delivery, installation and assembly, the cost of technical supervision and legal support of the transaction, as well as the estimated cost of mandatory dismantling and disposal of the fixed asset and reclamation of the industrial site (including the extent to which a provision is made for such costs). Property, plant and equipment (consistently within each class) can be carried either at historical cost less accumulated depreciation and accumulated impairment losses (cost model) or at revalued amounts less subsequently accumulated depreciation and impairment losses (cost model). revaluation). The depreciable cost of property, plant and equipment, which represents the original cost of an asset minus an estimate of its salvage value, is written off systematically over its useful life.

Subsequent costs associated with an item of property, plant and equipment are included in the asset's carrying amount if they meet the general recognition criteria.

An item of property, plant and equipment may include components with different useful lives. Depreciation expense is calculated based on the useful life of each component. If one of the components is replaced, the replacement component is included in the carrying amount of the asset to the extent that it meets the criteria for recognition of an asset, and at the same time, partial disposal is recognized to the extent of the carrying amount of the replaced components.

Costs of maintenance and overhaul of fixed assets, which are carried out regularly throughout the entire useful life of the asset, are included in the carrying amount of the fixed asset (to the extent that they meet the recognition criteria) and are depreciated over time.

The IFRIC has published IFRIC 18, Transfers of Assets from Clients, which provides clarity on the treatment of arrangements with clients to transfer items of property, plant and equipment to a contractor as a condition of its continuing provision of services.

Borrowing costs

IAS 23 Borrowing Costs requires entities to capitalize borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset to be capitalized.

Investment property – IAS 40

For financial reporting purposes, certain properties are classified as investment property in accordance with IAS 40 Investment Property because the characteristics of such property differ significantly from those of the property used by the owner. For users of financial statements, the current value of such property and its changes over the period are important.

Investment property is property (land or building, or part of a building, or both) held for the purpose of earning rentals and/or capital appreciation. All other property is accounted for in accordance with:

• IAS 16 Property, Plant and Equipment as property, plant and equipment if the assets are used in the production of goods and services, or
• IAS 2 Inventories as inventories when the assets are held for sale in the ordinary course of business.

Upon initial recognition, an investment property is measured at actual costs. After initial recognition of an investment property, management may choose to use the fair value model or the cost model in its accounting policies. The selected accounting policy is applied consistently to all investment property of the enterprise.

If an entity elects fair value accounting, during construction or development, investment property is measured at fair value if that value can be measured reliably; otherwise, the investment property is recorded at cost.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Guidance on measuring fair value is provided in IFRS 13 Fair Value Measurement.

Changes in fair value are recognized in profit or loss in the period in which they arise. The cost model accounts for investment property at its cost less accumulated depreciation and accumulated impairment losses (if any), which is consistent with property, plant and equipment accounting rules. The fair value of such property is disclosed in the notes.

Impairment of assets – IAS 36

Almost all assets – current and non-current – ​​are subject to testing for possible impairment. The purpose of testing is to ensure that their carrying values ​​are not overstated. The basic principle for recognizing impairment is that the carrying amount of an asset cannot exceed its recoverable amount.

Recoverable amount is determined as the higher of the asset's fair value less costs to sell and value in use. Fair value less costs to sell is the price that would be received to sell the asset in a transaction between market participants, at the measurement date, less costs of disposal. Guidance on fair value measurement is provided in IFRS 13 Fair Value Measurement. To determine value in use, management needs to estimate the future pre-tax cash flows expected from the use of the asset and discount them using a pre-tax discount rate that should reflect current market assessments of the time value of money and the risks specific to the asset.

All assets are subject to testing for possible impairment if there is evidence of impairment. Certain assets (goodwill, indefinite-lived intangible assets and intangible assets not yet available for use) are subject to mandatory annual impairment testing even if there is no indication of impairment.

When considering the possibility of asset impairment, both external signs of possible impairment (for example, significant unfavorable changes in technology, economic conditions or legislation for the company, or increases in interest rates in the financial market) and internal (for example, signs of obsolescence or physical damage to the asset) are analyzed or management accounting data about the existing or expected deterioration in the economic performance of the asset).

Recoverable amount must be calculated for individual assets. However, it is extremely rare for assets to generate cash flows independently of other assets, so most impairment tests are conducted on groups of assets called cash-generating units. A cash-generating unit is defined as the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash flows generated by other assets.

The carrying amount of the asset is compared with its recoverable amount. An asset or cash-generating unit is considered impaired when its carrying amount exceeds its recoverable amount. The amount of such excess (impairment amount) is reduced to the cost of the asset or allocated to the assets of the cash-generating unit; an impairment loss is recognized in profit or loss.

The goodwill recognized in the initial accounting for a business combination is allocated to the cash-generating units or groups of cash-generating units that are expected to benefit from the combination. However, the largest group of cash-generating units for which goodwill can be tested for impairment is the operating segment before aggregation into reportable segments.

Leases – IAS 17

A lease agreement gives one party (the lessee) the right to use an asset for an agreed period in exchange for rent to the lessor. Rent is an important source of medium- and long-term financing. The accounting for leases can have a significant impact on the financial statements of both the lessee and the lessor.

A distinction is made between finance and operating leases depending on what risks and rewards are transferred to the lessee. In a finance lease, all significant risks and rewards associated with ownership of the leased property are transferred to the lessee. Leases that do not qualify as finance leases are operating leases. The classification of a lease is determined at the time it is initially recognized. In the case of building leases, the lease of land and the lease of the building itself are treated separately in IFRS.

In a finance lease, the lessee recognizes the leased property as an asset and recognizes a corresponding liability to make lease payments. Depreciation is charged on rental property.

The lessee recognizes the property leased under finance lease as a receivable. Accounts receivable are recognized in an amount equal to the net investment in the lease, i.e., the amount of expected minimum lease payments, discounted at the internal lease rate of return, and the unguaranteed residual value of the leased asset due to the lessor.

Under an operating lease, the lessee does not recognize an asset (or liability) on its balance sheet, and lease payments are typically recognized in profit or loss, spread out evenly over the lease term. The lessor continues to recognize the leased asset and depreciate it. Lease proceeds are income to the lessor and are generally recognized in the lessor's profit and loss account on a straight-line basis over the lease term. Related transactions that have the legal form of a lease are accounted for based on their economic substance.

For example, a sale and leaseback transaction where the seller continues to use the asset will not be a lease in nature if the “seller” retains significant risks and rewards of ownership of the asset, i.e., substantially the same rights as before the operation.

The essence of such transactions is to provide financing to the seller-tenant under guarantees of ownership of the asset.

Conversely, some transactions that do not have the legal form of a lease are essentially leases if (as stated in IFRIC 4) the performance of one party's contractual obligations involves that party's use of a specific asset that the counterparty can control physically or economically .

Inventories – IAS 2

Inventories are initially recognized at the lower of cost and net realizable value. Cost of inventories includes import duties, non-refundable taxes, transportation, handling and other costs directly attributable to the acquisition of inventories, less any trade discounts and refunds. Net realizable price is the estimated selling price in the ordinary course of business less estimated costs to complete production and estimated selling costs.

In accordance with IAS 2 Inventories, the cost of inventories that are not fungible, as well as those inventories that have been allocated to a specific order, must be determined for each unit of such inventories. The cost of all other inventories is determined using the FIFO formula “first in, first out” (first-in, first-out, FIFO) or using the weighted average cost formula. The use of the LIFO formula “last in, first out” (last-in, first-out, LIFO) is not allowed. The company must use the same costing formula for all inventories of the same nature and scope. The use of a different formula for calculating cost may be justified in cases where inventories are of a different nature or are used by the company in different areas of activity. The selected cost calculation formula is applied consistently from period to period.

