Conceptual Framework instruments for an entity, the nature of extent of associated risk exposures

and the entity’s risk management processes.

The Conceptual Framework for Financial Reporting issued by IASB outlines

the broad over-arching principles used by the IASB in setting standards and IFRS 8 Operating Segments
by preparers of financial statements in determining accounting policies if no IFRS 8 requires companies who have publicly-listed equity or debt
specific standard is available. instruments to disclose information which helps investors in identifying
performance of its different business activities. Entities are required to
separately disclose information for operating segments (segments whose
International Financial Reporting Standards operations are separately measured and reviewed by executive
management) whose assets, revenue or profits are 10% or more of the
total assets, total revenue and net income.
IFRS 1 First-time Adoption of International Financial Reporting
Standards
IFRS 1 deals with an entity’s first set of annual (and associated interim) IFRS 9 Financial Instruments
IFRS-compliant financial statements. It requires an entity to prepare the IFRS 9 outlines recognition, derecognition, and classification requirements
opening IFRS statement of financial position at the date of transition to for financial assets and liabilities, and impairment and hedge accounting
IFRS. On transition, an entity follows all IFRSs effective as at the first guidance. It requires financial assets to be classified either as amortized
annual reporting date in its opening IFRS SFP and all periods presented in cost (if the entity’s business model is to hold the asset for earning cash
the first IFRS financial statements. Transitional provisions contained in flows and the cash flows are solely payments of principal and interest), fair
other IFRSs typically do not apply to first-time adopters. The standard value through other comprehensive income (if the business model is to
contains certain transactions/events for which retrospective application is both collect cash flows and make a capital gain), and fair value through
either prohibited or exempted. It does not allow revision to accounting profit or loss (the residual category). Financial liabilities are mostly classified
estimates unless there is evidence that those estimates were erroneous. as amortized cost or at fair value through profit or loss (in case of
The standard requires statements of financial position for three years and derivatives, for example). While financial assets may be reclassified after
other statements for two years. initial recognition, financial liabilities cannot be. IFRS 9 also contains
forward-looking impairment recognition requirements and new hedge
accounting guidance.
IFRS 2 Share-based Payment
IFRS 2 deals with accounting for share-based payments (including
employee stock options). It requires an increase in equity in case of equity- IFRS 10 Consolidated Financial Statements
settled share-based payments and increase in liability in case of cash-
settled share-based payment. In an equity-settled share-based payment
transaction, the standard requires an entity to measure the goods or IFRS 10 contains principles for preparation of consolidated financial
services at the fair value (or if it not available at the fair value of the equity) statements. It deals with determination of control, accounting requirements
at the grant date and does not allow any remeasurement. In a cash-settled for consolidation, and outlines exceptions available to investment entities.
share-based payment, liability is remeasured at each reporting and
settlement date. The recognition also depends on any vesting conditions IFRS 11 Joint Arrangements
and vesting period. IFRS 11 contains guidance on accounting for joint arrangements,
arrangement in which unanimous decision of two or more entities are
IFRS 3 Business Combinations required. These include joint operations and joint ventures. In accordance
IFRS 3 requires an acquirer to measure the cost of the acquisition at the with IFRS 11, a joint operator recognizes its share of the assets and
fair value of the consideration paid; allocate that cost to the acquired liabilities, and revenues and expenses in accordance with IFRSs applying to
identifiable assets and liabilities based on their fair values; recognize any those items. However, a joint venture partner applies the equity method
excess (deficit) of the consideration over the fair value of net assets as required by IAS 28.
goodwill (on statement of financial position) and bargain purchase (in profit
or loss). IFRS 3 also stipulates related disclosures requirements. IFRS 12 Disclosure of Interests in Other Entities
IFRS 12 stipulates disclosures which entities must make regarding the
IFRS 4 Insurance Contracts natures and risks of their interests in subsidiaries, associates, joint
IFRS 4 shall be superseded by IFRS 17. IFRS 4 applies to all insurance ventures, etc., and the associated effects on its financial position,
contracts issued by an insurer. It exempts the entity from applying the performance and cash flows.
Conceptual Framework to accounting for its insurance contracts. However,
it requires testing for adequacy of insurance liabilities and impairment IFRS 13 Fair Value Measurement
testing of assets. Similarly, it prohibits offsetting of insurance liabilities with IFRS 13 defines fair value and outlines the measurement and disclosure
reinsurance assets, and creation of provision in respect of insurance guidance which are to be applied when other standards requires or permits
contracts not yet entered. fair value measurement except for cases in which those standards contain
their own fair value guidance (such as share-based payments and leases).
IFRS 5 Non-current Assets Held for Sale and Discontinued The standard defines fair value as ‘the price that would be received to sell
Operations an asset or paid to transfer a liability in an orderly transaction between
IFRS 5 requires that if an entity determines that the carrying amount to a market participants at the measurement date (an exit price)’.
non-current asset or a group shall be recovered through a sale transaction,
it shall classify these as held for sale. Once such a classification is made, IFRS 14 Regulatory Deferral Accounts
depreciation shall cease, and the asset shall be carried at the lower of the IFRS 14 allows first-time adopters to continue to recognize regulatory
carrying amount and fair value less cost to sell. Assets and liabilities and deferral balances. Regulatory deferral balances are amounts of income or
income resulting from these assets are presented separately in financial expense which do not qualify for recognition, but which can be deferred
statements. because the rate regulator will consider them in future price determination.

