Wiley II FF RR SS International Financial Reporting Standards WORKBOOK GUIDE AND ■ Practical insights ■ Case studies ■ Multiple-choice questions ■ Illustrations Abbas Ali Mirza Graham J. Holt Magnus Orrell JOHN WILEY & SONS, INC. Wiley II FF RR SS International Financial Reporting Standards WORKBOOK GUIDE AND Wiley II FF RR SS International Financial Reporting Standards WORKBOOK GUIDE AND ■ Practical insights ■ Case studies ■ Multiple-choice questions ■ Illustrations Abbas Ali Mirza Graham J. Holt Magnus Orrell JOHN WILEY & SONS, INC. Portions of this book have their origins in copyrighted materials from the International Accounting Standards Board. These are noted by reference to the specific pronouncements, except for certain of the definitions introduced in bold type, which appear in a separate section at the beginning of each chapter. Complete copies of the international standards are available from the IASB. 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ISBN 13: 978-0471-69742-8 ISBN 10: 0-471-69742-7 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 CONTENTS Chapter Title Page No. 1 Introduction to International Financial Reporting Standards ............................. 1 2 IASB Framework ............................................................................................... 7 3 Presentation of Financial Statements (IAS 1) .................................................... 12 4 Inventories (IAS 2) ............................................................................................ 20 5 Cash Flow Statements (IAS 7) ........................................................................... 27 6 Accounting Policies, Changes in Accounting Estimates and Errors (IAS 8) ..... 39 7 Events After the Balance Sheet Date (IAS 10) .................................................. 48 8 Construction Contracts (IAS 11) ....................................................................... 53 9 Income Taxes (IAS 12) ...................................................................................... 62 10 Segment Reporting (IAS 14) ............................................................................. 75 11 Property, Plant, and Equipment (IAS 16) .......................................................... 85 12 Leases (IAS 17) ................................................................................................. 93 13 Revenue (IAS 18) .............................................................................................. 103 14 Employee Benefits (IAS19) ............................................................................... 110 Accounting for Government Grants and Disclosure of Government 15 Assistance (IAS 20) ........................................................................................ 122 16 The Effects of Changes in Foreign Exchange Rates (IAS 21) ........................... 129 17 Borrowing Costs (IAS 23) ................................................................................. 138 18 Related Party Disclosures (IAS 24) ................................................................... 144 19 Accounting and Reporting by Retirement Benefit Plans (IAS 26) .................... 152 20 Consolidated and Separate Financial Statements ( IAS 27) ............................... 159 21 Investments in Associates (IAS 28) ................................................................... 166 22 Financial Reporting in Hyperinflationary Economies (IAS 29) ........................ 172 Disclosures in the Financial Statements of Banks and Similar Financial 23 Institutions (IAS 30) ....................................................................................... 177 24 Interests in Joint Ventures (IAS 31) ................................................................... 182 25 Financial Instruments: Presentation (IAS 32) ................................................... 187 26 Financial Instruments: Recognition and Measurement (IAS 39) ...................... 203 27 Earnings Per Share (IAS 33) .............................................................................. 248 28 Interim Financial Reporting (IAS 34) ................................................................ 260 29 Impairment of Assets (IAS 36) .......................................................................... 264 30 Provisions, Contingent Liabilities, and Contingent Assets (IAS 37) ................. 276 31 Intangible Assets (IAS 38) ................................................................................. 287 32 Investment Property (IAS 40) ............................................................................ 298 33 Agriculture (IAS 41) .......................................................................................... 306 34 First-Time Adoption of International Financial Reporting Standards (IFRS 1) 314 35 Share-Based Payments (IFRS 2) ........................................................................ 326 36 Business Combinations (IFRS 3) ....................................................................... 338 37 Insurance Contracts (IFRS 4) ............................................................................ 350 38 Noncurrent Assets Held for Sale and Discontinued Operations (IFRS 5) ......... 356 39 Exploration for and Evaluation of Mineral Resources (IFRS 6) ........................ 365 40 Financial Instruments: Disclosures (IFRS 7) .................................................... 371 Index .................................................................................................................................... 380 FOREWORD by the Chairman of IASB I and my fellow Board members at the International Accounting Standards Board (IASB) are committed to developing high quality, understandable, and enforceable global accounting standards that meet the de- mands for comparable and transparent information in the world’s capital markets. Recently we completed a work program to develop and issue a stable platform of such standards. Those standards, the International Financial Reporting Standards (IFRS), are now being implemented in a large number of countries around the world. This is a major achievement on the road towards the global acceptance of a single set of accounting standards. The responsibility for achieving high quality financial reporting, however, does not rest solely with IASB. Our role is limited to providing the set of standards that entities should apply to achieve high quality, comparable, and transparent financial reporting. For IFRS to be properly understood, implemented, and ap- plied in practice, education and training of all relevant parties—including financial statement preparers, auditors, regulators, financial analysts, and other users of financial statements as well as accounting students—is essential. This book should be a helpful tool in this regard. The approach of the book is to discuss core concepts and other key elements of the standards and to provide training material in the form of worked case studies and questions to support successful learning of the material. Consequently, the book should be useful for students who prepare for professional exams and for financial statement preparers, auditors, regulators, fi- nancial analysts, and other users of financial statements who in their work need to be familiar with the stan- dards. The book should help practitioners and students alike understand, implement, and apply the key ele- ments of the standards. Sir David Tweedie Chairman of IASB December, 2005