Provisions, contingent liabilities and contingent assets - IAS 37

A liability (for financial reporting purposes) is “a present obligation of an entity arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits from the entity.” Reserves are included in the concept of liability and are defined as “obligations with an indefinite period of fulfillment or obligations of an indefinite amount.”

Recognition and initial measurement

A provision should be recognized when the entity has a present obligation to transfer economic benefits as a result of a past event and it is probable (more likely than not) that an outflow of resources embodying the economic benefits will occur to settle that obligation; Moreover, its value can be reliably estimated.

The amount recognized as a provision should represent the best estimate of the costs required to settle the existing liability at the reporting date, based on the expected cash flows required to settle the liability, discounted for the effects of the time value of money.

A present obligation arises as a result of the occurrence of a so-called obligating event and may take the form of a legal or voluntary obligation. An obligating event puts a company in a position where it has no choice but to fulfill the obligation caused by the event. If a company can avoid future costs as a result of its future actions, the company has no existing obligations and no provision is required. Also, a company cannot recognize a provision based solely on its intention to incur expenses at some time in the future. Provisions are also not recognized for expected future operating losses unless those losses are related to an onerous contract.

It is not necessary to wait until the company's obligations take the form of a “legal” obligation to recognize a provision. A company may have historical practices that indicate to other parties that the company has accepted certain responsibilities, and which have already given those parties a reasonable expectation that the company will live up to its obligations (this means that the company has a voluntary commitment to obligation).

If an entity is liable under a contract that is onerous to it (the unavoidable costs of fulfilling the obligations under the contract exceed the economic benefits expected from fulfilling the contract), the existing liability under such contract is recognized as a provision. Until a separate provision is created, the company recognizes impairment losses on any assets related to the onerous contract.

Provisions for restructuring

Special requirements are provided for the creation of valuation reserves for restructuring costs. A provision is created only if: a) there is a detailed, officially adopted restructuring plan that defines the main parameters of the restructuring, and b) the enterprise, having begun implementation of the restructuring plan or communicating its main provisions to all parties affected by it, has created reasonable expectations that the company will undergo restructuring. A restructuring plan does not create a present liability at the reporting date if it is announced after that date, even if the announcement occurs before the financial statements are authorized. The company does not have any obligation to sell part of the business until the company is obligated to make such a sale, that is, until a binding agreement to sell is entered into.

The amount of the valuation allowance includes only direct costs inevitably associated with restructuring. Costs associated with the continuing activities of the company are not subject to provision. Proceeds from expected disposals of assets are not taken into account when measuring the restructuring provision.

Refunds

The provision and the expected amount are recorded separately as a liability and an asset, respectively. However, an asset is recognized only if it is virtually certain that consideration will be received if the company fulfills its obligation, and the amount of consideration recognized should not exceed the amount of the provision. The amount of expected reimbursement must be disclosed. Presentation of this item as a reduction of the recoverable liability is permitted only in the income statement.

Follow-up assessment

At each reporting date, management shall review the amount of the provision based on its best estimate at the reporting date of the costs required to settle the existing liability at the reporting date. An increase in the carrying amount of a valuation allowance that reflects the passage of time (as a result of the application of a discount rate) is recognized as interest expense.

Contingent liabilities

Contingent liabilities are potential obligations that will be confirmed only by the occurrence or non-occurrence of uncertain future events beyond the entity's control, or existing obligations for which provisions are not recognized because: a) it is not probable that it will be necessary to satisfy the obligations. an outflow of resources embodying economic benefits, or b) the amount of the liability cannot be measured reliably.

Contingent liabilities are not recognized in the financial statements. Contingent liabilities are disclosed in the notes to the financial statements (including an estimate of their potential effect on the financial performance and uncertainties about the amount or timing of an outflow of resources) unless the possibility of an outflow of resources is remote.

Contingent assets

Contingent assets are possible assets whose existence will only be confirmed by the occurrence or non-occurrence of uncertain future events outside the company's control. Contingent assets are not recognized in the financial statements.

In cases where the receipt of income is virtually certain, the corresponding asset is not classified as a contingent asset and its recognition is appropriate.

Contingent assets are disclosed in the notes to the financial statements (including an estimate of their potential impact on the financial performance) if it is probable that the flow of economic benefits will flow.

Events after the end of the reporting period – IAS 10

To prepare financial statements, companies typically require the period of time between the reporting date and the date the financial statements are authorized for issue. This raises the question of the extent to which events that occur between the reporting date and the date the financial statements are authorized for approval (that is, events after the end of the reporting period) should be reflected in the financial statements.

Events after the end of the reporting period are either adjusting events or events that do not require adjustment. So-called adjusting events provide additional evidence about conditions that existed at the reporting date, for example the determination after the end of the reporting year of the amount of consideration for assets sold before the end of that year. Events that do not require adjustment relate to conditions that arise after the reporting date, such as the announcement of a plan to cease operations after the end of the reporting year.

The carrying amount of assets and liabilities at the reporting date is formed taking into account adjusting events. In addition, an adjustment must be made when events after the reporting date indicate that the going concern assumption is no longer applicable. The notes to the financial statements should disclose significant events after the reporting date that do not require adjustment, such as the issue of shares or a major purchase of a business.

Dividends proposed or declared after the reporting date but before the financial statements are authorized for issue are not recognized as a liability at the reporting date. Such dividends must be disclosed. The Company discloses the date on which the financial statements were authorized for issue and the persons approving their issue. If, after the financial statements are issued, the company's owners or other persons have the authority to make changes to the financial statements, this fact must be disclosed in the financial statements.

Share capital and reserves

Capital, along with assets and liabilities, represents one of the three elements of a company's financial position. The IASB's Conceptual Framework for the Preparation and Presentation of Financial Reports defines equity as the remaining interest in the assets of an entity after netting off all its liabilities. The term "equity" is often used as a general category for a company's equity instruments and all its reserves. In financial statements, capital can be referred to in different ways: as equity capital, shareholder invested capital, share capital and reserves, shareholders' equity, funds, etc. The category of capital combines components with very different characteristics. The definition of equity instruments for IFRS purposes and their accounting treatment are within the scope of the financial instruments standard IAS 32 Financial Instruments: Presentation in Financial Statements.

Equity instruments (eg, non-redeemable ordinary shares) are generally recognized at the rate of resources received, which is the fair value of the consideration received less transaction costs. After initial recognition, equity instruments are not subject to remeasurement.

Reserves include retained earnings, fair value reserves, hedging reserves, property and equipment revaluation reserves and foreign exchange reserves, as well as other regulatory provisions.

Treasury shares repurchased from shareholders Treasury shares are deducted from total capital. Purchases, sales, issues or redemptions of a company's own equity instruments are not reflected in the profit or loss account.

Non-controlling interest

Non-controlling interest (formerly defined as “minority interest”) is presented in the consolidated financial statements as a separate component of equity from share capital and reserves attributable to the parent's equity holders.

Information disclosure

The new edition of IAS 1 Presentation of Financial Statements requires various disclosures in relation to equity. This includes information on the total amount of issued share capital and reserves, the presentation of a statement of changes in capital, information on capital management policies and information on dividends.

Consolidated and separate financial statements

Consolidated and separate financial statements – IAS 27

Applicable to companies in EU countries. For entities operating outside the EU, see Consolidated and Separate Financial Statements - IFRS 10.

IAS 27 Consolidated and Separate Financial Statements requires the preparation of consolidated financial statements for an economically separate group of entities (with limited exceptions). All subsidiaries are consolidated. A subsidiary is any company controlled by another parent company. Control is the power to determine the financial and operating policies of a company in order to obtain benefits from its activities. Control is presumed when an investor owns, directly or indirectly, more than half of the voting rights of the investee, subject to clear evidence to the contrary. Control may exist by owning less than half of the investee's voting rights if the parent company has the power to exercise control, for example, through a dominant position on the board of directors.