IFRS 6 Exploration for and Evaluation of Mineral Resources IFRS 15 Revenue from Contracts with Customers
IFRS 6 specifies treatment for some exploration and evaluation costs, and IFRS 15 establishes the following five-step model for recognition of revenue
costs incurred on determination of technical feasibility of extraction of from contracts with customers (other than leases, financial instruments and
mineral resources. IFRS 6 allows companies to make determine an some other exceptions):
accounting policy regarding their exploration/evaluation and development
activities and carry out impairment testing if there are indications that any
exploration and evaluation assets are impaired.  Identifying the contract with customer.
 Identifying the performance obligations in a contract.
IFRS 7 Financial Instruments: Disclosures  Determining transaction price of the contract.
IFRS 7 prescribers financial instruments disclosure aimed at giving the
users of the financial statements an overview of the significance of financial
  Allocating the transaction price to difference performance If a specific IFRS does not address an accounting transaction, IAS 8
obligations. requires entities to draw guidance, first from IFRSs dealing with similar
transaction, and then from the Conceptual Framework. Any change in
 Recognizing revenue based on progress towards satisfaction of accounting policies shall be made retrospectively unless an IFRS contains
each performance obligation. specific transition provisions. Any change in accounting estimates is
accounted for prospectively. Any prior period errors or omissions are
IFRS 16 Leases corrected retrospectively.
IFRS 16 replaces IAS 17, the previous lease accounting standard. It
requires lessees to present all leases (except short-term leases and leases IAS 10 Events after the Reporting Period
of low-value items) on their statements of financial position (by recognizing IAS 10 requires than an entity adjust its financial statements for any
a right of use asset and a lease liability). However, it retains the finance adjusting events but not for non-adjusting events. Adjusting events are
lease and operating lease bifurcation in case of lessors. Lessee depreciation those that provide evidences of conditions existing at the year-end.
their right of use assets and unwind the lease liability. Lessors recognize However, significant non-adjusting events are disclosed.
finance income on their net investment in lease (in case of finance leases)
and operating lease income (on some reasonable basis) in case of
operating leases. The standards also provide guidance on lease term, lease IAS 12 Income Taxes
components, lease modifications and sale and leaseback transactions. In accordance with IAS 12, an entity recognizes a liability or asset in
respect of current tax for current or prior periods at tax rates which are
enacted or substantively enacted. IAS 12 also requires recognition of
IFRS 17 Insurance Contracts deferred tax liability or a deferred tax asset for temporary differences
IFRS 17 will be effective for annual reporting periods beginning on or after arising from differences between financial accounting treatment and tax
1 January 2023. IFRS 17 requires an entity to identify insurance contracts treatment of transactions (based on tax rates expected to be enacted when
with customers, separate the non-insurance (investment, embedded those differences reverse). Deferred tax assets may also be recognized in
derivative, etc.) components, divide the contracts to different groups and respect of tax losses carried forward. However, a valuation adjustment is
measures the groups at (a) a risk-adjusted present value of the future cash needed if future tax profits will not be enough to utilize the whole deferred
flows, and (b) an amount representing the unearned profit. The standards tax assets.
requires an entity to recognize profit from insurance contracts as the entity
provides services and it is released from the risk. However, any loss is
required to be recognized immediately. IAS 16 Property, Plant and Equipment
IAS 16 stipulates accounting treatment for tangible fixed assets. It requires
capitalization of costs which are expected to generate economic benefits in
International Accounting Standards more than on period. Subsequent to initial recognition, it allows an entity to
adopt either the cost model or the revaluation model. While the cost model
just depreciates the initial cost of the asset on some systematic basis, the
IAS 1 Presentation of Financial Statements
revaluation model allows for recognition of changes in fair value of the
IAS 1 provides guidance on structure, contents, frequency and overall
asset which are credited/debited to shareholders’ equity.
presentation of financial statements. It stipulates that a complete set of
financial statements include:
IAS 19 Employee Benefits
IAS 19 provides accounting guidance on employee compensations other
 A statement of financial position, than share options (which are dealt by IFRS 2). Short-term benefits such as
