Comparison IFRS VAS

8/12/2019 Comparison IFRS VAS

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Summary of differences between International Financial Reporting Standards (IFRS) and the Vietnamese Accounting System (VAS)

This brief comparison is based on IFRS and VAS as at 24 May 2004. IFRS and VAS are both subject to chanes.

IFRS Ref IFRS VAS

Framework Framework for the preparation and presentation of financialstatements

The Framework deals with:

(a) The objective of financial statements;

to provide information about the financial position,

performance and changes in financial position of an

enterprise that is useful to a wide range of users in

making economic decisions;

to show the results of the stewardship of management, or

the accountability of management for the resources

entrusted to it

(b) The underlying assumptions: accrual basis, going concern

(c) The !ualitative characteristics that determine the usefulness

of information in financial statements The " principal

!ualitative characteristics are: understandability, relevance,

reliability and comparability

(d) The definition, recognition and measurement of the elements

from which financial statements are constructed # assets,

liabilities, e!uity, income and e$penses

(e) %oncepts of capital and capital maintenance

The &inistry of Finance ('&oF) issued a standard *+ %hartof *ccounts in ecision --"- (dated - .ovember -//0) This

has been amended by various %irculars since The most recent

guidance is contained in %ircular 00 for Foreign1invested

enterprises (dated 23 4une 2552), %ircular 6/ (dated / 7ctober

2552) and %ircular -50 (dated " .ovember 2558)

-3 new ietnamese *ccounting +tandards have been issued

since 8- ecember 255- These are based on 9F+, with certainamendments, as described in the relevant sections below

*+5- 1Frame!or"(issued on 8- ecember 2552) is based on

the 9*+:Frame!or" for the preparation and presentation of

financia# statements. *+5- is shorter and more simple that the

9*+ Framework, however all the key areas and concepts are

covered, including:

asic accounting principles # accruals, going concern,

matching, prudence, consistency

e!uirements of *ccounting 9nformation # integrity,

objectivity, completeness, timeliness, comparability


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IFRS Ref IFRS VAS

9*+ - Presentation of financial statements

9*+ - is designed to improve the !uality of financial statementspresented using 9nternational *ccounting +tandards by:

ensuring that financial statements that state compliance

with 9*+ comply with each applicable +tandard,

including all disclosure re!uirements;

ensuring that departures from 9*+ re!uirements are

restricted to e$tremely rare cases;

providing guidance on the structure of financial

statements including minimum re!uirements for each

primary statement, accounting policies and notes, and anillustrative appendi$; and

establishing practical re!uirements on issues such as

materiality, going concern, the selection of accounting

policies when no +tandard e$ists, consistency and the

presentation of comparative information

Financial statements comprise a balance sheet, income

statement, cash flow statement, statement of changes in e!uity,and notes to the financial statements

!ote"9*+ - was revised in ecember 2558, with the changes

effective for accounting periods beginning on or after - 4anuary

2550 The changes include:

=uidance on the meaning of 'present fairly

=ives a definition of 'material

*+2- #$resentation of financia# statements(issued on 85ecember 2558) is based on 9*+ - #$resentation of financia#

statements 9t is very similar to the previous version of 9*+ -,

especially the sections onRe%uirements in $reparation and$resentation of Financia# Statements, including:

=oing concern

*ccrual basis

%onsistency of presentation

%omparative information

The sections in *+2- onInformation to be presented on theface of the ba#ance sheet and income statementapply the

headings given in the standard *+ Financial +tatements

Format, and *+2- also notes that the format for presenting

these financial statements is prescribed in the applicable

regulations This is a more prescriptive approach than 9*+ -

There are no illustrative financial statements in *+2-

eference needs to be made to the relevant %irculars, such as

%ircular 00, for the re!uired format of financial statements

The implementing guidance for *+2- has not yet been issued,

but is not e$pected to have a significant impact on the current*+ format for financial statements

.ote that *+2- includes an analysis of changes in e!uity in the

notes to the financial statements The statement of changes in

e!uity is not a re!uired primary statement as in 9*+ -

2


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IFRS Ref IFRS VAS

9*+ -

evised

(continued)

The evised +tandard re!uires a financial liability that is due

within twelve months after the balance sheet date, or for which

the entity does not have an unconditional right to defer itssettlement for at least twelve months after the balance sheet date,

to be classified as a current liability This classification is

re!uired even if an agreement to refinance, or to reschedulepayments, on a long1term basis is completed after the balance

sheet date and before the financial statements are authorised for

issue

The evised +tandard re!uires the following disclosures:

(a) the judgements management has made in the process of

applying the entity>s accounting policies that have the mostsignificant effect on the amounts recognised in the financial

statements; and

(b) the key assumptions concerning the future, and other key

sources of estimation uncertainty at the balance sheet date,

that have a significant risk of causing a material adjustment

to the carrying amounts of assets and liabilities within the

ne$t financial year

The following disclosures re!uired by the previous version of

the +tandard have been omitted:

(a) the results of operating activities, and e$traordinary items, as

line items on the face of the income statement The revised

+tandard prohibits disclosure of ?e$traordinary items> in

financial statements;

(b) the number of an entity>s employees

8


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IFRS Ref IFRS VAS

9*+ 2 Inventories

9nventories should be valued at lower of historical cost and netrealisable value The benchmark cost formula is either F9F7 or

weighted average methods @9F7 is allowed as a permitted

alternative method Ahen @9F7 is used, difference between@9F7 method and benchmark treatment must be !uantified and

disclosed

!ote"9*+ 2 revised in ecember 2558 prohibits the use of the

@9F7 method This is effective for accounting periods

beginning on or after - 4anuary 2550

*+52 #In&entorieswas issued on 8- ecember 255-

9nventories should be valued at lower of historical cost and net

realisable value

F9F7, @9F7, specific identification and weighted average

methods are accepted @9F7 is treated e!ually to other methods

but it re!uires disclosure of the effect of using @9F7 in

comparison to F9F7 or weighted average


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IFRS Ref IFRS VAS

9*+ 6 Net profit or loss for the period, fundamental errors and

changes in accounting policies

%hanges in accounting policies or corrections of material errors

should lead to a restatement of comparatives and prior year

opening retained earnings The effect to current year income ofchanges in accounting policies should be disclosed fully