A subsidiary is included in the consolidated financial statements from the date of its acquisition, that is, from the date on which control of the net assets and activities of the acquired company effectively passes to the acquirer. Consolidated financial statements are prepared as if the parent company and all of its subsidiaries were a single entity. Transactions between group companies (for example, sales of goods from one subsidiary to another) are eliminated during consolidation.

A parent company that has one or more subsidiaries presents consolidated financial statements unless all of the following conditions are met:

• it is itself a subsidiary (unless any shareholder objects to it);
• its debt or equity securities are not publicly traded;
• the company is not in the process of issuing securities to public circulation;
• the parent company is itself a subsidiary, and its ultimate or intermediate parent company publishes consolidated financial statements in accordance with IFRS.

There are no exceptions for groups in which the share of subsidiaries is small, or where some subsidiaries have a different type of activity from other companies in the group.

From the date of acquisition, the parent includes in its consolidated statement of comprehensive income the financial results of the subsidiary and reports its assets and liabilities, including the goodwill recognized in the initial accounting of the business combination, on the consolidated balance sheet (see Section 25 Business Combinations—IFRS). IFRS) 3").

In a parent's separate financial statements, investments in subsidiaries, jointly controlled entities and associates must be recorded at cost or as financial assets in accordance with IAS 39 Financial Instruments: Recognition and Measurement.

A parent company recognizes dividends received from its subsidiary as income in the separate financial statements if it is entitled to receive the dividends. It is not necessary to establish whether the dividends were paid out of the subsidiary's pre- or post-acquisition profits. The receipt of dividends from a subsidiary may be an indicator that the underlying investment may be impaired if the amount of the dividends exceeds the subsidiary's total comprehensive income for the period in which the dividends are declared.

Special Purpose Companies

A special purpose entity (SPE) is a company created to perform a narrow, clearly defined mission. Such a company may carry out its activities in a prescribed manner such that, once formed, no other party has specific decision-making authority over its activities.

A parent consolidates special purpose entities if the substance of the relationship between the parent and the special purpose entity indicates that the parent controls the special purpose entity. Control may be predetermined by the operating procedures of the special purpose entity established at its inception, or otherwise ensured. A parent is considered to control a special purpose entity if it experiences most of the risks and receives most of the benefits associated with the special purpose entity's activities or assets.

Consolidated financial statements - IFRS 10

The principles of consolidated financial statements are set out in IFRS 10 Consolidated Financial Statements. IFRS 10 defines a common approach to the concept of control and replaces the control and consolidation principles set out in the original edition of IAS 27 Consolidated and Separate Financial Statements and SIC 12 Consolidation of a Special Purpose Entity.

IFRS 10 sets out the requirements for when an entity should prepare consolidated financial statements, defines the principles of control, explains how to apply them, and explains the accounting and preparation requirements for consolidated financial statements [IFRS 10, paragraph 2]. The basic principle underlying the new standard is that control exists and consolidation is necessary only if the investor has power over the investee, is exposed to changes in the returns from its involvement in the investee, and can use its power to influence on your income.

In accordance with IAS 27, control was defined as the power to manage the company, in accordance with SIC 12 - as exposure to risks and the ability to earn income. IFRS 10 brings these two concepts together in the new definition of control and the concept of exposure to earnings fluctuations. The basic principle of consolidation remains unchanged and is that the consolidated entity presents its financial statements as if the parent company and its subsidiaries formed a single company.

IFRS 10 provides guidance on the following issues in determining who controls an investee:

• assessment of the purpose and structure of the enterprise - the object of investment;
• nature of rights – whether they are real rights or rights of protection
• the impact of income risk;
• assessment of voting rights and potential voting rights;
• whether the investor acts as a guarantor (principal) or an agent when exercising his right to control;
• relationships between investors and how these relationships affect control; And
• having rights and powers only in relation to certain assets.

Some companies will be more impacted by the new standard than others. For companies with a simple group structure, the consolidation process should not change. However, changes may affect companies with complex group structures or structured entities. The following companies are most likely to be affected by the new standard:

• enterprises with a dominant investor who does not own a majority of voting shares, and the remaining votes are distributed among a large number of other shareholders (effective control);
• structured entities, also known as special purpose entities;
• enterprises that issue or have a significant number of potential voting rights.

In complex situations, specific facts and circumstances will influence the analysis based on IFRS 10. IFRS 10 does not contain clear-cut criteria and, when assessing control, involves considering many factors, such as the existence of contractual agreements and rights held by other parties. The new standard could be applied ahead of schedule; the requirement for its mandatory application came into force on January 1, 2013 (from January 1, 2014 in EU countries).

IFRS 10 does not contain any disclosure requirements; such requirements are contained in IFRS 12: this standard significantly increased the number of required disclosures. Entities preparing consolidated statements must plan and implement the processes and controls needed to collect information in the future. This may require preliminary consideration of issues raised by IFRS 12, such as the extent of unbundling required.

In October 2012, the IASB amended IFRS 10 (effective from 1 January 2014; not approved at the date of this publication) related to investment entities' approach to accounting for entities they control. Companies classified as investment companies according to the applicable definition are exempt from the obligation to consolidate the entities they control. In turn, they must account for these subsidiaries at fair value through profit or loss in accordance with IFRS 9

Business combinations – IFRS 3

A business combination is a transaction or event in which an entity (the “acquirer”) obtains control of one or more businesses. IAS 27 defines control as “the power to determine the financial and operating policies of an entity to obtain benefits from its activities.” (Under IFRS 10, an investor controls an investee if the investor is exposed to, or has the right to receive, variable returns from its involvement with the investee and can use its power to affect its returns.)

When determining which entity has gained control, a number of factors must be taken into account, such as ownership percentage, control of the board of directors, and direct agreements between owners regarding the distribution of control functions. Control is presumed to exist if an enterprise owns more than 50% of the capital of another enterprise.

Business combinations can be structured in different ways. For accounting purposes under IFRS, the focus is on the substance of the transaction rather than its legal form. If a series of transactions are carried out between the parties involved in a transaction, the overall result of the series of interrelated transactions is considered. Thus, any transaction the terms of which are made dependent on the completion of another transaction may be considered related. Determining whether transactions should be considered related requires professional judgment.

Business combinations, other than transactions under common control, are accounted for as acquisitions. In general, acquisition accounting involves the following steps:

• identifying the buyer (buying company);
• determining the date of acquisition;
• recognizing and measuring acquired identifiable assets and liabilities and non-controlling interests;
• recognition and measurement of consideration paid for acquired business;
• recognition and measurement of goodwill or gain on purchase

The identifiable assets (including intangible assets not previously recognized), liabilities and contingent liabilities of the acquired business are generally stated at their fair values. Fair value is determined based on arm's length transactions and does not take into account the buyer's intentions regarding the future use of the acquired assets. If less than 100% of the company's capital is acquired, an ownership interest that does not provide control is allocated. A non-controlling interest is an interest in the capital of a subsidiary that is not owned, directly or indirectly, by the parent company of the consolidated group. The acquirer has a choice whether to measure the non-controlling interest at its fair value or at its proportionate value to its net identifiable assets.

The total consideration for the transaction includes cash, cash equivalents and the fair value of any other consideration transferred. Any equity financial instruments issued as consideration are measured at fair value. If any payment has been deferred in time, it is discounted to reflect its present value at the acquisition date if the effect of discounting is significant. The consideration includes only those amounts paid to the seller in exchange for control of the business. Payment does not include amounts paid to settle pre-existing relationships, payments that are conditional on future employee service, or acquisition costs.

The payment of consideration may depend in part on the outcome of any future events or on the future performance of the acquired business (“contingent consideration”). Contingent consideration is also measured at fair value at the date of acquisition of the business. The treatment of contingent consideration after initial recognition at the date of acquisition of the business depends on its classification under IAS 32 Financial Instruments: Presentation - as a liability (in most cases will be measured at fair value at the reporting date, with changes in fair value allocated to to the profit and loss account) or in equity (after initial recognition it is not subject to subsequent revaluation).

Goodwill reflects the future economic benefits of those assets that cannot be individually identified and therefore separately recognized on the balance sheet. If the non-controlling interest is accounted for at fair value, the carrying amount of goodwill includes the portion attributable to the non-controlling interest. If the non-controlling interest is accounted for at the cost of identifiable net assets, then the carrying amount of goodwill will reflect only the parent's interest.

Goodwill is recorded as an asset that is tested for impairment at least annually, or more frequently when there is an indication that it may be impaired. In rare cases, such as when collateral is purchased at a favorable price for the buyer, goodwill may not arise, but a gain will be recognized.

Disposals of subsidiaries, businesses and certain non-current assets - IFRS 5

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations applies if any sale is made or is planned, including a distribution of non-current assets to shareholders. The 'held for sale' test in IFRS 5 applies to non-current assets (or disposal groups) whose cost will be recovered primarily through sale rather than through continued use in ongoing operations. It does not apply to assets that are being decommissioned, in the process of being liquidated or disposed of. IFRS 5 defines a disposal group as a group of assets intended to be disposed of simultaneously, in a single transaction, by sale or other action, and liabilities directly associated with those assets that will be transferred as a result of that transaction.

A non-current asset (or disposal group) is classified as held for sale if it is available for immediate sale in its current condition and such sale is highly probable. A sale is highly probable when the following conditions are met: there is evidence of management's commitment to sell the asset, there is an active program to find a buyer and implementation of the sale plan, there is active exposure of the asset for sale at a reasonable price, the sale is expected to be completed within 12 months from the date of classification and the actions required to implement the plan indicate that it is unlikely that significant changes to the plan will occur or that it will be delayed.

Non-current assets (or disposal groups) classified as held for sale:

• are measured at the lower of their carrying amount and fair value less costs to sell;
• are not depreciated;
• The assets and liabilities of the disposal group are reflected separately in the balance sheet (offsetting between asset and liability items is not permitted).

A discontinued operation is a component of an entity that, from a financial and operational perspective, can be separated in the financial statements from the rest of the entity's operations and:

• represents a separate significant activity or geographical area of ​​operations,
• is part of a single coordinated plan for the disposal of a separate significant line of business or major geographic area of ​​operations, or
• is a subsidiary acquired solely for the purpose of subsequent resale.

An operation is classified as discontinued when its assets meet the criteria for classification as held for sale or when the operation is disposed of from the enterprise. Although the information presented in the balance sheet is not restated or restated for discontinued operations, the statement of comprehensive income must be restated for the comparative period.

Discontinued operations are presented separately in the income statement and in the statement of cash flows. Additional disclosure requirements regarding discontinued operations are provided for the notes to the financial statements.

The date of disposal of a subsidiary or disposal group is the date control passes. The consolidated income statement includes the results of operations of the subsidiary or disposal group for the entire period up to the date of disposal; gains or losses on disposal are calculated as the difference between (a) the sum of the carrying amount of net assets and the goodwill attributable to the disposal subsidiary or group and the amounts accumulated in other comprehensive income (for example, foreign exchange differences and the fair value allowance for financial assets, available for sale); and (b) proceeds from the sale of the asset.

Investments in associates – IAS 28

IAS 28 Investments in Associates and Joint Ventures requires that interests in such entities be accounted for using the equity method. An associate is an enterprise over which the investor has significant influence and is neither a subsidiary nor a joint venture of the investor. Significant influence is the right to participate in decisions regarding the financial and operating policies of an investee without exercising control over those policies.

An investor is presumed to have significant influence if it owns 20 percent or more of the voting rights of an investee. Conversely, if an investor owns less than 20 percent of the voting rights of an investee, then the investor is not presumed to have significant influence. These assumptions can be refuted if there is compelling evidence to the contrary. The revised IAS 28 was issued following the publication of IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities and requires accounting shares in joint ventures using the equity method. A joint venture is a joint arrangement in which the parties with joint control have rights to the net assets of that arrangement. These amendments apply from January 1, 2013 (for companies in EU countries - from January 1, 2014).

Associates and joint ventures are accounted for using the equity method unless they meet the criteria for recognition as assets held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in associates are initially recognized at cost. Their carrying amount is subsequently increased or decreased by the investor's share of profit or loss and other changes in the net assets of the associate for subsequent periods.

Investments in associates or joint ventures are classified as non-current assets and are presented as a single line item on the balance sheet (including any goodwill arising on acquisition).

The investment in each individual associate or joint venture is tested as a single asset for possible impairment in accordance with IAS 36 Impairment of Assets if there are indications of impairment as described in IAS 39 Financial Instruments: Recognition and Measurement.

If an investor's share of losses in an associate or joint venture exceeds the carrying amount of its investment, the carrying amount of the investment in the associate is reduced to zero. Additional losses are not recognized by the investor unless the investor has an obligation to finance the associate or joint venture or has provided security for the associate or joint venture.

In an investor's separate (unconsolidated) financial statements, investments in associates or joint ventures may be recorded at cost or as financial assets in accordance with IAS 39.

Joint ventures – IAS 31

For entities outside the EU, IFRS 11 Joint Arrangements applies. A joint venture is a contractual arrangement between two or more parties in which strategic financial and operating decisions require the unanimous approval of the parties sharing joint control.

A company may enter into a joint venture agreement with another party (incorporated or unincorporated) for many reasons. In its simplest form, a joint venture does not result in the creation of a separate enterprise. For example, “strategic alliances,” in which companies agree to work together to promote their products or services, may also be considered joint ventures. To determine the existence of strategic entrepreneurship, it is necessary first to determine the existence of a contractual relationship aimed at establishing control between two or more parties. Joint ventures are divided into three categories:

• jointly controlled operations,
• jointly controlled assets,
• jointly controlled enterprises.

The approach to accounting for a joint venture depends on the category to which it falls.

Jointly controlled operations

A jointly controlled transaction involves the use of the assets and other resources of the participants instead of creating a corporation, partnership or other entity. [IFRS (IAS) 31, paragraph 13].

A participant in a jointly controlled transaction must recognize in its financial statements:

• the assets it controls and the liabilities it assumes;
• the expenses it incurs and the share of income it receives from the sale of goods or services produced under the joint venture.

Jointly controlled assets

Some types of joint ventures involve joint control by the participants over one or more assets contributed or acquired for the purpose of the joint venture. As with jointly controlled transactions, these types of joint ventures do not involve the formation of a corporation, partnership, or other entity. Each venturer obtains control of its share of the future economic benefits through its share of the jointly controlled asset. [IAS 31, paras. 18 and 19].

In respect of its interest in jointly controlled assets, a jointly controlling entity must recognize in its financial statements:

• its share of jointly controlled assets, classified according to the nature of those assets;
• any obligations assumed by him;
• its share of the obligations assumed jointly with other participants in the joint venture in relation to this joint venture;
• any income from the sale or use of its share in the joint venture's products, as well as its share of expenses incurred by the joint venture;
• any expenses incurred by him in connection with his share of participation in this joint venture.

