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  • IAS 40 — Investment Property
    asset recognised An entity may make the foregoing classification on a property by property basis Partial own use If the owner uses part of the property for its own use and part to earn rentals or for capital appreciation and the portions can be sold or leased out separately they are accounted for separately Therefore the part that is rented out is investment property If the portions cannot be sold or leased out separately the property is investment property only if the owner occupied portion is insignificant IAS 40 10 Ancillary services If the entity provides ancillary services to the occupants of a property held by the entity the appropriateness of classification as investment property is determined by the significance of the services provided If those services are a relatively insignificant component of the arrangement as a whole for instance the building owner supplies security and maintenance services to the lessees then the entity may treat the property as investment property Where the services provided are more significant such as in the case of an owner managed hotel the property should be classified as owner occupied IAS 40 13 Intracompany rentals Property rented to a parent subsidiary or fellow subsidiary is not investment property in consolidated financial statements that include both the lessor and the lessee because the property is owner occupied from the perspective of the group However such property could qualify as investment property in the separate financial statements of the lessor if the definition of investment property is otherwise met IAS 40 15 Recognition Investment property should be recognised as an asset when it is probable that the future economic benefits that are associated with the property will flow to the entity and the cost of the property can be reliably measured IAS 40 16 Initial measurement Investment property is initially measured at cost including transaction costs Such cost should not include start up costs abnormal waste or initial operating losses incurred before the investment property achieves the planned level of occupancy IAS 40 20 and 40 23 Measurement subsequent to initial recognition IAS 40 permits entities to choose between IAS 40 30 a fair value model and a cost model One method must be adopted for all of an entity s investment property Change is permitted only if this results in a more appropriate presentation IAS 40 notes that this is highly unlikely for a change from a fair value model to a cost model Fair value model Investment property is remeasured at fair value which is the amount for which the property could be exchanged between knowledgeable willing parties in an arm s length transaction IAS 40 5 Gains or losses arising from changes in the fair value of investment property must be included in net profit or loss for the period in which it arises IAS 40 35 Fair value should reflect the actual market state and circumstances as of the balance sheet date IAS 40 38 The best evidence of fair value is normally given by current prices on an active market for similar property in the same location and condition and subject to similar lease and other contracts IAS 40 45 In the absence of such information the entity may consider current prices for properties of a different nature or subject to different conditions recent prices on less active markets with adjustments to reflect changes in economic conditions and discounted cash flow projections based on reliable estimates of future cash flows IAS 40 46 There is a rebuttable presumption that the entity will be able to determine the fair value of an investment property reliably on a continuing basis However IAS 40 53 If an entity determines that the fair value of an investment property under construction is not reliably determinable but expects the fair value of the property to be reliably determinable when construction is complete it measures that investment property under construction at cost until either its fair value becomes reliably determinable or construction is completed If an entity determines that the fair value of an investment property other than an investment property under construction is not reliably determinable on a continuing basis the entity shall measure that investment property using the cost model in IAS 16 The residual value of the investment property shall be assumed to be zero The entity shall apply IAS 16 until disposal of the investment property Where a property has previously been measured at fair value it should continue to be measured at fair value until disposal even if comparable market transactions become less frequent or market prices become less readily available IAS 40 55 Cost model After initial recognition investment property is accounted for in accordance with the cost model as set out in IAS 16 Property Plant and Equipment cost less accumulated depreciation and less accumulated impairment losses IAS 40 56 Transfers to or from investment property classification Transfers to or from investment property should only be made when there is a change in use evidenced by one or more of the following IAS 40 57 commencement of owner occupation transfer from investment property to owner occupied property commencement of development with a view to sale transfer from investment property to inventories end of owner occupation transfer from owner occupied property to investment property commencement of an operating lease to another party transfer from inventories to investment property end of construction or development transfer from property in the course of construction development to investment property When an entity decides to sell an investment property without development the property is not reclassified as inventory but is dealt with as investment property until it is derecognised IAS 40 58 The following rules apply for accounting for transfers between categories for a transfer from investment property carried at fair value to owner occupied property or inventories the fair value at the change of use is the cost of the property under its new classification IAS 40 60 for a transfer from owner occupied property to

    Original URL path: http://www.iasplus.com/en/standards/ias/ias40 (2016-02-10)
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  • IAS 41 — Agriculture
    incidental scrap sales Agricultural produce The harvested product from biological assets Costs to sell The incremental costs directly attributable to the disposal of an asset excluding finance costs and income taxes Definition included by Agriculture Bearer Plants Amendments to IAS 16 and IAS 41 which applies to annual periods beginning on or after 1 January 2016 Initial recognition An entity recognises a biological asset or agriculture produce only when the entity controls the asset as a result of past events it is probable that future economic benefits will flow to the entity and the fair value or cost of the asset can be measured reliably IAS 41 10 Measurement Biological assets within the scope of IAS 41 are measured on initial recognition and at subsequent reporting dates at fair value less estimated costs to sell unless fair value cannot be reliably measured IAS 41 12 Agricultural produce is measured at fair value less estimated costs to sell at the point of harvest IAS 41 13 Because harvested produce is a marketable commodity there is no measurement reliability exception for produce The gain on initial recognition of biological assets at fair value less costs to sell and changes in fair value less costs to sell of biological assets during a period are included in profit or loss IAS 41 26 A gain on initial recognition e g as a result of harvesting of agricultural produce at fair value less costs to sell are included in profit or loss for the period in which it arises IAS 41 28 All costs related to biological assets that are measured at fair value are recognised as expenses when incurred other than costs to purchase biological assets IAS 41 presumes that fair value can be reliably measured for most biological assets However that presumption can be rebutted for a biological asset that at the time it is initially recognised does not have a quoted market price in an active market and for which alternative fair value measurements are determined to be clearly unreliable In such a case the asset is measured at cost less accumulated depreciation and impairment losses But the entity must still measure all of its other biological assets at fair value less costs to sell If circumstances change and fair value becomes reliably measurable a switch to fair value less costs to sell is required IAS 41 30 Guidance on the determination of fair value is available in IFRS 13 Fair Value Measurement IFRS 13 also requires disclosures about fair value measurements Other issues The change in fair value of biological assets is part physical change growth etc and part unit price change Separate disclosure of the two components is encouraged not required IAS 41 51 Agricultural produce is measured at fair value less costs to sell at harvest and this measurement is considered the cost of the produce at that time for the purposes of IAS 2 Inventories or any other applicable standard IAS 41 13 Agricultural land is accounted for

    Original URL path: http://www.iasplus.com/en/standards/ias/ias41 (2016-02-10)
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  • IFRIC 1 — Changes in Existing Decommissioning, Restoration and Similar Liabilities
    Assets from Customers IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine IFRIC 21 Levies Info IFRIC 1 Changes in Existing Decommissioning Restoration and Similar Liabilities Quick Article Links References IAS 37 Provisions Contingent Liabilities and Contingent Assets History Date Development Comments 4 September 2003 IFRIC D2 Changes in Decommissioning Restoration and Similar Liabilities published Comment deadline 3 November 2003 27 May 2004 IFRIC 1 Changes in Decommissioning Restoration and Similar Liabilities issued Effective for annual periods beginning on or after 1 September 2004 Summary of IFRIC 1 IFRIC 1 contains guidance on accounting for changes in decommissioning restoration and similar liabilities that have previously been recognised both as part of the cost of an item of property plant and equipment under IAS 16 and as a provision liability under IAS 37 An example would be a liability that was recognised by the operator of a nuclear power plant for costs that it expects to incur in the future when the plant is shut down decommissioned The interpretation addresses subsequent changes to the amount of the liability that may arise from a a revision in the timing or amount of the estimated decommissioning or restoration costs or from b a change in the current market based discount rate IAS 37 requires the amount recognised as a provision to be the best estimate of the expenditure required to settle the obligation at the balance sheet date This is measured at its present value which IFRIC 1 confirms should be measured using a current market based