*llowed alternative treatments:

correction of a fundamental error can be made to the current

period CD@;

a change in accounting policy can be applied prospectively

when the effect of the change on prior periods cannot be

reasonably determined

!ote"9*+ 6 has been revised in ecember 2558 to: 9*+ 6,

Accountin po#icies( chanes in accountin estimates and errors

which is effective for accounting periods beginning on or after -

4anuary 2550 *mong other changes, the evised +tandard:

eliminates the use of the above allowed alternative

treatments;

eliminates the concept of a fundamental error; defines material omissions or misstatements, and

describes how to apply the concept of materiality when

applying accounting policies and correcting errors; and

re!uires, rather than encourages, disclosure of an

impending change in accounting policy (and its impact)

when an entity has yet to implement a new +tandard that

has been issued but not yet come into effect

* *+ based on 9*+ 6 has not yet been issued, so prior year

adjustments are currently not permitted

%hanges in accounting polices resulting from the adoption of a

*+ or &oF regulations should be accounted for in the current

year with detailed disclosures made in a note to the financial

statements

%orrection of material or fundamental errors is recorded in the

income statement of the current year

0


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IFRS Ref IFRS VAS

9*+ -5 Events after the balance sheet date

%lear definition of adjusting and non1adjusting events *djustingevents are events where a circumstance has arisen prior to the

balance sheet date and the likelihood of a material financial

impact is high &aterial non1adjusting events or contingentliabilities should be disclosed

!ote"9*+ -5 has been revised in ecember 2558 to clarify that

if an entity declares a dividend after the balance sheet date, the

dividend is not a liability at the balance sheet date This is


2550

.o specific +tandard or regulation on post balance sheet events

9*+ -- Construction contracts

evenue and e$penses on construction contracts should be

recognised using the percentage of completion method %ontract

costs should be recognised as e$penses as incurred


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IFRS Ref IFRS VAS

9*+ -" Segmental reporting

eporting formats are classified into business segments andgeographical segments The dominant source and nature of the

entity>s risks and returns should be used to determine whether

the business or geographical segmental analysis is the ?primaryreporting format> The other basis of segmentation is the

?secondary reporting format> * segment is reportable if its

revenue, its result or assets are E-5 of the total base criteria

The reported segments should present at least B0 of the total

consolidated revenue

.o specific +tandard or regulation on segmental reporting

9*+ -0 Information reflecting the effects of changing prices

%ompliance to 9*+ -0 is optional and this standard will be

withdrawn with effect from - 4anuary 2550

+tate17wned


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IFRS Ref IFRS VAS

9*+ -3 Propert, Plant and E!uipment

enchmark treatment is to carry fi$ed assets at historical costless depreciation and less any impairment losses

*lso an allowed alternative treatment of carrying fi$ed assets ata revalued amount (less depreciation and any subse!uent

impairment)

!ote"9*+ -3 has been revised in 2558 with effect for

accounting periods beginning on or after - 4anuary 2550

*mong other changes, the revised +tandard specifies that:

epreciation on CC< must be started as soon as the itemis available for use and to continue to depreciate even if

the item is idle

The cost of an item of CC< includes the costs of its

dismantlement, removal or restoration, the obligation for

which an entity incurs as a conse!uence of installing the

item

*n entity is re!uired to determine the depreciation

charge separately for each significant part of an item of

property, plant and e!uipment

*n entity is re!uired to derecognise the carrying amount

of a part of an item of CC< if that part has been replaced

and the entity has included the cost of the replacement in

the carrying amount of the item

*+58 # Tanib#e fi)ed assetswas issued on 8- ecember255-

Fi$ed assets should be carried at cost less depreciation

evaluation or write down for impairment is not allowed, unless

a specific approval is received from =overnment authorities

Gnder *+, fi$ed assets may be overstated in the balance sheet,

even when it is known that an impairment has occurred and the

current valuation is less than the carrying amount in the

accounts

epreciation is based on management>s assessment of e$pected

useful life, as per 9*+ -3

!ote"for Ta$ation purposes, depreciation on fi$ed assets isgenerally based on predetermined rates regulated by the &oF

6


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IFRS Ref IFRS VAS

9*+ -B "eases

@eases are classified into finance leases and operating leasesdepending on the substance of the transaction rather than the

form of the contract

* finance lease is where risks and rewards are substantially

transferred to the lessee 7ther leases are operating leases

!ote"9*+ -B has been revised in 2558 with effect foraccounting periods beginning on or after - 4anuary 2550

*mong other changes, it clarifies that when classifying a lease of

land and buildings, an entity normally considers the land and

buildings elements separately:

the minimum lease payments are allocated between the

land and buildings elements in proportion to the relative fairvalues of the leasehold interests in the land and buildings

elements of the lease;

the land element is normally classified as an operating

lease unless title passes to the lessee at the end of the lease

term;

the buildings element is classified as an operating or

finance lease by applying the classification criteria in the

+tandard

*+53 #*easeswas issued on 8- ecember 2552

This +tandard is very similar to previous 9*+ -B

The section from 9*+ -B on recognition of revenue by

manufacture or dealer lessors has been omitted from *+53

* lease of @and Gse ights is usually classified as an operating

lease, with the lease payment amortised over the lease term

9*+ -6 #evenue

%onditions for recognition of revenues for sale of goods,

services interest, royalties and dividends are clearly defined For

sales, recognition is generally upon goods and services being

*+-" #Re&enue and other incomewas issued on 8- ecember

255-

/


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IFRS Ref IFRS VAS

rendered to customers This +tandard is very similar to 9*+ -6

9*+ -/ Emploee benefits

9*+ -/ re!uires an enterprise to recognise contributions to a

defined contribution plan when an employee has rendered

service in e$change for those contributions

For defined benefit schemes, 9*+ -/ re!uires an enterprise to:

determine the present value of defined benefit obligations

and the fair value of any plan assets with sufficient

regularity that the amounts recognised in the financial

statements do not differ materially from the amounts that

would be determined at the balance sheet date;

use the Crojected Gnit %redit &ethod to measure its

obligations and costs;