Jointly controlled entities

A jointly controlled entity is a type of joint venture that involves the creation of a separate entity, such as a corporation or partnership. Members contribute assets or capital to a jointly controlled entity in exchange for an ownership interest in it and typically appoint members of a board or management committee to oversee operations. The level of assets or capital transferred, or the ownership interest received, does not always reflect control of the entity. For example, if two participants contribute 40% and 60% of the initial capital for the purpose of creating a jointly controlled enterprise and agree to share profits in proportion to their contributions, the joint venture will exist provided that the participants have entered into an agreement to jointly control the economic activities of the enterprise.

Jointly controlled entities may be accounted for using either the proportionate consolidation method or the equity method. In cases where a participant transfers a non-monetary asset to a jointly controlled entity in exchange for an interest in it, appropriate instructions and guidance apply.

Other joint venture participants

Some parties to the contractual agreement may not be among the parties sharing control. Such participants are investors who account for their interests in accordance with the guidance applicable to their investments.

Joint arrangements – IFRS 11

A joint arrangement is an activity based on an agreement that gives two or more parties the right to jointly control the activity. Joint control exists only when decisions regarding the relevant activities require the unanimous approval of the parties sharing control.

Joint arrangements may be classified as joint operations or joint ventures. The classification is based on principles and depends on the degree of influence of the parties on the activity. If the parties only have rights to the net assets of the activity, then the activity is a joint venture.

Participants in joint operations are vested with rights to assets and responsibility for obligations. Joint operations are often conducted outside the structure of a separate organization. If a joint operation is spun off into a separate entity, it may be a joint operation or a joint venture. In such cases, further analysis of the legal form of the enterprise, the terms and conditions included in the contractual agreements, and sometimes other factors and circumstances is necessary. This is because, in practice, other facts and circumstances may prevail over the principles determined by the legal form of an individual enterprise.

Participants in joint operations recognize their assets and liabilities for their liabilities. Joint venture participants recognize their interest in the joint venture using the equity method.

Other questions

Related party disclosures - IAS 24

IAS 24 requires companies to disclose transactions with related parties. Related parties of the company include:

• parent companies;
• subsidiaries;
• subsidiaries of subsidiaries;
• associates and other group members;
• joint ventures and other group members;
• persons who are members of the key management personnel of the enterprise or parent enterprise (as well as their close relatives);
• persons exercising control, joint control or significant influence over the enterprise (as well as their close relatives);
• companies that administer post-employment benefit plans for employees.

A company's primary creditor, which has influence over the company only by virtue of its activities, is not a related party. Management discloses the name of the parent company and ultimate controlling party (which may be an individual) if it is not the parent company. Information about the relationship between a parent and its subsidiaries is disclosed whether or not there are transactions between them.

If transactions with related parties occurred during the reporting period, management discloses the nature of the relationships that make the parties related and information about the transactions and the amounts of transaction balances, including contractual obligations, necessary to understand their effect on the financial statements. Information is disclosed in aggregate for similar categories of related parties and for similar types of transactions, unless separate disclosure of a transaction is required to understand the effect of related party transactions on the entity's financial statements. Management discloses that transactions with a related party were conducted on terms identical to those of transactions between unrelated parties only if such terms can be substantiated.

An enterprise is exempt from disclosure requirements in respect of transactions with related parties and balances of such transactions if the relationship between the related enterprises is due to the government exercising control or significant influence over the enterprise; or there is another enterprise that is a related party because the same government authorities exercise control or significant influence over the enterprise. If an enterprise applies an exemption from such requirements, it must disclose the name of the government agency and the nature of its relationship with the enterprise. It also discloses the nature and amount of each individual significant transaction, as well as qualitative or quantitative indications of the extent of other transactions that are significant not individually but in the aggregate.

Statement of Cash Flows - IAS 7

The cash flow statement is one of the main forms of financial reporting (along with the statement of comprehensive income, balance sheet and statement of changes in equity). It reflects information on the receipt and use of cash and cash equivalents by type of activity (operating, investing, financial) over a certain period of time. The report allows users to assess the company's ability to generate cash flows and the ability to use them.

Operating activities are the activities of a company that generate its main income and revenue. Investing activities represent the acquisition and sale of non-current assets (including business combinations) and financial investments that are not cash equivalents. Financial activity refers to operations that lead to changes in the structure of equity and borrowed funds.

Management may present cash flows from operating activities directly (representing gross cash flows for like groups of revenues) or indirectly (representing adjustments to net income or losses by excluding the effects of non-operating transactions, non-cash transactions and changes in working capital).

For investing and financing activities, cash flows are reflected in detail (i.e., separately for groups of similar transactions: gross cash receipts and gross cash payments) with the exception of several specially specified conditions. Cash flows associated with the receipt and payment of dividends and interest are disclosed separately and classified consistently from period to period as operating, investing or financing activities, depending on the nature of the payment. Income tax cash flows are shown separately as part of operating activities unless the related cash flow can be attributed to a specific transaction in a financing or investing activity.

The total result of cash flows from operating, investing and financing activities represents the change in the balance of cash and cash equivalents accounts for the reporting period.

Significant non-cash transactions, such as the issuance of treasury shares to acquire a subsidiary, the acquisition of assets through barter, the conversion of debt into equity, or the acquisition of assets through a finance lease, must be reported separately. Non-cash transactions include the recognition or reversal of impairment losses; depreciation and amortization; gains/losses from changes in fair value; accrual of reserves from profits or losses.

Interim financial reporting – IAS 34

IFRS does not require publication of interim financial statements. However, in a number of countries the publication of interim financial statements is either required or recommended, particularly for public companies. The IRA rules do not require the use of IAS 34 when preparing six-month financial statements. Companies registered with the IRA can either prepare six-month financial statements in accordance with IAS 34 or make minimum disclosures in accordance with Rule 18 of the IRA.

When an entity chooses to publish interim financial statements in accordance with IFRS, IAS 34 Interim Financial Reporting applies, which sets out the minimum requirements for the content of interim financial statements and the principles for recognizing and measuring the business transactions included in the interim financial statements. and account balances.

Companies may prepare full IFRS financial statements (as required by IAS 1 Presentation of Financial Statements) or condensed financial statements. The preparation of condensed financial statements is a more common approach. Condensed financial statements include a condensed statement of financial position (balance sheet), a condensed statement or statements of profit or loss and other comprehensive income (the income statement and a statement of other comprehensive income, if presented separately), a condensed statement of movements cash, condensed statement of changes in shareholders' equity and selected notes.

Typically, an entity applies the same accounting policies to recognize and measure assets, liabilities, revenues, expenses, gains and losses for both interim and current year financial statements.

There are special requirements for the measurement of certain costs that can only be calculated on an annual basis (for example, taxes, which are determined based on the estimated effective rate for the full year), and for the use of estimates in interim financial statements. An impairment loss recognized in the previous interim period in respect of goodwill or investments in equity instruments or financial assets carried at cost is not reversed.

As a mandatory minimum, interim financial statements disclose information for the following periods (condensed or complete):

• statement of financial position (balance sheet) - as of the end of the current interim period and comparative data as of the end of the previous financial year;
• Statement of profit or loss and other comprehensive income (or, if presented separately, the statement of profit or loss and statement of other comprehensive income) - data for the current interim period and for the current financial year to the reporting date, presenting comparative data for similar periods periods (interim and one year before the reporting date);
• cash flow statement and statement of changes in capital – for the current financial period before the reporting date with the presentation of comparative data for the same period of the previous financial year;
• notes.

IAS 34 sets out certain criteria for determining what information should be disclosed in interim financial statements. They include:

• materiality in relation to the interim financial statements as a whole;
• non-standard and irregular;
• volatility compared to prior reporting periods that had a significant impact on the interim financial statements;
• relevance to understanding the estimates used in the interim financial statements.