discount rate The Interpretation deals with three kinds of change in an existing liability for such costs The two main kinds of change dealt with in the Interpretation are those that arise from the revision of estimated outflows of resources embodying economic benefits For example the estimated costs of decommissioning a nuclear power plant may vary significantly both in timing and amount revisions to the current market based discount rate Most entities account for their property plant and equipment using the cost model Where this is so these changes are required to be capitalised as part of the cost of the item and depreciated prospectively over the remaining life of the item to which they relate This is consistent with the treatment under IAS 16 of other changes in estimate relating to property plant and equipment In the spirit of convergence the IFRIC considered the US GAAP approach in Statement of Financial Accounting Standards No 143 Accounting for Asset Retirement Obligations The Interpretation treats changes in estimated cash flows in a similar way to SFAS 143 However SFAS 143 does not require any adjustment to the cost of the item or to the provision to reflect the effect of a change in the current market based discount rate The IFRIC did not choose this approach because IAS 37 unlike US GAAP requires provisions to be measured at the current best estimate which should reflect current

    Original URL path: http://www.iasplus.com/en/standards/ifric/ifric1 (2016-02-10)
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  • IFRIC 2 — Members' Shares in Co-operative Entities and Similar Instruments
    and Electronic Equipment IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies IFRIC 8 Scope of IFRS 2 IFRIC 9 Reassessment of Embedded Derivatives IFRIC 10 Interim Financial Reporting and Impairment IFRIC 11 IFRS 2 Group and Treasury Share Transactions IFRIC 12 Service Concession Arrangements IFRIC 13 Customer Loyalty Programmes IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset Minimum Funding Requirements and their Interaction IFRIC 15 Agreements for the Construction of Real Estate IFRIC 16 Hedges of a Net Investment in a Foreign Operation IFRIC 17 Distributions of Non cash Assets to Owners IFRIC 18 Transfers of Assets from Customers IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine IFRIC 21 Levies Info IFRIC 2 Members Shares in Co operative Entities and Similar Instruments Quick Article Links References IAS 32 Financial Instruments Presentation History Date Development Comments 20 September 2003 IFRIC D8 Members Shares in Co operative Entities published Comment deadline 13 September 2004 25 November 2004 IFRIC 2 Members Shares in Co operative Entities and Similar Instruments issued Effective for annual periods beginning on or after 1 January 2005 Summary of IFRIC 2 Members shares in co operative entities have some characteristics of equity They also give the holder the right to request redemption for cash although that right may be subject to certain limitations IFRIC 2 gives guidance on how those redemption terms should be evaluated in determining whether the shares should be classified as financial liabilities or as equity Under IFRIC 2 shares for which the member has the right to request redemption are normally liabilities However they are equity if the entity has an unconditional right to refuse redemption or local law regulation or the entity s

    Original URL path: http://www.iasplus.com/en/standards/ifric/ifric2 (2016-02-10)
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  • IFRIC 3 — Emission Rights (withdrawn)
    equal to their actual emissions The Interpretation specifies that rights allowances are intangible assets that should be recognised in the financial statements in accordance with IAS 38 Intangible Assets when allowances are issued to a participant by government or government agency for less than their fair value the difference between the amount paid if any and their fair value is a government grant that is accounted for in accordance IAS 20 Accounting for Government Grants and Disclosure of Government Assistance as a participant produces emissions it recognises a provision for its obligation to deliver allowances in accordance with IAS 37 Provisions Contingent Liabilities and Contingent Assets This provision is normally measured at the market value of the allowances needed to settle it Discussion at the June 2005 IFRIC Meeting In June 2005 the IFRIC discussed two papers A proposed amendment to IAS 38 Intangible Assets that would create an additional category of intangibles measured at fair value through profit and loss and A proposal from EFRAG as to how hedge accounting could be used to resolve the mismatch issues created by IFRIC 3 At its February 2005 meeting the IFRIC had agreed to prepare a limited amendment to IAS 38 despite the preference of some members for the revaluation model contained in that standard to be completely revisited It was noted that the effect of the proposed amendment was to move the gains and losses into the same place profit and loss however the timing might still have a mismatch because of the at the beginning of the period an asset exists for which fair value gains and losses must be recognised however the corresponding liability builds up over the period EFRAG presented a paper proposing to include emission rights within a hedge accounting model that would use the principles of cash flow hedging to deal with this issue There was support from a number of IFRIC members however many expressed reluctance to