use unbiased and mutually compatible actuarial

assumptions about demographic variables and financial

variables;

determine the discount rate by reference to market yields at

the balance sheet date on high !uality corporate bonds

Termination benefits are employee benefits payable as a result ofan enterprise>s decision to terminate an employee>s employment

before the normal retirement date The event which gives rise to

an obligation is the termination rather than employee service

Therefore, an enterprise should recognise termination benefits

when, and only when, the enterprise is demonstrably committed

to terminate the employment of an employee

%ircular 00 re!uires a provision to be made for employees>

entitlement to severance payments, in accordance with the

current regulations of the +tate and the commitments in the

employment contract

9n practice, companies make a provision of one half month>s

current salary for each year of service for each employee # based

on the ietnam @abour %ode re!uirement for severance

payments in the event of an employee leaving the company

voluntarily or on the cessation of the company 9f the employeeleaves involuntarilyHdue to redundancy, the re!uirement is for a

full month>s current salary for each year of service

.o other specific re!uirement for disclosure of employee

benefits as a separate item in the financial statements

For +tate17wned


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IFRS Ref IFRS VAS

9*+ 25 $ccounting for government grants and disclosure ofgovernment assistance

=overnment grant may be of e!uity nature or of revenue nature

9n the income statement, government grants should be

recognised in order to match revenue to related costs provided

that the entity complies with covenants of the grant

9n the balance sheet, grants relating to fi$ed assets should be

recognised as deferred income or deducted from the related

assets

=overnment grants are normally accounted for into the entity>s

e!uity account

.o specific regulations on disclosure of government grants and

assistance

9*+ 2- %he effects of changes in foreign exchange rates

* transaction in a foreign currency is recorded in the reporting

currency using e$change rate ruling at the date of the

transaction

istinction is made between 'foreign operation that is integral to

the operations of the reporting enterprise or 'foreign entities

For a foreign operation that is integral to the operations of

the reporting enterprise, the transactions are translated as if

the transactions were those of the reporting enterprise itself;

For a foreign entity, the assets and liabilities are translated at

balance sheet date rate and fore$ differences are carried in

*+-5 # The effects of chanes in forein e)chane rateswas

issued on 8- ecember 2552

This +tandard is substantially similar to previous 9*+ 2-

.ote: during the construction phase of a new %ompany,

e$change differences arising are retained in an e!uity account,

until the time when the fi$ed assets are put into use Then they

are amortised to the income statement over a ma$imum period of

five years from the start of operations

--


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IFRS Ref IFRS VAS

9*+ 2-evised

e!uity

!ote"9*+ 2- has been revised in ecember 2558 with effect foraccounting periods beginning on or after - 4anuary 2550 There

are significant changes The focus is on determining the

'functional currency, which is the currency of the primaryeconomic environment in which the entity operates The entity

must determine its functional currency and measure its results

and financial position in that currency

The re!uirements in the previous version of 9*+ 2- for

distinguishing between foreign operations that are integral to the

operations of the reporting entity (referred to below as 'integral

foreign operations) and foreign entities are revised There!uirements are now among the indicators of an entity>s

functional currency *s a result:

there is no distinction between integral foreign operations

and foreign entities ather, an entity that was previously

classified as an integral foreign operation will have the same

functional currency as the reporting entity;

only one translation method is used for foreign operations 1

namely that described in the previous version of 9*+ 2- as

applying to foreign entities Gnder this method, assets and

liabilities are translated at the closing rate, and income and

e$penses are translated at the e$change rates at the dates ofthe transactions (or an average rate may be acceptable)

Ahere an entity chooses to use a 'presentation currency that isdifferent from its functional currency, the entity is re!uired to

translate its results and financial position from its functional

currency into the presentation currency using the same method

-2


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IFRS Ref IFRS VAS

re!uired for translating a foreign operation for inclusion in the

reporting entity>s financial statements

9*+ 22replaced by

IFRS #

from

8- &arch 255"

&usiness combinations

+ee comments on 9F+ 8 later in this document

9*+ 28 &orrowing Costs

enchmark treatment is that borrowing costs should be e$pensed

in the period in which they are incurred

*llowed alternative treatment is the capitalisation of borrowing

costs if they are directly attributable to the ac!uisition,

construction or production of a !ualifying asset

*+-3 #+orro!in costswas issued on 8- ecember 2552

*+-3 applies the 9*+ 28 alternative treatment as its re!uiredtreatment

orrowing costs should be capitalised if they are directly

attributable to the ac!uisition, construction or production of a

!ualifying asset, and if it is probable that the costs will result in

future economic benefits to the enterprise and the costs can be

measured reliably 7ther borrowing costs should be recognised

as an e$pense when incurred


14/43


IFRS Ref IFRS VAS

9*+ 2" #elated part disclosures

elated parties are determined by the level of direct or indirect

control or significant influence of one party over another, or the

common control of two parties

For relationships of control, disclosure is re!uired regardless of

whether transactions occur

!ote"9*+ 2" has been revised in 2558 with effect for


*mong other changes:

disclosure is re!uired of compensation of key

management personnel;

definition of related parties has been

e$panded;

more e$tensive disclosure of related party

transactions

Creviously under *+, there had been no concept of related

parties Then in 2552, %ircular 00 re!uired some disclosures for

related party transactions, but did not give a definition of a

related party

*+23 #Re#ated party disc#osures was issued on 85 ecember

2558 This is very similar to the previous version of 9*+ 2"

9*+ 23 $ccounting and reporting b retirement benefit plans

eport on retirement benefit plans includes a statement of

changes in net assets available for benefits; summary of

significant accounting policies; a description of the plan and the

effect of any changes in the plans during the period

.ot mentioned in *+

-"


15/43


IFRS Ref IFRS VAS

efer to 9*+ -/ for appropriate accounting for cost of defined

benefit pension plan

9*+ 2B Consolidated financial statements and accounting for

investments in subsidiaries

efinition of subsidiary is based on voting control or dominant

influence over the entity

9nvestments in subsidiaries in the parent>s separate financial

statements should be accounted for using e!uity method or

recorded at cost or revalued amount under the parent>s

accounting policy for long term investment For consolidatedfinancial statements, see 9F+ 8 usiness %ombinations