The primary objective is to provide users of interim financial statements with complete information that is important in understanding the financial position and financial performance of the company for the interim period.

Service Concession Agreements - SIC 29 and IFRIC 12

There is currently no separate IFRS standard for public service concession agreements entered into by government agencies with the private sector. IFRIC 12, Service Concession Agreements, interprets various standards that set out the accounting requirements for service concession agreements; SIC Interpretation 29 “Disclosure: Service Concession Agreements” contains disclosure requirements.

IFRIC 12 applies to public service concession agreements under which a government entity (the franchisor) controls and/or regulates services provided by a private company (the operator) using infrastructure controlled by the franchisor.

Typically, concession agreements specify to whom the operator must provide services and at what price. In addition, the franchisor must control the residual value of all significant infrastructure assets.

Since infrastructure assets are controlled by the copyright holder, the operator does not reflect the infrastructure as part of fixed assets. The operator also does not recognize finance lease receivables in connection with the transfer of infrastructure facilities it has built to the control of a government agency. The operator records a financial asset if it has an unconditional right to receive funds arising from the contract, regardless of the intensity of use of the infrastructure. The operator reflects the intangible in the event (a license) to collect fees from users of public services.

Both in the case of recognition of financial assets and in the case of recognition of an intangible asset, the operator accounts for income and expenses associated with the provision of services to the owner for the construction or modernization of infrastructure facilities, in accordance with IAS 11. The operator recognizes income and expenses associated with the provision of services to them for the use of infrastructure, in accordance with IAS 18. Contractual obligations to maintain the operating condition of the infrastructure (excluding modernization services) are recognized in accordance with IAS 37.

Accounting and reporting for pension plans - IAS 26

Financial statements for a pension plan prepared in accordance with IFRS must meet the requirements of IAS 26 Accounting and Reporting for Pension Plans. All other standards apply to the financial statements of pension plans to the extent that IAS 26 does not replace them.

IAS 26 requires the financial statements of a defined contribution plan to include:

• a statement of the net assets of the pension plan that can be used for payments;
• a statement of changes in the net assets of the pension plan that can be used for payments;
• a description of the benefit plan and any changes to the plan during the period (including their effect on the plan's reported performance);
• description of the pension plan financing policy.

IAS 26 requires the financial statements of a defined benefit plan to include:

• A statement presenting the net assets of a pension plan that can be used for benefits and the actuarial present value of benefits due and the resulting surplus/deficit of the pension plan, or a reference to this information in an actuarial report accompanying the financial statements;
• a statement of changes in net assets that can be used for payments;
• cash flow statement;
• main provisions of accounting policies;
• a description of the plan and any changes to the plan during the period (including their effect on the plan's reported performance).

In addition, the financial statements must include an explanation of the relationship between the actuarial present value of benefits entitlement and the net assets of the plan that can be used for benefits, as well as a description of the policy for funding the pension liability. The investments that constitute the assets of any pension plan (both defined benefit and defined contribution) are stated at fair value.

Fair value measurement - IFRS 13

IFRS 13 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date” (IFRS 13, paragraph 9 ). The key here is that fair value is the output price from the perspective of market participants who hold the asset or have the liability at the measurement date. This approach is based on the view of market participants rather than the view of the entity itself, so that the fair value is not affected by the entity's intentions for the asset, liability or equity measured at fair value.

To measure fair value, management must make four determinations: the specific asset or liability that is measured (appropriate for its unit of account); the most efficient use of a non-financial asset; main (or most attractive) market; assessment method.

In our view, many of the requirements set out in IFRS 13 are broadly consistent with measurement practices that are already in place today. Therefore, IFRS 13 is unlikely to lead to many significant changes.

However, IFRS 13 does introduce some changes, namely:

• a fair value hierarchy for non-financial assets and liabilities similar to that currently prescribed by IFRS 7 for financial instruments;
• requirements to determine the fair value of all liabilities, including derivative liabilities, based on the assumption that the liability will be transferred to another party rather than otherwise settled or settled;
• eliminating the requirement to use bid and bid prices for financial assets and financial liabilities, respectively, that are actively listed on an exchange; instead, the most representative price within the range of the bid-ask spread should be used;
• requirements for additional disclosures related to fair value.

IFRS 13 discusses how to measure fair value, but does not specify when fair value can or should be applied.

According to available official data, in 2015 the introduction of such regulations as special categories will become mandatory. Most often you can find the abbreviation of this concept - IFRS.

• stock market professional participants;
• commodity exchanges;
• non-state pension funds;
• clearing companies;
• joint stock investment funds;
• management organizations of the above categories.

It makes sense to first decide on the question: “IFRS - what is it?” This concept is deciphered as a complex of specialized documents, or rather standards, through which the procedure for creating financial statements that are freely available to external users is regulated.

IFRS versus the Russian accounting system

First of all, there is a difference in the end users of information, which includes relevant accounting indicators grouped according to the above standards. In particular, the Russian model was aimed at government agencies and statistics, and the international one at investors, enterprises and financial institutions. As a result, the associated differences in interests and needs for financial information also reveal different principles on which the procedure for generating this reporting is based.

Thus, a mandatory rule in IFRS is the priority of content regarding the form of presentation of previously specified information. When talking about the Russian accounting system, this point is most often omitted.

A practical example would be a situation in which PBU considers part of the capital of an enterprise, although regarding their economic nature there are very few distinctive features from bonds. Under IFRS, these features are significant enough not to be included in equity.

The purpose of introducing IFRS to Russian enterprises

In order to create something that is adequately perceived and understandable to users in different countries, international standards were introduced. Their goal is to unify the preparation of the set of documents under consideration and provide data on the activities of a company.

It is worth highlighting the list of documents defining IFRS aimed at their unification regarding the order of creation, namely:

• balance sheet;
• Report on ;
• Profits and Losses Report;
• report on changes in capital or other transactions in this area;
• accounting policy.

Along with the above reports, enterprises can also generate certain reviews for the management team, which display the profit indicators of a given company.

IFRS - what is it?

This accounting system looks like a specific set of documents, including the following elements:

• preface to the provisions of the standards under consideration;
• clarification of the fundamental principles of preparation and form of presentation of this type of reporting, in essence the concept of IFRS;
• standards and corresponding interpretations to these documents.

Each of the above documents has its own significance, but is used exclusively in conjunction with other elements. Thus, from the previously indicated list it means that IFRS are standards, each of which has a clearly established structure.

The semantic aspect of the standards of the accounting system under consideration

They establish rules that determine the procedure for deciphering individual transactions performed in the course of carrying out the core activities of the enterprise and reflected in the financial statements.

It is important to note that the standards adopted by the relevant body before 2001 are called International Accounting Standards or abbreviated IAS, and then, since 2001, International Financial Reporting Standards, the abbreviation of which has the same spelling - IFRS.

Current above standards

The main IFRSs developed before 2001 include:

International Financial Reporting Standards

The list of standards of the accounting system under consideration, adopted since 2001, is as follows:

1. “Adoption of International Financial Reporting Standards for the first time” (IFRS No. 1).
2. “Share-based payments” (IFRS No. 2).
3. Business Combinations (IFRS No. 3).
4. “Insurance Contracts” (IFRS No. 4).
5. “Non-current assets held for sale and discontinued operations” (IFRS No. 5).
6. "Exploration and Evaluation of Mineral Resources" (IFRS No. 6).

What is the significance of the current year regarding the accounting system in question?

From official sources it became known that the last volume of IFRS 2014, called the “Red Book,” is ready. It contains rules for international accounting, including those that will come into force after January 1 of the current year. An example is the amendments to the ninth standard, called “Financial Instruments,” adopted in 2001. There are also two sets of annual changes regarding IFRS 2011-2013 and IFRS 2010-2012, one interpretation of fees, the constitution of the IFRS Foundation, and a detailed work plan.