 A single statement of profit or loss and other comprehensive salaries are recognized at their undiscounted amounts when the employees
income or separate statement or profit or loss and statement of provide services. In case of a defined contribution plan, an entity
other comprehensive income, recognizes the contributions payable as expense when the employee
provides services unless they can be capitalized under another standard. In
 A statement of cash flows
case of a defined benefit plan, an entity determines its liability and expense
 A statement of changes in equity in relation to the present value of future expected outlays and plan assets.
 Cross-referred notes to the financial statements. An entity recognizes termination benefits at the earlier of when the entity
cannot withdraw offer or when it recognizes associated restructuring
provision in accordance with IAS 37.
It also specifies other requirements such as when an entity can claim
compliance with IFRS, going concern, changes in classification, etc.
IAS 20 Accounting for Government Grants and Disclosure of
Government Assistance
IAS 2 Inventories IAS 20 deals with accounting for government grants. Entities recognize
IAS 2 allows an entity to capitalize direct labor and conversion costs and government grants only when they are reasonably certain they will meet
only such other costs which are necessary to bring the inventories to their the associated conditions. Expense-related government grants are
present location and condition. It allows assigning cost of inventories to recognized in the periods in which the associated expense is recognized,
sales using either specific identification, or FIFO or weighted average and asset-related government grants are either netted-off from the
methods. Cost of inventories is recognized when associated revenues are associated asset or presented as a deferred amount. If a government grant
recognized. The closing inventories are carried at the lower of cost or net becomes repayable, it is treated as a change in estimate.
realizable value (which equals estimated selling price less costs to sell) and
any write-down is expensed. IAS 2 also allows any reversal of impairment
loss recognized on inventories if their value recovers. IAS 21 The Effects of Changes in Foreign Exchange Rates
IAS 21 stipulates accounting for foreign exchange transactions, translation
of foreign operations to its functional currency (currency of its main
IAS 7 Statement of Cash Flows economic environment) and translation of its own financial statements to
IAS 7 requires an entity to present its cash flows segregated into operating, another presentation currency. A foreign currency transaction is initially
investing and financing activities using either the direct method (which recorded at the spot exchange rate on the transaction date. At each
shows each category of inflow and outflow) or indirect method (which reporting period, foreign-currency monetary items are translated at the
determines net operating cash flow by adjusting net income for non-cash closing exchange rate, the non-monetary transactions at the historical
transactions and working capital changes). Operating activities are the exchange rate or the date of their fair value (if carried at fair value). Any
principal revenue-producing activities, investing activities are concerned difference is carried to profit or loss except for differences arising from net
with acquisition or disposal of long-term assets, and financing activities investment in foreign operations which are taken to other comprehensive
represent transactions with providers of capital. IAS 7 allows policy choice income. Translation of financial statements to foreign currency is carried
in classification of interest received, interest paid and dividends. out by translating assets and liabilities at the closing rate and the income
and expenses at the date of transactions. Any differences are reflected in
IAS 8 Accounting Policies, Changes in Accounting Estimates and other comprehensive income.
Errors
IAS 23 Borrowing Costs
IAS 23 requires capitalization of borrowing costs incurred in qualifying IAS 37 Provisions, Contingent Liabilities and Contingent Assets
assets (assets that necessarily take a substantial period of time in getting IAS 37 requires provisions (liabilities with uncertain timing and amount
ready for their intended use). It contains guidance on borrowing costs arising from present legal or constructive obligation) to be recognized at the
measurement. discounted present value of future cash outflow. If outflow is not probable,
a liability is treated as a contingent liability and is disclosed in the financial
statements (but not recognized) unless the probability of outflow is remote.
IAS 24 Related Party Disclosures
Contingent assets are assets whose existence depends on some future
IAS 24 defines a related party and specifies disclosure requirements of
events. If it is more likely than not that an inflow related to a contingent
related party relationships and transactions with related parties. It also
asset would occur, it is disclosed.
requires disclosure of management compensation.