9nvestment in subsidiaries in non1consolidated financial

statements should be accounted for as if they are investments

!ote"9*+ 2B has been revised in 2558: 9*+ 2B, 'onso#idated

and separate financia# statementsis effective for accounting

periods beginning on or after - 4anuary 2550

The evised +tandard modifies the e$emption from preparing

consolidated financial statements * parent need not presentconsolidated financial statements if:

the parent is itself a wholly1owned subsidiary, or the parent

is a partially1owned subsidiary of another entity and its other

owners, including those not otherwise entitled to vote, have

been informed about, and do not object to, the parent not

preparing consolidated financial statements;

*+20 1 'onso#idated financia# statements and accountin for

in&estment in subsidiaries was issued on 85 ecember 2558

This is similar to the previous version of 9*+ 2B The main

difference is that investments in subsidiaries in the parent>s

separate financial statements can only be carried at cost The

e!uity accounting method is not permitted

-0


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IFRS Ref IFRS VAS

9*+ 2B

evised(continued)

the parent>s debt or e!uity instruments are not traded in a

public market;

the parent did not file, nor is it in the process of filing, its

financial statements with a securities commission or other

regulatory organisation for the purpose of issuing any class

of instruments in a public market; and

the ultimate or any intermediate parent of the parent

produces consolidated financial statements available for

public use that comply with 9nternational Financial

eporting +tandards

The +tandard does not re!uire consolidation of a subsidiary

ac!uired when there is evidence that control is intended to betemporary Iowever there must be evidence that the subsidiary

is ac!uired with the intention to dispose of it within -2 months

*n entity is not permitted to e$clude from consolidation an

entity it continues to control simply because that entity is

operating under severe long1term restrictions that significantly

impair its ability to transfer funds to the parent %ontrol must be

lost for e$clusion to occur

-3


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IFRS Ref IFRS VAS

9*+ 26 $ccounting for investments in associates

efinition of associates is based on significant influence over the

entity

9nvestment in associates in consolidated financial statements

should be accounted for by the e!uity method, e$cept when it is

ac!uired with the intention to resell or it operates under long1

term restrictions 9n these cases the investment is accounted for

in accordance with 9*+ 8/

9nvestment in associates in non1consolidated financial

statements should be accounted for either:

at cost;

using the e!uity method; or

under 9*+ 8/

!ote"9*+ 26 has been revised in 2558: 9*+ 26, In&estments in

associatesis effective for accounting periods beginning on or

after - 4anuary 2550 *mong the changes are:

the +tandard clarifies that investments in associates over which

the investor has significant influence must be accounted for

using the e!uity method whether or not the investor also has

investments in subsidiaries and prepares consolidated

financial statements Iowever, the investor does not applythe e!uity method when presenting separate financial

*+5B 1 Accountin for in&estments in associates was issued

on 85 ecember 2558

This is similar to the previous version of 9*+ 26 The main

difference is that investments in associates in the investor>s

separate financial statements can only be carried at cost The

e!uity accounting method is not permitted in the investor>s own

financial statements

-B


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IFRS Ref IFRS VAS

statements prepared in accordance with 9*+ 2B

clarifications on the e$emptions from applying the e!uity

method are as per 9*+ 2B revised

9*+ 2/ Financial reporting in hperinflationar economies

eports in the currency of a hyperinflationary economy should

be restated in terms of measuring unit current at the balancesheet date =ainHloss on net monetary position should be

included in the profit and loss and separately disclosed

.ot mentioned in *+

9*+ 85 'isclosures in the financial statements of banks and similarfinancial institution

This +tandard sets up detailed classification and disclosurere!uirements for banks and similar financial institutions

The +tate ank of ietnam ('+) is the regulator andsupervisor of the banking industry in ietnam The + has

issued a specific accounting system for banks and financial

institutions &any differences from 9*+ 85

9*+ 8- Financial reporting of interests in (oint ventures

4oint ventures can be structured as jointly controlled operations,jointly controlled assets or jointly controlled entities

For jointly controlled operationsHassets: venturer records its

share of the assets, liabilities, income and e$penses

For jointly controlled entities: in consolidated financial

*+56 1Financia# reportin of interests in joint &entureswasissued on 85 ecember 2558 This is similar to the previous

version of 9*+ 8- in respect of jointly controlled

operationsHassets 9t includes ietnam1specific references such

as %%s

The treatment of jointly controlled entities is different from 9*+

-6


19/43


IFRS Ref IFRS VAS

9*+ 8-evised

statements of the venturer, proportionate consolidation is the

benchmark treatment and e!uity method is an allowed

alternative treatment There is no specific guidance on

accounting treatment in the venturer>s separate (non1consolidated) financial statements

!ote"9*+ 8- has been revised in 2558: 9*+ 8-, Interests injoint &enturesis effective for accounting periods beginning on or

after - 4anuary 2550 The changes include the same

clarifications on e$emptions from applying proportionate

consolidation or the e!uity method as per 9*+ 2B and 9*+ 26 9t

also specifies that the re!uirements for the preparation of the

investor>s separate financial statements are as per 9*+ 2B

8- Ahen a venturer prepares consolidated financial statements,

it accounts for its interest in the joint venture using the e!uity

method # not proportionate consolidation The venturer

accounts for its interest in the joint venture in its separatefinancial statements at cost

9*+ 82 Financial instruments) 'isclosure and presentation

Crescribes certain re!uirements for presentation of on1balance1

sheet financial instruments and identifies the information that

should be disclosed about both on1balance1sheet (recognised)

and off1balance1sheet (unrecognised) financial instruments

The presentation standards deal with the classification of

financial instruments between liabilities and e!uity, the

classification of related interest, dividends, losses and gains, and

the circumstances in which financial assets and financialliabilities should be offset

The disclosure standards deal with information about factors that

affect the amount, timing and certainty of an enterprise>s future

cash flows relating to financial instruments and the accounting

policies applied to the instruments

For foreign1invested enterprises, %ircular 00 of the &oF states

that disclosure of financial instruments is re!uired Iowever,

there are no details of the disclosure re!uirements

-/


20/43


IFRS Ref IFRS VAS

9*+ 82evised

9n addition, the +tandard encourages disclosure of information

about the nature and e$tent of an enterprise>s use of financial

instruments, the business purposes that they serve, the risks

associated with them and management>s policies for controllingthose risks

!ote"9*+ 82 was revised in ecember 2558, the changes areeffective for accounting periods beginning on or after - 4anuary

