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Accounting policies
Determination of accounting policies
Management should develop accounting policies that
result in relevant and reliable financial statements
[IAS8R.7-10]. The appropriate recognition, measurement
and presentation policies should be developed from
general accounting principles, analogy with similar
requirements, the Framework and accepted practices
in situations where there is no relevant IFRS .
There are three sources from which appropriate
accounting policies may be derived in circumstances
where the Standards and Interpretations are silent
[IAS8R.11-12]:
| a) |
analogy with similar requirements in IFRS
and Interpretations |
Entities should consider Standards or Interpretations
with which an analogy may be drawn in the absence
of specific requirements. Judgement is required
to determine whether an analogy is reasonable.
| b) |
derivation from general definitions and
criteria in the IASB's Framework |
The Framework contains definitions of and criteria
for the recognition of the elements of financial
statements. These definitions and criteria can be
used to determine how and when a certain item should
be recognised
.
| c) |
transfer of national requirements, other
accounting literature and accepted industry
practices |
IFRS requirements prevail over conflicting national
rules if an entity's financial statements are described
as being in compliance with IFRS. However, where
IFRS are silent, the pronouncements of other standard-setting
bodies with a similar conceptual framework to develop
accounting policies may be considered. Other accounting
literature and accepted industry practices may also
be considered to the extent that these do not conflict
with the sources in a) and b) above .
The use of exposure drafts in developing accounting
policies should be undertaken cautiously. An exposure
draft may indicate the general direction in which
IASB thinking is moving, but the final standard
could look very different. The early adoption of
exposure drafts is not permitted.
The preparer should ensure in developing accounting
policies that the policies aid the financial statements'
relevance and reliability .
Choices of accounting policies
Some standards provide a choice of accounting policy
but do not clarify how that choice should be exercised.
The entity should choose and apply consistently
one of the available accounting policies [IAS8R.13].
An accounting policy, once adopted, should be changed
only if required by statute or by a standard-setting
body, or if the change is to a more relevant or
reliable alternative [IAS8R.14].
Notes to financial statements
Structure
Disclosures are normally presented in the notes in
the following order [IAS1R.105(a)-(d)]:
| a) |
statement of compliance with IFRS; |
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| b) |
information about the statement's basis
of preparation, for example the historical cost
convention, and the specific accounting policies
selected and applied for significant transactions
and events; |
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| c) |
information required or encouraged by IFRS
that is not presented elsewhere; |
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| d) |
information relating to line items presented
on the face of the financial statements. Each
financial statement item should be cross-referenced
to the appropriate note. Such notes should follow
the order of the items in the financial statements;
and |
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| e) |
other disclosures including contingencies,
commitments, and other financial disclosures,
as well as non-financial disclosures. |
Presentation of accounting policies
Disclosure of the measurement bases and the accounting
policies an entity uses may be a separate component
of the financial statements or a separate section
in the notes [IAS1R.108(a)]. The entity's accounting
policies should be clearly stated and presented and
not "lost" in the rest of the notes to the
financial statements .
The disclosure given in respect of an accounting
policy should be sufficiently detailed that it is
understandable without the need to refer to the
text of an IFRS [IAS1R.108(b)].
Comparative information
Presentation of comparative numerical information
for all periods presented is required unless an
IFRS permits or requires otherwise [IAS1R.36]. Narrative
information relating to prior periods should be
disclosed in the notes when it is still relevant
to users of the current financial statements [IAS1R.37]
.
Other information
Financial review
Entities are encouraged, but not required, to publish
a financial review. The financial review should
disclose and discuss known trends, commitments,
events or uncertainties that are reasonably expected
to have a material impact on the entity's business,
financial condition or results of operations. Sufficient
information on financial and non-financial risks
and uncertainties should be provided, given the
rapidly changing economic environment within which
most entities operate
[IAS1R.9].
Other reviews
Entities are encouraged to present additional information
outside the financial statements (such as environmental
reports, corporate governance reports, value added
statements or supplementary financial statements
reflecting the effects of inflation as described
in IAS 15), if management believes that such information
is useful and aids economic decision-making [IAS1R.10].
Where financial information is presented outside
the financial statements in an annual report, registration
statement, etc., that information should be presented
in a manner consistent with the financial statements
[IAS1R.45].
Other information about the entity and its parent entities
The following information should be Included in
the financial statements, or included in other documents
published with them [IAS1R.126(a)-(c)]:
| a) |
the entity's domicile and legal form,
its country of incorporation and the address
of its registered office (or principal place
of business if different from the registered
office); |
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| b) |
a description of the nature of the entity's
operations and its principal activities; and |
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| c) |
the name of the entity's parent and the
name of its ultimate parent . |
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