IAS 38 Intangible Assets

IAS 26 Accounting and Reporting by Retirement Benefit Plans
IAS 38 contains guidance on accounting for intangible assets (assets lacking
IAS 26 specifies the minimum content requirements for financial statements
physical substance). It disallows capitalization of some internally-generated
of (defined benefit) retirement plans.
intangible assets (such as brands, customer lists, etc.) but allows
capitalization of development costs but not research costs incurred on
IAS 27 Separate Financial Statements certain other intangible assets. It allows an intangible asset to be carried at
If an entity elects or is required to present separate financial statements in cost less accumulated amortization and accumulated impairment or at fair
addition to the consolidated financial statements, it follows IAS 27 for the value (if it can be measured with reference to an active market). For
accounting and disclosure requirements for investments in subsidiaries, intangible assets with infinite useful life, it requires annual impairment
joint ventures and associates. In the separate financial statements, testing.
investments are measured either at cost (under IFRS 9) of the equity
method.
IAS 39 Financial Instruments: Recognition and Measurement
While IAS 39 is superseded by IFRS 9, it still contains some guidance on
IAS 28 Investments in Associates and Joint Ventures recognition and derecognition and retains the prior hedge accounting
IAS 28 requires application of equity method to accounting for investments requirements which entities have an option to adopt instead of the IFRS 9
in associates (entities on which an investor has significant influence, hedge accounting requirements.
presumed by a 20% holding). The joint venture accounting part is
superseded by IFRS 11 which also requires equity method. Under the
IAS 40 Investment Property
equity method, an investment is initially recognized at cost, periodically
IAS 40 requires an entity to account for land and buildings held for the
increased by the proportion of the investor’s share in the net profits of the
purpose of earning rentals and/or capital appreciation differently than
associate and decreased by proportionate share in dividends. However, in
owner-occupied property. After initial classification/recognition of an
some situations, certain adjustments are needed.
investment property (which is at fair value plus initial costs), an entity
either adopts the cost model or the fair value model and applies it to all of
IAS 29 Financial Reporting in Hyperinflationary Economies its investment property. Under the cost model, no change in fair value of
IAS 29 is applied to an entity whose function currency is the currency of a the property is recognized but under the fair value model, any change in
hyperinflationary economy (i.e., it has cumulative inflation of 100% in 3 fair value is charged to profit or loss for the period. The standard also
years). The standard requires restatement of comparative information specifies the treatment when a property is transferred between investment
based on changes in the general price index, and a disclosure of this fact. property, owner-occupied property and inventories.
Any gain or loss is recognized in profit or loss.
IAS 41 Agriculture
IAS 32 Financial Instruments: Presentation IAS 41 deals with agricultural activity, the management of biological
While IFRS 9/IAS 39 contains guidance on recognition and measurement, transformation of living animals or plants and their harvest or conversion to
and disclosure (respectively) of financial instruments, IAS 32 specifies agricultural produce. It is concerned with accounting during the
presentation requirements. Financial instruments are classified into financial transformation and the initial measurement of agricultural produce. Except
assets, financial liabilities and equity instruments. A component financial for bearer plants (which are accounted for under IAS 16), all biological
instrument is split into equity and liability components. The fair value of assets and agriculture produce are measured at fair value less costs to sell
equity component equals the difference between fair value of the and any changes are reflected in profit or loss.
component instrument minus fair value of the liability component.
Offsetting between financial assets and financial liabilities is allowed only
when there are both a legally enforceable right and intention. Sarbanes Oxley Act - Summary of Key Provisions