2550 and include the following:

Ahen an issuer determines whether a financial instrument is a

financial liability or an e!uity instrument, the instrument is an

e!uity instrument if, and only if, both conditions (a) and (b) are

met

(a) The instrument includes no contractual obligation to

deliver cash or another financial asset to another entity; or

to e$change financial assets or financial liabilities with

another entity under conditions that are potentially

unfavourable to the issuer

(b) 9f the instrument will or may be settled in the issuer>s own

e!uity instruments, it is:

(i) a non1derivative that includes no contractual obligation

for the issuer to deliver a variable number of its own

e!uity instruments; or(ii) a derivative that will be settled by the issuer

e$changing a fi$ed amount of cash or another financialasset for a fi$ed number of its own e!uity instruments

The definitions of a financial asset and a financial liability, and

the description of an e!uity instrument, are amended consistently

25


21/43


IFRS Ref IFRS VAS

with this principle

The re!uirements for separating the liability and e!uity

components of a compound financial instrument are conformedto both the definition of an e!uity instrument as a residual and

the measurement re!uirements in 9*+ 8/

9*+ 88 Earnings per share

.umerator in basic earnings per share ('


22/43


IFRS Ref IFRS VAS

ne$t annual financial statements .o re!uirement to publish

interim financial report

financial reports, should follow *+ in these reports

9*+ 80 'iscontinued operations

+pecific disclosure is re!uired for sale or abandonment that

represents a separate, major line of business of an entity and of

which the assets, net profit or loss and activities can be

distinguished physically or operationally

!ote"9F+ 0,,on-current assets he#d for sa#e and discontinuedoperationswas issued on 8- &arch 255" and is effective for


9F+ 0 supersedes 9*+ 80 +ee comments on 9F+ 0 later in

this document

.ot specifically mentioned under *+

9n practice, the &oF re!uires disclosure on the closing down of

an entity>s operations For companies that are being wound up,

financial statements are prepared under the same accounting

basis as they were when fully operational Therefore, thehistorical cost convention is still applied to companies which are

being wound up, which may lead to assets being stated at the

report>s date in e$cess of the amount at which they are

subse!uently realised

9*+ 83evised

8- &arch 255"

Impairment of assets

The revised 9*+ 83 applies to goodwill or intangible assets

ac!uired in an ac!uisition after 8- &arch 255", and for all other

assets for accounting periods beginning on or after 8- &arch

255"

9*+ 83 has been revised as part of the project on usiness

%ombinations that has seen the release of 9F+ 8

*+ does recognise diminution in value of certain current

assets

=enerally, impairment of tangibleHintangible fi$ed assets is not

permitted

22


23/43


IFRS Ref IFRS VAS

9*+ 83

evised

(continued)

The previous version of 9*+ 83 re!uired the recoverable amount

of an asset to be measured whenever there is an indication that

the asset may be impaired This re!uirement is included in the

evised +tandard Iowever, the evised +tandard also re!uires:

the recoverable amount of an intangible asset with an

indefinite useful life to be measured annually, irrespective

of whether there is any indication that it may be impaired

The most recent detailed calculation of recoverable amount

made in a preceding period may be used in the impairment

test for that asset in the current period, provided specified

criteria are met

the recoverable amount of an intangible asset not yet

available for use to be measured annually, irrespective of

whether there is any indication that it may be impaired

goodwill ac!uired in a business combination to be tested

for impairment annually

The evised +tandard gives guidance on calculation of an

asset>s value in use and guidance on using reasonable cash flow

projections for this calculation

.ew guidance is given on allocating goodwill to cash1generating

units as part of impairment testing the cash1generating unit(s) to

which it relates

*lso new guidance on timing of the annual impairment tests for

goodwill

28


24/43


IFRS Ref IFRS VAS

The evised +tandard prohibits the recognition of reversals of

impairment losses for goodwill

9*+ 8B Provisions, contingent liabilities and contingent assets

9*+ 8B defines provisions as liabilities of uncertain timing or

amount * provision should be recognised when, and only

when:

an enterprise has a present obligation (legal or

constructive) as a result of a past event;

it is probable (ie more likely than not) that an outflow of

resources embodying economic benefits will be re!uired to

settle the obligation; and

a reliable estimate can be made of the amount of the

obligation The +tandard notes that it is only in e$tremelyrare cases that a reliable estimate will not be possible

The amount recognised as a provision should be the bestestimate of the e$penditure re!uired to settle the present

obligation at the balance sheet date

9*+ 8B e$plains how the general recognition and measurement

re!uirements for provisions should be applied in three specific

cases: future operating losses; onerous contracts; and

restructurings

Crovisions should not be recognised for future operating

.o +tandard has been issued on provisions and contingencies

The re!uirement to make provisions is described in certain

regulations, for e$ample: %ircular 00 mentions provision for

accrued retirement benefits

%ontingencies are mentioned in *+2-,$resentation of

financia# statements, but no specific accounting guidance has

been issued

2"


25/43


IFRS Ref IFRS VAS

9*+ 8B

(continued)

losses

9f an enterprise has a contract that is onerous, the present

obligation under the contract should be recognised and

measured as a provision

* provision for restructuring costs is recognised only when

the general criteria for provisions are met

* contingent liability is defined as:

a possible obligation that arises from past events and whose

e$istence will be confirmed only by the occurrence or non1

occurrence of one or more uncertain future events not wholly

within the control of the enterprise; or

a present obligation that arises from past events but is not

recognised because:

(i) it is not probable that an outflow of resources embodying

economic benefits will be re!uired to settle theobligation; or

(ii) the amount of the obligation cannot be measured with

sufficient reliability

*n enterprise should not recognise a contingent liability *nenterprise should disclose a contingent liability, unless thepossibility of an outflow of resources embodying economic

benefits is remote

* contingent asset is defined as a possible asset that arises from

past events and whose e$istence will be confirmed only by the

occurrence or non1occurrence of one or more uncertain future

20


26/43


IFRS Ref IFRS VAS

events not wholly within the control of the enterprise

*n enterprise should not recognise a contingent asset *

contingent asset should be disclosed where an inflow of

economic benefits is probable

9*+ 86

evised

8- &arch 255"