What's good about this accounting system?

In order to create a financial report that is correct by international standards, IFRS will be indispensable in helping.

It is worth highlighting a number of advantages of this accounting system, which may be associated with the activities of the following entities:

1. investors, as this is due to clarity, transparency, reliability and lower costs.
2. Companies, because the costs of activities to attract investment are reduced, there is a unified accounting system, there is no need to harmonize financial information, there is order in both internal and external accounting.
3. Auditors: due to the fact that there is uniformity in the fundamentals, there is an opportunity to participate in the adoption of relevant standards, large-scale trainings are conducted.
4. The developers of these standards themselves - due to the fact that this is an excellent opportunity to exchange experience, the basis for future national standards and the convergence of existing ones.

All of the above helps once again to get an answer to the question: “IFRS - what is it?”

How to smooth the process of transition to IFRS?

The reform objectives include the following:

1. Special training of accountants to the level of professional knowledge of the basics of the accounting system in question.
2. Strengthening in the minds of enterprise managers a real interest in providing truthful and objective information.
3. The final differentiation of accounting into tax, financial and management.

The importance of the transition is determined by the fact that IFRS are standards that are a compromise between the world's main accounting systems.

The appeal of accounting reform to businesses around the world

The IFRS financial statements under consideration can make it easier for companies from different countries to enter world-class capital markets, and will also increase the comparability of information and make it more transparent for external users.

Specifically, Russian enterprises will be able to speak the same language with their foreign colleagues and strengthen their business position in foreign markets from the point of view of equality of opportunity, as a result of which multiple prospects of international capital markets will become available.

The implementation of IFRS will have a positive impact on quality, in particular on its improvement, and will also contribute to updating information systems and motivating staff.

In addition, attracting foreign capital without reporting prepared in accordance with IFRS is currently very difficult. And it doesn’t matter whether this will be done either with the help of Western banks, or by entering the stock market located abroad, or by attracting private investment from abroad. A potential foreign investor will most likely not understand reporting prepared in accordance with PBU. Therefore, it is worth taking care of generating reporting regulated by IFRS.

Companies are aware of the fact that in the near future, international standards will become national. For many firms, IFRS reporting is already required today in order to secure a significant competitive advantage by attracting resources in international borrowing markets such as bonds, loans or IPOs.

Thus, all of the above helps to understand in more detail the question: “IFRS - what is it?”

IFRS 1 establishes uniform rules for the preparation of financial statements to ensure their comparability both with data from previous periods and with the statements of other organizations. Let's consider the main provisions of this standard.

The statement of changes in equity includes information about changes during the period in all components of this indicator, both normal for the period and those associated with retrospective adjustments to data.

A separate document is devoted to the rules for drawing up a cash flow statement that is quite important for assessing trends in existing cash flows: IFRS 7.

Special meaning IFRS 1 provides explanations to the reporting, which are recommended to be drawn up in the following order:

• declare compliance of reporting with IFRS requirements;
• review the applicable accounting policies;
• bring additional data to the main reporting forms;
• disclose information that requires additional qualifications, including the specifics of the estimates used, existing capital management processes, proposed or declared dividends.

Results

The standard in question establishes the fundamental rules for the preparation of publicly available financial statements prepared in accordance with IFRS requirements. Despite a fairly free approach to the forms of this reporting, there are a number of strict requirements for the set of data included in it, and the need to detail them.

With the entry into force of Federal Law No. 208-FZ “On Consolidated Financial Statements”, the range of companies that will apply IFRS will expand. This will require additional clarification on the transition to new standards.

Consolidated financial statements in accordance with IFRS for 2012 will have to be prepared by credit, insurance organizations and other companies whose securities are admitted to circulation on the market. All organizations that are required to prepare consolidated statements under RAS, since 2012, must already prepare them according to IFRS.

In addition, the deadlines for compiling and publishing reports, which are now regulated by law, are extremely tight. By April 30, it is necessary to prepare reports and undergo an audit, and within the month following signing, publish them in open sources.

One of the main questions that an organization faces at the beginning of preparing its first financial statements under IFRS is how best to approach the issue of selecting specialists responsible for its preparation.

To obtain financial statements in accordance with IFRS, a company must go through three enlarged stages:

• collection of information necessary for reporting;
• directly preparing reports;
• reporting audit.

Conducting an audit of financial statements falls within the competence of an independent auditor. We will focus on the first two stages.

Collection of information

The reporting preparer (whether internal or external) generates a request, the answer to which is provided by the company’s financial, accounting, human resources, legal, and operational services.

The process of collecting information for reporting is almost always within the competence of the organization. Hiring an external consultant for this process is expensive, because he will study the accounting system, software product, and analytics. He will have to disassemble almost every wiring.

Useful materials:

Another thing is an accountant who works in a separate accounting area. He is familiar with the entire information storage system, in addition, he has in-house knowledge. What would take a hired specialist weeks to complete, will literally take a company accountant a couple of days.

However, there are also disadvantages to using the work of an accountant for the purpose of collecting information when preparing financial statements under IFRS. Thus, the accountant does not know exactly how the information will be used, so he cannot always present it correctly in the request. When a reporting preparer receives an incorrectly completed response to a request, he spends time analyzing it, sends it for revision, receives it back, checks it again - all this also takes time.

The ideal option for me is for accountants to fill out information requests while simultaneously conducting brief training in filling out tables. The reporting preparer must explain the purpose of completion for each block of information collected.

Namely, why information is required in such a breakdown and detail, what adjustments are formed for this block, what errors are encountered when filling out a specific table. This training is best provided as a workshop for all accountants involved in completing the spreadsheets, approximately halfway through the process.

Independent consultant

So, the main stage is reporting. There are three main preparation options from the point of view of attracting specialists - hiring an independent consultant, preparing reports on your own, and combining these approaches. Let's look at each of them.

Engaging an independent consultant has long been the main method of preparing financial statements under IFRS. This also includes the auditor’s assistance in preparing reports, which, to some extent, is permitted by the Code of Ethics for Professional Accountants.

All organizations that are required to prepare consolidated statements under RAS, since 2012, must already prepare them according to IFRS...

With this option, the company provides the consultant with all the required information in the format of information requests, and the latter prepares its own financial statements in accordance with IFRS. The draft reporting is necessarily discussed with management, including in terms of professional judgments - on the formation of reserves, on conducting an impairment test, on the disclosure of segment and other information.

Independent appraisers and actuaries may also be involved. An independent consultant also provides audit support - answers the auditor's questions on all adjustments in settlement files and disclosures in financial statements, up to the issuance of an audit report.

The consultant always provides all working documentation upon completion of the work. In addition, if the company wishes, he will explain exactly what adjustments were made and what approaches were used. This allows you to involve any other consultant when preparing reports for the next period or do the reporting yourself.

We can immediately say that if an enterprise chooses the option of involving an external consultant, it is very important that personnel responsible for ensuring the process of preparing financial statements in accordance with IFRS are appointed. It will be the point of intersection of information flows - from the consultant to the accounting, personnel, operational services of the company - and vice versa.

Also, if necessary, these personnel will be able to use “administrative” resources. In small firms, this role can be combined by the person who will sign the reports.

Large structures most often require the involvement of at least one specialist who will monitor the timely receipt of information from the company's services to the consultant.

The question of independence

There are different opinions about the usefulness of engaging an independent consultant. They often turn out to be wrong, for example:

• “The consultant will do everything for me.” The consultant will take on the lion's share of the work, but the company itself will always provide information and be responsible for the final result. He will provide all the comments to the auditor, but will never be able to ensure an unconditionally positive audit opinion, because he only systematizes, analyzes and processes information about what happened to the company during the reporting period in the format as required by IFRS.
• “The company will depend on the consultant”. A normal consulting company will not reduce its reputation in such a way as, for example, hiding working documentation from the client. All working files are transferred to the organization with the simultaneous provision of comments. You can then use these files when working, including with another consultant.