take the project further until the IASB had been explicitly consulted as whether they considered this an appropriate project to pursue It was noted that the amendment to IAS 38 in itself is insufficient to alleviate the concerns raised by EFRAG but is not incompatible with the EFRAG proposals Accordingly the amendment to IAS 38 would solve part of the problem for entities that do not pursue hedge accounting It was noted that if the hedging proposal was used it would be difficult to mandate hedging as entities could fail eligibility for hedging on a number of criteria particularly forecast usage and therefore this might open up more options It was agreed that in principle hedge accounting should be required where certain facts and circumstances exist with a default treatment being required if an entity fails to meet the hedge accounting requirements The IFRIC agreed that the staff should continue with the proposal to amend IAS 38 subject to satisfying themselves that the amendment is necessary irrespective of whether the hedging methodology is introduced and that the

    Original URL path: http://www.iasplus.com/en/standards/ifric/ifric3 (2016-02-10)
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  • IFRIC 4 — Determining Whether an Arrangement Contains a Lease
    and Treasury Share Transactions IFRIC 12 Service Concession Arrangements IFRIC 13 Customer Loyalty Programmes IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset Minimum Funding Requirements and their Interaction IFRIC 15 Agreements for the Construction of Real Estate IFRIC 16 Hedges of a Net Investment in a Foreign Operation IFRIC 17 Distributions of Non cash Assets to Owners IFRIC 18 Transfers of Assets from Customers IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine IFRIC 21 Levies Info IFRIC 4 Determining Whether an Arrangement Contains a Lease Quick Article Links Note IFRIC 4 will be superseded by IFRS 16 Leases as of 1 January 2019 References IAS 17 Leases History Date Development Comments 15 January 2004 IFRIC D3 Determining Whether an Arrangement Contains a Lease published Comment deadline 19 March 2004 2 December 2004 IFRIC 4 Determining Whether an Arrangement Contains a Lease issued Effective for annual periods beginning on or after 1 January 2006 1 January 2019 IFRIC 4 will be superseded by IFRS 16 Leases Summary of IFRIC 4 In recent years arrangements have developed that do not take the legal form of a lease but which convey rights to use assets in return for a payment or series of payments Examples of such arrangements include outsourcing arrangements telecommunication contracts that provide rights to capacity and take or pay and similar contracts in which purchasers must make specified payments regardless of whether they take delivery of the contracted products or services The Interpretation specifies that an arrangement that meets the following criteria is or contains a lease that should be accounted for in accordance with IAS 17 Leases Fulfilment of the arrangement depends upon a specific asset The asset need not be explicitly identified by the contractual provisions of the arrangement Rather it may be implicitly specified because it is not economically feasible or practical for the supplier to fulfil the arrangement by providing use of alternative assets The arrangement conveys a right to control the use of the underlying asset This is the case if any of the following conditions is met the purchaser in the arrangement has the ability or right to operate the asset or direct others to operate the asset while obtaining more than an insignificant amount of the output of the asset the purchaser has the ability or right to control physical access to the asset while obtaining more than an insignificant amount of the output of the asset there is only a remote possibility that parties other than the purchaser will take more than an insignificant amount of the output of the asset and the price that the purchaser will pay is neither fixed per unit of output nor equal to the current market price at the time of delivery Related news IASB issues new leasing standard 13 Jan 2016 IASB staff publishes update on the leases project 24 Feb 2015 FASB and IASB announce joint roundtable meeting on

    Original URL path: http://www.iasplus.com/en/standards/ifric/ifric4 (2016-02-10)
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  • IFRIC 5 — Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds
    Transactions IFRIC 12 Service Concession Arrangements IFRIC 13 Customer Loyalty Programmes IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset Minimum Funding Requirements and their Interaction IFRIC 15 Agreements for the Construction of Real Estate IFRIC 16 Hedges of a Net Investment in a Foreign Operation IFRIC 17 Distributions of Non cash Assets to Owners IFRIC 18 Transfers of Assets from Customers IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine IFRIC 21 Levies Info IFRIC 5 Rights to Interests Arising from Decommissioning Restoration and Environmental Rehabilitation Funds Quick Article Links References IAS 8 Accounting Policies Changes in Accounting Estimates and Errors IAS 27 Consolidated and Separate Financial Statements IAS 28 Investments in Associates IAS 31 Interests In Joint Ventures IAS 37 Provisions Contingent Liabilities and Contingent Assets IAS 39 Financial Instruments Recognition and Measurement SIC 12 Consolidation Special Purpose Entities History Date Development Comments 15 January 2004 IFRIC D4 Decommissioning Restoration and Environmental Rehabilitation Funds published Comment