Intangible assets

The revised 9*+ 86 applies to intangible assets ac!uired in an

ac!uisition after 8- &arch 255", and for all other assets for

accounting periods beginning on or after 8- &arch 255"

The previous version of 9*+ 86 defined an intangible asset as an

identifiable non1monetary asset without physical substance held

for use in the production or supply of goods or services, for

rental to others, or for administrative purposes The re!uirementfor the asset to be held for use in the production or supply of

goods or services, for rental to others, or for administrative

purposes has now been removed from the definition of an

intangible asset

The previous version of 9*+ 86 did not define 'identifiability,

but stated that an intangible asset could be distinguished clearlyfrom goodwill if the asset was separable, but that separability

was not a necessary condition for identifiability The evised

+tandard states that an asset meets the identifiability criterion in

the definition of an intangible asset when it:

(a) is separable, ie capable of being separated or divided from

the entity and sold, transferred, licensed, rented or

*+5" #Intanib#e fi)ed assetswas issued on 8- ecember

255-

This +tandard is substantially similar to the previous version of9*+ 86, so there are now significant differences between the

revised 9*+ 86 and *+5"

9f the definition of an asset met, intangible assets must beamortised over useful life, which should be no longer than 25

years, unless there is persuasive evidence that a life over 25

years is appropriate

evaluation or write down for impairment is not allowed Gnder

*+, intangible fi$ed assets may be overstated in the balance

sheet, even when it is known that an impairment has occurredand the current valuation is less than the carrying amount in the

accounts

%ertain pre1operating costs, in relation to an entity>s

establishment, training, advertisement activities, research andrelocation of a business are allowed to be deferred and charged

23


27/43


IFRS Ref IFRS VAS

9*+ 86

evised

(continued)

e$changed, either individually or together with a related

contract, asset or liability; or

(b) arises from contractual or other legal rights, regardless of

whether those rights are transferable or separable from the

entity or from other rights and obligations

The previous version of 9*+ 86 re!uired an intangible asset to be

recognised if, and only if, it was probable that the e$pectedfuture economic benefits attributable to the asset would flow to

the entity, and its cost could be measured reliably These

recognition criteria have been included in the evised +tandard

Iowever, additional guidance has been included to clarify that:(a) the probability recognition criterion is always considered to

be satisfied for intangible assets that are ac!uired separately

or in a business combination

(b) the fair value of an intangible asset ac!uired in a business

combination can normally be measured with sufficient

reliability to be recognised separately from goodwill 9f an

intangible asset ac!uired in a business combination has a

finite useful life, there is a rebuttable presumption that its fair

value can be measured reliably

The previous version of 9*+ 86 was based on the assumption

that the useful life of an intangible asset is always finite, andincluded a rebuttable presumption that the useful life cannot

e$ceed twenty years from the date the asset is available for use

That rebuttable presumption has been removed The evised

+tandard re!uires an intangible asset to be regarded as having an

indefinite useful life when, based on an analysis of all of the

over 8 years

2B


28/43


IFRS Ref IFRS VAS

9*+ 86

evised

(continued)

relevant factors, there is no foreseeable limit to the period over

which the asset is e$pected to generate net cash inflows for the

entity

The evised +tandard re!uires that:

(a) an intangible asset with an indefinite useful life should not

be amortised

(b) the useful life of such an asset should be reviewed each

reporting period to determine whether events and

circumstances continue to support an indefinite useful lifeassessment for that asset 9f they do not, the change in the

useful life assessment from indefinite to finite should be

accounted for as a change in an accounting estimate

The previous version of 9*+ 86 re!uired the recoverable amount

of an intangible asset that was amortised over a period e$ceeding

twenty years from the date it was available for use to be

estimated at least at each financial year1end, even if there was noindication that the asset was impaired This re!uirement has

been removed Therefore, an entity needs to determine the

recoverable amount of an intangible asset with a finite useful lifethat is amortised over a period e$ceeding twenty years from the

date it is available for use only when, in accordance with 9*+

83, there is an indication that the asset may be impaired

26


29/43


IFRS Ref IFRS VAS

9*+ 8/ Financial instruments) recognition and measurement

@iabilities versus e!uity: the classification between liabilities

and e!uity depends on whether the issuer has a contractual

obligation to deliver cash or another financial asset to the holder

of the instrument, regardless of its legal form

erivatives: all derivatives must be carried at fair value =ains

or losses on all derivatives are recorded in income unless they

!ualify for cash flow hedge accounting when such gains or

losses are deferred in e!uity

Financial assets: should be initially measured at cost, being the

fair value of the consideration given, including transaction costs

There are only four categories of financial assets under 9*+ 8/:

held for trading, held to maturity, originated by the enterprise

and available for sale

Financial liabilities: should be initially measured at cost, beingthe fair value of the consideration received, including transaction

costs *ll financial liabilities e$cept for held for trading and

derivatives that are liabilities should be carried at amortised cost

@iabilities held for trading and derivatives that are liabilities

should be measured at fair value

.o specific rules on financial instruments

*+-5 # The effects of chanes in forein e)chane ratesand

%ircular 00 both include a statement that where financial

instruments are used to hedge against foreign e$change risk,the foreign currency loanHliability should not be retranslated

The meaning of this statement is not clear, and has not been

tested in practice

2/


30/43


IFRS Ref IFRS VAS

9*+ 8/

(continued)

7ffsetting: the ability to offset financial assets and liabilities is

severely restricted

Iedge accounting: may be used only if the hedge relationship

meets !ualifying criteria of documentation and hedge

effectiveness There must be a one1on1one hedging relationship;

hedge accounting may not be used for overall balance sheet

positions =ains or losses on instruments !ualifying as cash flow

hedges should be included in e!uity and recycled to the income

statement when the hedged transaction or balance effects theincome statement, or is used to adjust the carrying amount of an

asset or liability at ac!uisition

erecognition: a financial asset should be derecognised whenthe enterprise realises the rights to benefits specified in the

contract, the rights e$pire, or the enterprise loses control of the

contractual rights * financial liability should only be removed

from the balance sheet when the obligation specified in the

contract is discharged, cancelled, e$pires, or the primary

responsibility for the liability is transferred to another party

!ote"9*+ 8/ was revised in ecember 2558, the changes are


2550 and include the following:

The definition of 'originated loans and receivables is amendedto become 'loans and receivables Gnder the revised definition,

85


31/43


IFRS Ref IFRS VAS

9*+ 8/

evised

(continued)

an entity is permitted to classify as loans and receivables

purchased loans that are not !uoted in an active market

The evised +tandard clarifies that the evaluation of the transfer

of risks and rewards of ownership precedes the evaluation of thetransfer of control for all derecognition transactions &ore

guidance is given on derecognition of financial assets

The evised +tandard introduces the notion of a 'transfer of a

financial asset and gives rules to define when a transfer has

occurred 9t also provides guidance on how to apply the

concepts of risks and rewards and of control

The option previously contained in 9*+ 8/ to recognise in profit

or loss gains and losses on available1for1sale financial assets hasbeen eliminated +uch an option is no longer necessary becauseunder the amendments to 9*+ 8/ an entity is now permitted by

designation to measure any financial asset or financial liability at

fair value with gains and losses recognised in profit or loss

The evised +tandard provides additional guidance about how

to evaluate impairment that is inherent in a group of loans,

receivables or held1to1maturity investments, but cannot yet be

identified with any individual financial asset in the group

Iedges of firm commitments are now treated as fair value

hedges rather than cash flow hedges Iowever, the evised+tandard clarifies that a hedge of the foreign currency risk of a

firm commitment can be treated as either a cash flow hedge or a

fair value hedge

The evised +tandard re!uires that when a hedged forecast

transaction occurs and results in the recognition of afinancia#

asset or afinancia#liability, the gain or loss deferred in e!uity

8-


32/43


IFRS Ref IFRS VAS

9*+ 8/

evised

(continued)

does not adjust the initial carrying amount of the asset or liability

(ie basis adjustment is prohibited), but remains in e!uity and is

recognised in profit or loss consistently with the recognition of

gains and losses on the asset or liability

For hedges of forecast transactions that result in the recognition

of a non-financia#asset or a non-financia#liability, the entity has

a choice of whether to apply basis adjustment or retain the

hedging gain or loss in e!uity and report it in profit or loss when

the asset or liability affects profit or loss

The disclosure re!uirements previously in 9*+ 8/ have beenmoved to 9*+ 82

9*+ "5 Investment propert

9nvestment property is defined as property (land or a building 1

or part of a building 1 or both) held (by the owner or by the

lessee under a finance lease) to earn rentals or for capital

appreciation or both, rather than for:

(a) use in the production or supply of goods or services or for

administrative purposes; or

(b) sale in the ordinary course of business

9*+ "5 permits enterprises to choose either:

(a) a fair value model: investment property should be measured

at fair value and changes in fair value should be recognised

*+50 1In&estment property( was issued on 85 ecember 2558

The +tandard is based on the structure of 9*+ "5, but has the

fundamental difference that investment property can only be

measured at depreciated historical cost

&easurement at fair value is not permitted

82


33/43


IFRS Ref IFRS VAS

9*+ "5

(continued)

in the income statement; or

(b) a cost model The cost model is the benchmark treatment in

9*+ -3$roperty( $#ant and %uipment: investment property

should be measured at depreciated cost (less anyaccumulated impairment losses) *n enterprise that chooses

the cost model should disclose the fair value of its

investment property

Gnder the fair value model, all changes in fair value are

recognised in the income statement

9f there is clear evidence when an enterprise first ac!uires an

investment property that the fair value of the property will not be

able to be reliably measured on a continuing basis, then that

investment property is measured using the depreciated cost

model under 9*+ -3 until it is disposed of

!ote"9*+ "5 was revised in ecember 2558, the changes are


2550 This is a limited revision that includes the following:

* property interest that is held by a lessee under an operatinglease may be classified and accounted for as investment property

provided that:

(a) the rest of the definition of investment property is met;

(b) the operating lease is accounted for as if it were a financelease in accordance with 9*+ -B*eases; and

(c) the lessee uses the fair value model set out in 9*+ "5 for the

asset recognised

88


34/43


IFRS Ref IFRS VAS

9*+ "5

evised

(continued)

The evised +tandard re!uires an entity to disclose:

(a) whether it applies the fair value model or the cost model; and

(b) if it applies the fair value model, whether, and in what

circumstances, property interests held under operating leases

are classified and accounted for as investment property

Ahen a valuation obtained for investment property is adjusted

significantly for the purpose of the financial statements, areconciliation is re!uired between the valuation obtained and the

valuation included in the financial statements

7ther changes have been incorporated into the evised 9*+ "5as a result of amendments to 9*+ -3:$roperty( $#ant and

%uipment.

8"


35/43


IFRS Ref IFRS VAS

9*+ "- $griculture

9*+ "- deals with accounting for agricultural activity This isdefined as the managed biological transformation of biological

assets (living animals and plants) for sale, into agricultural

produce (harvested product of biological assets) or intoadditional biological assets

*ll biological assets should be measured at fair value less

estimated point1of1sale costs, with the change in the carrying

amount reported as part of profit or loss from operating

activities *gricultural produce harvested from an enterprise>s

biological assets should be measured at fair value less estimated

point1of1sale costs at the point of harvest The fair value is the!uoted price in any available market

.ot specifically mentioned under *+

9F+ -


36/43


IFRS Ref IFRS VAS

9F+ -

(continued)

following in the opening 9F+ balance sheet that it prepares as a

starting point for its accounting under 9F+s:

(a) recognise all assets and liabilities whose recognition is

re!uired by 9F+s;

(b) not recognise items as assets or liabilities if 9F+s do not

permit such recognition;

