© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks

CAIB - 1© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.

Role of IFRS in Financial Statement PreparationRole of IFRS in Financial Statement Preparation

AUDITAUDIT

Presentation to the 2006 CAIB ConferencePresentation to the 2006 CAIB Conference


Role of IFRSs Role of IFRSs

Provides specific guidance on:

Definition

Recognition

Measurement

Disclosure


IAS(30)

SIC(11)

Framework

IFRIC(7)

Summary of IFRSSummary of IFRS

IFRS(7)

IFRSs are for general purpose financial reporting by profit-oriented entities


AgendaAgenda

IFRS Framework

IAS 1

Financial Instruments Standards

Future Developments

IFRS Framework

IAS 1


Future Developments


FrameworkFramework

Consistency of IFRSs

Assist in development of future IFRSs and review of existing IASs

Assist national standard setting bodies in developing national standards

Assist preparers and users in preparing and interpreting IFRS financial statements and with the issues not covered by standards

Strict guidance in IAS 8 applies


Objective of financial statementsObjective of financial statements

The objective is to

Provide information about financial position, performance, and changes in financial position of an entity:

…that is useful to a wide range of users in making economic decisions


Financial statements

Users of financial statementsUsers of financial statements

Investors,Present & potential

Employees

Suppliers and other trade creditors

Lenders

Customers

PublicGovernments and

their agencies


Underlying assumptionsUnderlying assumptions

Accrual basis

Going concern


Qualitative characteristics of financial statementsQualitative characteristics of financial statements

Materiality

Faithful representation

Substance over form

Neutrality

Prudence

Completeness

Relevance

Understandability

Reliability

Comparability

True and

fair view / fair

presentation


Qualitative characteristics of financial statements (continued)Qualitative characteristics of financial statements (continued)

Constraints on relevant and reliable information

Timeliness

Balance between benefit and cost

Balance between qualitative characteristics


Assets & Liabilities: Definition and recognitionAssets & Liabilities: Definition and recognition

Asset

Liability

Income

Income

Expenses

Expenses

The matching concept less important


Assets, liabilities and equity: definitionsAssets, liabilities and equity: definitions

Asset Liability

Equity

Residual interest in the assets of the entity


AgendaAgenda

IFRS Framework

IAS 1


Future Developments

IFRS Framework

IAS 1


Future Developments


Objective and scopeObjective and scope

Objective: ensure comparability between years and entities

Scope: all financial statements (FS) prepared in accordance with IFRSs:

All financial statements, including interims (IAS 34)

All types of entities

Separate FS

Consolidated FS

Individual FS


Required components of financial statementsRequired components of financial statements

Balance sheet

Income statement

Either:

Statement showing all changes in equity; or

Statement of recognised income and expense (SoRIE)

Cash flow statement

Notes


Other components of financial reportsOther components of financial reports

Not within scope of IFRSs, but often presented outside financial statements:

Financial review by managementperformance

financial position

uncertainties

Environmental reports, value added statements etc

The financial statements must be clearly identified and distinguished from other information in annual report


Overall considerationsOverall considerations

Accrual basis of accounting

Going concern

Materiality andaggregation

Offsetting

Consistency of presentation

Comparative information

Compliance with IFRS

Fair presentation

Financial Statements


OffsettingOffsetting

Assets and liabilities should not be offset unless:

Required or permitted by a standard or interpretation

Items of income and expense should not be offset unless:

Required or permitted by a standard or interpretation, or

Gains, losses and related expenses arising from the same or similar items not material


Compliance with IFRSsCompliance with IFRSs

“Explicit and unreserved statement of compliance” in notes

Disclose application of standards or interpretations before effective date

Compliance with all standards and interpretations.

Inappropriate accounting treatments not rectified by disclosure


Fair presentationFair presentation

Achieved by appropriate application of IFRSs

Requires faithful representation of effects of transactions, events and conditions in accordance with recognition criteria set out in the Framework

If compliance with a standard or interpretation misleading, departure from that standard required (extremely rare)

Comprehensive disclosure requirements


Assets – Suggested PresentationAssets – Suggested Presentation

Cash and cash equivalents

Trading assets

Pledged assets

Derivative assets held for risk management

Loans and advances to banks

Loans and advances to customers

Investment securities

Property and equipment

Intangible assets

Deferred tax assets

Other assets


Liabilities – Suggested PresentationLiabilities – Suggested Presentation

Trading liabilities

Derivative liabilities held for risk management

Deposits from banks

Deposit from customers

Debt securities issued

Subordinated liabilities

Provisions

Current tax liabilities

Deferred tax liabilities

Other liabilities


Other Elements of the Financial StatementsOther Elements of the Financial Statements

Total assets

Total liabilities

Equity

Share capital and share premium

Retained earnings

Other reserves

Total equity attributable to equity holders of the Bank

Minority interest

Total equity

Total liabilities and equity


AgendaAgenda

IFRS Framework

IAS 1


Future Developments

IFRS Framework

IAS 1


Future Developments


Overview of currently effective financial instruments standards Overview of currently effective financial instruments standards


IFRS 7 Financial Instruments: DisclosuresIFRS 7 Financial Instruments: Disclosures

The disclosure requirements for financial instruments have been amended by IFRS 7, which was issued in August 2005 and supersedes IAS 30 and the disclosure requirements in IAS 32.

In particular, the IASB removed unnecessarily onerous or duplicate disclosures from IAS 30 and IAS 32 and located in one IFRS all disclosure requirements relating to financial instruments.


AgendaAgenda

IFRS Framework

IAS 1


Future Developments

IFRS Framework

IAS 1


Future Developments


Future developmentsFuture developments

Discussion paper Management Commentary

Guidance on management commentary in financial report

Prerequisite for compliance with IFRSs?

Exposure Draft of Proposed Amendments to IAS 1 Presentation of Financial Statements – A Revised Presentation

Focus on performance (total recognised income and expense) rather than on profit or loss

Statement of financial position (balance sheet) for three periods


increasedcomplexity

increaseddisclosure

limitedoptions

increased useof fair values

Trends in recent IFRSTrends in recent IFRS

strict application: no“IFRS lite”

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved.

Presenter’s contact details

Robert Alleyne

1 868 623 1081-3

[email protected]

www.kpmg.co.tt

Presenter’s contact details

Robert Alleyne

1 868 623 1081-3

[email protected]

www.kpmg.co.tt

Documents

© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks