1. 1 International Financial Reporting Standards IFRS for SMEs IFRS Foundation-World Bank 18–20 October 2011 Sarajevo, Bosnia and Herzegovina Copyright © 2010 IFRS Foundation. All rights reserved.

2. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 2 The IFRS for SMEs Topic 1.7(a) Quiz and Discussion Sections 3-8 Financial Statement Presentation Michael Wells

3. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 3 Questions about Sections 3 to 8 Financial Statement Presentation. Questions are based on the illustrative financial statements published along with the IFRS for SMEs (in separate printed booklet).

4. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 4 Financial Statement Presentation Case Question (a): Consolidated statement of comprehensive income and retained earnings Could the group present two statements (separate consolidated statement of comprehensive income and consolidated statement of changes in equity) instead of presenting a single consolidated statement of income and retained earnings?

5. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 5 Financial Statement Presentation Case Question (b): Consolidated statement of comprehensive income and retained earnings How would the presentation of the consolidated statement of income and retained earnings change if the XYZ Group had a discontinued operation in the year ended 31 December 20X2?

6. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 6 Financial Statement Presentation Case Question (c):Consolidated statement of comprehensive income and retained earnings How would the presentation of the consolidated statement of income and retained earnings change if the XYZ Group had a partly owned subsidiary?

7. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 7 Financial Statement Presentation Case Question (d):Consolidated statement of comprehensive income and retained earnings Could the XYZ Group choose to present an analysis of expenses by function instead of an analysis of expenses by nature? What are examples of expenses by function?

8. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 8 Financial Statement Presentation Case Question (e):Consolidated statement of comprehensive income and retained earnings Is the group required to disclose this line item ‘Profit before tax’?

9. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 9 Financial Statement Presentation Case Question (f): Consolidated statement of financial position Could this statement have been called ‘Balance Sheet’ instead of ‘Statement of Financial Position’? What about ‘Statement of Asset and Liability Values’?

10. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 10 Financial Statement Presentation Case Question (g):Consolidated statement of financial position Does the IFRS for SMEs prohibit presenting the statement of financial position before the statement of income and retained earnings?

11. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 11 Financial Statement Presentation Case Question (h):Consolidated statement of financial position Does the IFRS for SMEs require a statement of financial position at the beginning of the earliest comparative period?

12. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 12 Financial Statement Presentation Case Question (i): Consolidated statement of financial position Instead of presenting its current assets / liabilities separately from its non-current assets / liabilities, could the XYZ Group choose to present its assets and liabilities in order of their liquidity (no current / non-current split)?

13. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 13 Financial Statement Presentation Case Question (j): Consolidated statement of financial position When an entity presents its assets and liabilities in order of their liquidity, is that order ascending or descending?

14. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 14 Financial Statement Presentation Case Question (k): Consolidated statement of cash flows This statement has a sub-heading “Cash flow included in investing activities” within “Cash flows from operating activities”. Why is this item there?

15. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 15 Financial Statement Presentation Case Question (l): Consolidated statement of cash flows Does the IFRS for SMEs require the XYZ Group to separately disclose the amount of finance costs paid in cash?

16. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 16 Financial Statement Presentation Case Question (m):Consolidated statement of cash flows Does the IFRS for SMEs require the group to separately disclose the amount of income taxes paid in cash?

17. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 17 Financial Statement Presentation Case Question (n): Note 2 Accounting Policies If the presentation currency is different from the functional currency, what additional information, if any, would the XYZ Group disclose?

18. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 18 Financial Statement Presentation Case Question (o):Note 2 Accounting Policies – Investments in Associates What other measurement bases, if any, could the XYZ Group adopt as its accounting policy for investments in associates?

19. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 19 Financial Statement Presentation Case Question (p):Note 2 Accounting Policies – Borrowing costs Could the XYZ Group change its accounting policy for borrowing costs such that borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset (ie can the group account for borrowing costs in accordance with the requirements of IAS 23 Borrowing Costs of full IFRSs)?

20. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 20 Financial Statement Presentation Case Question (q): Note 2 Accounting Policies – Intangible assets If the XYZ Group had purchased a trademark whose useful life management considers to be indefinite, would the group still account for the trademark at cost less accumulated depreciation and any accumulated impairment losses?

21. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 21 Financial Statement Presentation Case Question (r): Note 2 Accounting Policies – Leases Because of some guarantees made in a lease agreement, the lessee’s management found it difficult to classify the lease as operating or financing. In the end, they concluded it is operating. Is any special disclosure required?

22. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 22 Financial Statement Presentation Case Question (s): Note 2 Accounting Policies – Employee benefits – long-service payment Could XYZ Group have chosen another method to measure its defined benefit obligation rather than the projected unit credit method?

23. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 23 Financial Statement Presentation Case Question (t): Note 6 Gain on sale of equipment XYZ Group has never before disposed of any PP&E. Could XYZ present this gain as a separate line item in the consolidated statement of income and retained earnings described as ‘Extraordinary item – Gain on Sale of Equipment’?

24. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 24 Financial Statement Presentation Case Question (u): Note 10 Trade and other receivables Instead of presenting a single line ‘Trade and other receivables’ in the balance sheet and then disclosing ‘Trade debtors’ and ‘Prepayments’ separately in the notes, could XYZ present these two items as separate line items in the balance sheet?

25. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 25 Financial Statement Presentation Case Question (v): Note 15 Deferred tax Note 15 discloses that XYZ has both deferred tax assets and deferred tax liabilities. Yet the statement of financial position shows only a deferred tax asset. Why?

26. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 26 Financial Statement Presentation Case Question (w): Note 15 Deferred tax If a material amount of the deferred tax asset is expected to be received in cash in 20X3, would the XYZ Group present the amount to be received in 20X3 as a current asset in its consolidated statement of financial position at 31 December 20X2?

27. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 27 Financial Statement Presentation Case Question (x): Note 16 Bank overdraft and loan Instead of presenting cash (current asset) separately from bank overdraft (current liability) could XYZ choose to present the net amount (eg 20X2: 54,900) as a current liability ‘Cash and cash equivalents’ in its consolidated statement of financial position (ie in the same way that it is presented in the consolidated statement of cash flows)?

28. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 28 Financial Statement Presentation Case Question (y): Note 18 Provision for warranty obligations If the warranty was for a longer period (eg 3 years) what additional line item, if any, would you expect to see in the disclosure about the changes in the provision for the period?

29. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 29 Financial Statement Presentation Case Question (z): Note 25 Events after end of reporting period The 16,000 reimbursement from the insurance company was received in cash before the statements were approved on 10 March X3. So it is ‘virtually certain’. Why is it not shown as a receivable in the statement of financial position?

30. © 2010 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 30 Questions or comments? Expressions of individual views by members of the IASB and its staff are encouraged. The views expressed in this presentation are those of the presenter. Official positions of the IASB on accounting matters are determined only after extensive due process and deliberation.

31. © 2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org 31 This presentation may be modified from time to time. The latest version may be downloaded from: http://www.ifrs.org/IFRS+for+SMEs/SME+Workshops.htm The accounting requirements applicable to small and medium ‑ sized entities (SMEs) are set out in the International Financial Reporting Standard (IFRS) for SMEs, which was issued by the IASB in July 2009. The IFRS Foundation, the authors, the presenters and the publishers do not accept responsibility for loss caused to any person who acts or refrains from acting in reliance on the material in this PowerPoint presentation, whether such loss is caused by negligence or otherwise.