(c) reclassify items that it recognised under previous =**C as

one type of asset, liability or component of e!uity, but are a

different type of asset, liability or component of e!uity under

9F+s; and

(d) apply 9F+s in measuring all recognised assets and

liabilities

9F+ - grants limited e$emptions from these re!uirements inspecified areas where the cost of complying with them would be

likely to e$ceed the benefits to users of financial statements;

including e$emption from restating business combinations,

taking fair value as deemed cost for fi$ed assets, and e$emption

from calculating cumulative translation differences

9F+ - also prohibits retrospective application of 9F+s in some

areas; including where retrospective application would re!uirejudgements by management about past conditions after the

outcome of a particular transaction is already known,derecognition of financial assets and financial liabilities, and

hedge accounting

9F+ - re!uires disclosures that e$plain how the transition from

previous =**C to 9F+s affected the entity>s reported financial

83


37/43


IFRS Ref IFRS VAS

position, financial performance and cash flows

*n entity is re!uired to apply the 9F+ if its first 9F+ financial

statements are for a period beginning on or after - 4anuary 255"


38/43


IFRS Ref IFRS VAS

For e!uity1settled share1based payment transactions, an entity

measures the goods or services received, and the corresponding

increase in e!uity, directly, at the fair value of the goods or

services received, unless that fair value cannot be estimated

reliably

For cash1settled share1based payment transactions, an entity

measures the goods or services ac!uired and the liability

incurred at the fair value of the liability Gntil the liability is

settled, the entity is re!uired to remeasure the fair value of theliability at each reporting date and at the date of settlement, with

any changes in value recognised in profit or loss for the period

For share1based payment transactions in which the terms of the

arrangement provide either the entity or the supplier of goods or

services with a choice of whether the entity settles thetransaction in cash or by issuing e!uity instruments, the entity is

re!uired to account for that transaction, or the components of

that transaction, as a cash1settled share1based payment

transaction if, and to the e$tent that, the entity has incurred a

liability to settle in cash (or other assets), or as an e!uity1settled

share1based payment transaction if, and to the e$tent that, no

such liability has been incurred

9F+ 8


39/43


IFRS Ref IFRS VAS

9F+ 8

(continued)

aggregate of: the fair values, at the date of e$change, of assets

given, liabilities incurred or assumed, and e!uity instruments

issued by the ac!uirer, in e$change for control of the ac!uiree;

plus any costs directly attributable to the combination

*c!uirer recognises separately, at the ac!uisition date, the

ac!uiree>s identifiable assets, liabilities and contingent liabilities

that satisfy the following recognition criteria at that date,

regardless of whether they had been previously recognised in the

ac!uiree>s financial statements:

(i) in the case of an asset other than an intangible asset, it is

probable that any associated future economic benefits will

flow to the ac!uirer, and its fair value can be measured

reliably;

(ii) in the case of a liability other than a contingent liability, it is

probable that an outflow of resources embodying economic

benefits will be re!uired to settle the obligation, and its fair

value can be measured reliably; and

(iii) in the case of an intangible asset or a contingent liability, its

fair value can be measured reliably

The identifiable assets, liabilities and contingent liabilities that

satisfy the above recognition criteria are measured initially bythe ac!uirer at their fair values at the ac!uisition date,

irrespective of the e$tent of any minority interest

=oodwill ac!uired in a business combination is recognised by

the ac!uirer as an asset from the ac!uisition date, initially

measured as the e$cess of the cost of the business combination

over the ac!uirer>s interest in the net fair value of the ac!uiree>s

recognised as a deferred revenue and amortised to the income

statement over its useful life

8/


40/43


IFRS Ref IFRS VAS

identifiable assets, liabilities and contingent liabilities

=oodwill is not amortised 9t is tested for impairment at least

annually, or more fre!uently if events indicate that the asset

might be impaired

9F+ "


41/43


IFRS Ref IFRS VAS

9F+ "

(continued)

*n insurer is permitted to change its accounting policies for

insurance contracts only if, as a result, its financial statements

present information that is more relevant and no less reliable, or

more reliable and no less relevant 9n particular, an insurer

cannot introduce any of the following practices, although it may

continue using accounting policies that involve them:

(a) measuring insurance liabilities on an undiscounted basis

(b) measuring contractual rights to future investment

management fees at an amount that e$ceeds their fair value

as implied by a comparison with current fees charged byother market participants for similar services

(c) using non1uniform accounting policies for the insuranceliabilities of subsidiaries

9F+ " permits the introduction of an accounting policy that

involves remeasuring designated insurance liabilities

consistently in each period to reflect current market interest rates

(and, if the insurer so elects, other current estimates and

assumptions) Aithout this permission, an insurer would have

been re!uired to apply the change in accounting policies

consistently to all similar liabilities

9F+ ":

(a) clarifies that an insurer need not account for an embedded

derivative separately at fair value if the embedded derivativemeets the definition of an insurance contract

(b) re!uires an insurer to unbundle deposit components of some

insurance contracts, to avoid the omission of assets and

liabilities from its balance sheet

"-


42/43


IFRS Ref IFRS VAS

(c) clarifies the applicability of the practice sometimes known as

'shadow accounting

(d) permits an e$panded presentation for insurance contracts

ac!uired in a business combination or portfolio transfer

(e) addresses limited aspects of discretionary participation

features contained in insurance contracts or financial

instruments

9F+ " re!uires disclosure to help users understand:

(a) the amounts in the insurer>s financial statements that arise

from insurance contracts

(b) the amount, timing and uncertainty of future cash flows from

insurance contracts

9F+ 0


43/43


IFRS Ref IFRS VAS

*ssets or disposal groups that are classified as held for

sale are carried at the lower of carrying amount and fair

value less costs to sell

*n asset classified as held for sale, or included within a

disposal group that is classified as held for sale, is not

depreciated

*n asset classified as held for sale, and the assets and

liabilities included within a disposal group classified as

held for sale, are presented separately on the face of the

balance sheet

*n operation is classified as discontinued at the date the

operation meets the criteria to be classified as held for sale or

when the entity has disposed of the operation

esults of discontinued operations are to be shown

separately on the face of the income statement

etroactive classification of an operation as discontinued

is not permitted, when the criteria for that classification

are not met until after the balance sheet date

historical cost convention is still applied to companies which are

being wound up, which may lead to assets being stated at the

report>s date in e$cess of the amount at which they are

subse!uently realised

Documents

Comparison IFRS VAS