Let's consider advantages of this option. First of all, the consultant has experience in preparing reports for companies representing various types of business and having different volumes.

Secondly, he has experience communicating with different audit structures, which often reflect transactions differently in the financial statements.

In addition, the consultant looks at the company’s activities, at all operations through the prism of reporting, paying attention only to significant events. Among other things, its resources are practically unlimited - there is always the possibility of using additional employees.

A normal consulting company will not reduce its reputation in such a way as, for example, hiding working documentation from the client...

The result of the work of a team of consultants together with company specialists and auditors is the development of the most optimal approaches, assumptions, and disclosures.

When preparing IFRS statements, specialists in a different field are often required - for example, appraisers or actuaries.

If all specialists are involved in one place, all issues within one consulting company are resolved as quickly as possible.

The disadvantages include the rather high cost, as well as the sluggishness of the system.

The more parties involved in the process, the slower it happens. The need to coordinate decisions between the company's management, consultant and auditor can lead to increased deadlines. In addition, the requirements for process administration have been increased.

This option is ideal if the organization plans to prepare financial statements under IFRS on an annual basis. Thus, the consultants prepared the reports, and the company incurred strictly specified costs for this turnkey service. When the next reporting period arrives, employees will again come to the organization with a baggage of new knowledge.

On your own

Recently, many large companies have switched to preparing IFRS reports in-house. Creating an IFRS department requires, first of all, hiring highly qualified personnel. Finding such employees is a rather complex and lengthy process.

The lack of qualified personnel in this area is one of the problems of the labor market at the moment. Most often, enterprises hire employees from consulting and auditing companies who have sufficient experience in working with IFRS reporting.

Simultaneously with the preparation of reporting under RAS, specialists of the IFRS department collect data, most often independently using access to the accounting system for the parent company. However, they also send requests to various services - personnel, operational, legal, requesting everything that is not in the system. For subsidiaries, information is collected in the same way as with an independent consultant - by collecting information requests.

Like a consultant, they prepare reports and coordinate them with the auditor.

In cases where support from an independent appraiser or actuary is required, such specialists are brought in from outside.

The advantages of this option include ease of administration of the process and efficiency. All issues are resolved within the company, and if necessary, an auditor is involved.

It is possible to conduct parallel processes for collecting information and preparing reports.

Now let's consider flaws. Firstly, specialists from well-established consulting and auditing companies are quite expensive. Secondly, specialists of the IFRS department “live” in the reporting of one company. There is no developed methodology for accounting for new transactions, activities and similar situations.

In addition, standards tend to change, and the company's operating conditions also change. Therefore, it is necessary to conduct continuous training, turning to the help of educational centers, or to practicing consultants and auditors.

If there is a need to dramatically strengthen the team with qualified personnel in a critical situation, it is difficult to do this quickly.

Lack of independent third party opinion. No one supports the company's point of view, which can lead to the imposition of the auditor's opinion.

Some of the disadvantages of this option can be eliminated by concluding a contract for the provision of consultations with an independent company, which will provide support on the most complex methodological issues.

IFRS department

Another important issue that cannot be classified as a shortcoming, but needs to be discussed, is the location of the IFRS department in the structure.

On the one hand, this is just one of the financial departments. On the other hand, he must have the authority to obtain the required information from other structural units, including accounting services.

Otherwise, the workload of personnel from other services will significantly reduce the speed of response to requests, and without this information, department specialists simply will not be able to do their work.

Taking this into account, the ideal place in the company structure for the department is direct subordination to the financial director, who signs the reports.

This option is best used when reporting is prepared on a quarterly or even more frequent basis - that is, in fact, constantly.

The ideal place in the structure for the IFRS department seems to be directly subordinate to the financial director, in the case where reporting is prepared on a quarterly or even more frequent basis...

The high cost of specialists and the company's costs for creating and maintaining an IFRS department are justified by the efficiency of reporting.

Moreover, such a scheme will work successfully only if a truly team of specialists has been created, similar to the project team of a consultant or auditor.

Thus, the company needs to organize its own team of consultants, incurring all the same costs that an independent consulting firm would incur.

What specialists does such a team usually consist of? If we take as an example a group of 8-10 companies, with one large parent organization, then the IFRS department may consist of two or three people.

One of the employees must have sufficient qualifications to be responsible for the reporting preparation process until the completed reporting is ready, fully meeting the requirements of IFRS in terms of disclosure of qualitative and quantitative information.

In the hierarchy of consulting companies, this person is the project manager.

The remaining employees must have knowledge of IFRS sufficient to carry out all, even the most complex calculations for reporting.

Combined option

There can be any combination of services received from outside and inside the company. However, the most common structure is one in which the organization creates a department with employees who have good knowledge of Russian accounting and basic knowledge of IFRS.

An independent consultant is hired to generate reports from data processed by specialists in the IFRS department and resolve methodological issues. In this option, an independent consultant is responsible for preparing the reports, but most of the technical work is done in-house.

As a rule, employees of the required level for the IFRS department are most often found within the company itself.

They perform most of the technical work, which significantly reduces labor costs and, accordingly, the cost of an independent consultant.

A specialist involved in preparing financial statements under IFRS must devote his entire working time to this. It's impossible otherwise...

Moreover, all work on preparing reports takes place under the supervision of a consultant who has all the necessary knowledge.

It is also possible to conduct parallel processes for collecting information and preparing reports.

In addition, additional training and retraining of personnel, maintenance of the methodological base are kept to a minimum, since in fact they are carried out by an independent consultant.

During the period free from reporting preparation, department personnel with accounting qualifications may be busy with other work. However, it is important to understand that at the same time the reporting process begins again, these personnel should be relieved of other duties.

If the auditor has questions about the working documentation, the independent consultant, unless otherwise agreed, will determine the boundaries of his responsibility by the actual boundaries of the work.

If we agree with an independent consultant that full responsibility for the work of the employees of the IFRS department before the auditor is agreed upon, then the cost of his services will increase accordingly.

It is quite difficult to ensure such rotation of department employees across reporting sections in order to maintain constant interest in the process. After all, the main professional judgments come from the consultant, and specialists perform mainly technical work.

This option for preparing reports is universal and can be used both for quarterly and annual reporting under IFRS, including in a short time.

Debriefing

I consider it necessary to also mention common mistakes when creating your own IFRS department.

• “We don’t need a special IFRS department, we have a lot of good accountants.” Unfortunately, this is a very common myth. And the problem with this approach is not even that the accountant does not always have sufficient qualifications to prepare financial statements in accordance with IFRS. The main questions arise due to the fact that the time required for an accountant to complete a new task cannot be casually allocated from the work schedule.
  A specialist involved in preparing financial statements under IFRS must devote his entire working time to this.
• “We will prepare reports as“Anyway, let the auditor check and correct.” Yes, the auditor, who did not include time for participation in the preparation of reporting in the calculation of the cost of services, if errors are found, will offer adjustments and even help with revisions. However, at best, he will offer to increase the cost of services. At worst, it will not issue an audit report until all errors are corrected and the reporting is finalized.

In conclusion, we can say that each option for preparing financial statements under IFRS through transformation has its obvious advantages and disadvantages. If the company establishes the necessary risk management procedures for the approach it chooses depending on its needs, then reporting will be completed successfully.

After an organization generates its first IFRS reporting, it will be able to choose the path to further optimize the process, including its partial or maximum automation.

Polina Sungurova, expert of the magazine "Consultant"