IAS 33 Earnings per Share Many thousands of companies face the task of ensuring their accounting
IAS 33 is used by entities with publicly traded (current or potential) operations are in compliance with the Sarbanes Oxley Act. Auditing
ordinary shares in calculating the earning per share. Non-public entities departments typically first have a comprehensive external audit by a
choosing to present EPS must also comply with IAS 33. It specifies the Sarbanes-Oxley compliance specialist performed to identify areas of risk.
calculation mechanics for both the basic EPS and the diluted EPS. Next, specialized software is installed that provides the "electronic paper
trails" necessary to ensure Sarbanes-Oxley compliance.

IAS 34 Interim Financial Reporting

The summary highlights of the most important Sarbanes-Oxley sections for
compliance are listed below. Note that certification and specific public
IAS 34 specifies the minimum content requirements of interim condensed actions are required by companies to remain in SOX compliance. Also see
financial statements. It prohibits repetition of information already contained the Sarbanes-Oxley Act Table of Contents..
in the most recent annual financial statements and reduces the disclosure
requirements for different transactions.
SOX Section 302 - Corporate Responsibility for Financial Reports
a) CEO and CFO must review all financial reports.
IAS 36 Impairment of Assets b) Financial report does not contain any misrepresentations.
IAS 36 requires an entity to recognize impairment loss on assets (or cash- c) Information in the financial report is "fairly presented".
generating units) for which there is no specific impairment requirements d) CEO and CFO are responsible for the internal accounting controls.
contained in other standards. It mainly applies to PPE and intangible assets, e) CEO and CFO must report any deficiencies in internal accounting
etc. (or cash-generating units) for which there is no specific impairment controls, or any fraud involving the management of the audit committee.
requirements contained in other standards, such as financial assets, etc. f) CEO and CFO must indicate any material changes in internal accounting
Impairment loss is recognized when the recoverable amount of an asset controls.
exceeds its carrying amount. Recoverable amount equals the higher of the
fair value less costs to sell and the value in use (which in turn is the present
value of future cash flows).
SOX Section 401: Disclosures in Periodic Reports
All financial statements and their requirement to be accurate and presented
in a manner that does not contain incorrect statements or admit to state
material information. Such financial statements should also include all
material off-balance sheet liabilities, obligations, and transactions.

SOX Section 404: Management Assessment of Internal Controls

All annual financial reports must include an Internal Control Report stating
that management is responsible for an "adequate" internal control
structure, and an assessment by management of the effectiveness of the
control structure. Any shortcomings in these controls must also be reported.
In addition, registered external auditors must attest to the accuracy of the
company management's assertion that internal accounting controls are in
place, operational and effective.

SOX Section 409 - Real Time Issuer Disclosures

Companies are required to disclose on a almost real-time basis information
concerning material changes in its financial condition or operations.

SOX Section 802 - Criminal Penalties for Altering Documents

This section specifies the penalties for knowingly altering documents in an
ongoing legal investigation, audit, or bankruptcy proceeding.

SOX Section 806 - Protection for Employees of Publicly Traded

Companies Who Provide Evidence of Fraud
This section deals with whistleblower protection.

SOX Section 902 - Attempts & Conspiracies to Commit Fraud

Offenses
It is a crime for any person to corruptly alter, destroy, mutilate, or conceal
any document with the intent to impair the object's integrity or availability
for use in an official proceeding.

SOX Section 906 - Corporate Responsibility for Financial Reports

Section 906 addresses criminal penalties for certifying a misleading or
fraudulent financial report. Under SOX 906, penalties can be upwards of $5
million in fines and 20 years in prison.