deadline 19 March 2004 16 December 2004 IFRIC 5 Rights to Interests Arising from Decommissioning Restoration and Environmental Rehabilitation Funds issued Effective for annual periods beginning on or after 1 January 2006 Summary of IFRIC 5 Some entities have obligations to decommission assets or to perform environmental restoration or rehabilitation Some such entities contribute to a fund established to reimburse the decommissioning restoration or rehabilitation costs when they are incurred The fund may be set up to meet the decommissioning costs of a single contributor or for many contributors The issues addressed in IFRIC 5 are How should a contributor account for its interest in a fund When a contributor has an obligation to make additional contributions how should that obligation be accounted for Under IFRIC 5 If an entity recognises a decommissioning obligation under IFRSs and contributes to a fund to segregate assets to pay for the obligation it should apply IAS 27 Consolidated and Separate Financial Statements SIC 12 Consolidation Special Purpose Entities IAS 28 Investments in Associates and IAS 31 Interests in Joint Ventures to determine whether decommissioning funds should be consolidated proportionately consolidated or accounted for under the equity method When a fund is not consolidated proportionately consolidated or accounted for under the equity method and that fund does not relieve the contributor of its obligation to pay decommissioning costs the contributor should recognise its obligation to pay decommissioning costs as a liability and its rights to receive reimbursement from the fund as a reimbursement under IAS 37 A right to reimbursement should be measured at the lower of i the amount of the decommissioning obligation recognised and ii the contributor s share of the fair value of the net assets of the fund Changes in the carrying amount of this right other than contributions to and payments from the funds should be recognised in profit or loss When a contributor has an obligation to make potential additional contributions to the fund that obligation is

    Original URL path: http://www.iasplus.com/en/standards/ifric/ifric5 (2016-02-10)
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  • IFRIC 6 — Liabilities Arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment
    on Waste Management Costs PDF 51k Summary of IFRIC 6 IFRIC 6 clarifies when certain producers of electrical goods are required to recognise a liability under IAS 37 for the cost of waste management relating to the decommissioning of waste electrical and electronic equipment supplied to private households The European Union s Directive on Waste Electrical and Electronic Equipment WE EE has raised questions about when the liability of certain electrical goods manufacturers for the decommissioning of such waste should be recognised The Directive prescribes that the cost of waste management for equipment that has been sold to private households before 13 August 2005 should be borne by producers of that type of equipment that are in the market during the period specified in the applicable legislation of the individual member state the measurement period The manufacturers have to contribute to costs in proportion to their respective share of the market by type of equipment The issue that IFRIC 6 addresses is if an entity has an obligation to contribute to waste management costs based on its share of the market in a measurement period what is the event under paragraph 14 a of IAS 37 that gives rise to a liability the manufacture or sale of the historical household equipment participation in the market during the measurement period the incurrence of costs in the performance of waste management activities IFRIC 6 concludes that the event that triggers liability recognition is participation in the market during the measurement period The measurement period is a period in which market shares are determined for the purposes of allocating waste management costs IFRIC 6 states that it is this date rather than the date of production of the equipment or incurrence of costs that is the triggering event for liability recognition Examples Country A determines that producers within its jurisdiction will be responsible for historical household waste management costs in proportion to their respective share of the market for that type of equipment in each calendar year The government notifies participants in the relevant markets in February each year of their market share for the immediately preceding calendar year Waste management costs for the current year are allocated on this basis Company Z began operations in September 2005 and manufactures domestic washing machines Even though it was not responsible for producing any historical WE EE because it participates in the market currently it will contribute to the cost of recycling historical WE EE in proportion to its market share during the measurement period Company T ceased to produce domestic refrigerators in 2004 Because T no longer produces domestic refrigerators i e its market share is zero it has no obligation to fund the collection and recycling of historical WE EE it produced The IFRIC s conclusion on this issue is a pragmatic one The WE EE Directive attaches the liability for the disposal of historical waste to currently active producers and distributors on the basis of their current market share irrespective of the

    Original URL path: http://www.iasplus.com/en/standards/ifric/ifric6 (2016-02-10)
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