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© 2011 IFRS Foundation 1 The IFRS for SMEs Topic 2.3 Section 13 Inventories Section 16 Investment Property Sec 17 Property, Plant & Equipment Section 18

Apr 02, 2015

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2011 IFRS Foundation 1 The IFRS for SMEs Topic 2.3 Section 13 Inventories Section 16 Investment Property Sec 17 Property, Plant & Equipment Section 18 Intangible Assets Section 27 Impairment of Assets Slide 2 2011 IFRS Foundation 2 This PowerPoint presentation was prepared by IFRS Foundation education staff as a convenience for others. It has not been approved by the IASB. The IFRS Foundation allows individuals and organisations to use this presentation to conduct training on the IFRS for SMEs. However, if you make any changes to the PowerPoint presentation, your changes should be clearly identifiable as not part of the presentation prepared by the IFRS Foundation education staff and the copyright notice must be removed from every amended page. 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. Slide 3 2011 IFRS Foundation 3 The IFRS for SMEs Scope of Sections 13 and 1618 Slide 4 2011 IFRS Foundation 4 Section 13 scope Inventories are assets: held for sale in the ordinary course of business (finished goods); in the process of production for such sale (work in process); or in the form of materials or supplies to be consumed in the production process or in the rendering of services (raw materials & consumables). Section 13 specifies accounting + reporting for inventories Slide 5 2011 IFRS Foundation Section 13 scope exclusions Section 13 applies to all inventories, except work in progress arising under construction contracts financial instruments biological assets related to agricultural activity and agricultural produce at the point of harvest 5 Slide 6 2011 IFRS Foundation 6 Section 17 definition of PP&E Property, plant and equipment (PP&E) are tangible assets: held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; & are expected to be used in +1 period. Slide 7 2011 IFRS Foundation 7 Section 17 scope Section 17 specifies accounting & reporting for: property, plant and equipment; and investment property whose fair value cannot be measured reliably without undue cost or effort on an ongoing basis. Slide 8 2011 IFRS Foundation 8 Section 16 scope Investment property is land or a building (or part of a building, or both) held by the owner or by the lessee under a finance lease to earn rentals or for capital appreciation or both. Section 16 specifies accounting & reporting for: investment property whose fair value can be determined reliably without undue cost or effort on an ongoing basis Slide 9 2011 IFRS Foundation 9 Section 18 definition intangible asset Intangible = identifiable non-monetary asset without physical substance Identifiable when: separable, ie can be separated from the entity & sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, asset or liability, or arises from contractual or legal rights Slide 10 2011 IFRS Foundation 10 Section 18 scope Section 18 specifies accounting & reporting for intangible assets, excluding goodwill financial assets mineral rights & mineral reserves, such as oil, natural gas and similar non regenerative resources Slide 11 2011 IFRS Foundation Sections 13 & 1618 scope examples In scope of S13, S16, S17 or S18? Ex 1*: A trades in property (ie it buys property to sell it at a profit near-term) Ex 2*: B trades in transferable taxi licences Ex 3*: C produces wine from grapes harvested from its vineyards in a 3-year production cycle * see example with the same number in Module 13 of the IFRS Foundation training material 11 Slide 12 2011 IFRS Foundation Sections 13 & 1618 examples continued In scope of S13, S16, S17 or S18? Ex 4*: D holds lubricants that are consumed by its machine in producing goods Ex 6*: E maintains its plant using: a bespoke long-life cleaning machine; & a set of low-value common tools acquired from a local hardware store. * see example with the same number in Module 13 of the IFRS Foundation training material 12 Slide 13 2011 IFRS Foundation Sections 13 & 1618 examples continued In scope of S13, S16, S17 or S18? Ex 9*: F operate a hotel from a building it owns it rents out hotel rooms for short-stays guest services included in the room rate = breakfast and television services charged for separately = other meals, room bar, gymnasium facilities & guided tours * see example 9 in Module 16 of the IFRS Foundation training material 13 Slide 14 2011 IFRS Foundation Sections 13 & 1618 examples continued In scope of S13, S16, S17 or S18? Ex 3*: G buys a building to earn rentals under an operating lease from its subsidiary. The sub sells its products from the building Ex 7*: H owns a herd of cattlebreeding stock of its agricultural activities a tractor used to transport feed to the herd * see example with the same number in Module 17 of the IFRS Foundation training material 14 Slide 15 2011 IFRS Foundation Sections 13 & 1618 examples continued In scope of S13, S16, S17 or S18? Ex 1: I owns digital films and audio recordings which it licenses to its customers Ex 12: In accounting for the acquisition of the net assets and operations of a competitor J recognised future economic benefits arising from assets that are not individually identified as an asset (goodwill) 15 Slide 16 2011 IFRS Foundation Examples of classification judgements when unclear what purpose of acquiring property is (inventories, IP or PP&E?) when property owner provide ancillary services to the occupants of a property (IP or PP&E?) mixed use property (IP or PP&E?) when is undue cost or effort necessary to measure the fair value of an IP on an ongoing basis (IP or PP&E?) 16 Slide 17 2011 IFRS Foundation 17 The IFRS for SMEs Section 13 Inventories and Paragraphs 27.227.4 (impairment of inventories) Slide 18 2011 IFRS Foundation 18 Section 13 measurement Inventories in the scope of Section 13 are measured at the lower of: cost; and estimated selling price less costs to complete and sell (SP-CTC&S). Slide 19 2011 IFRS Foundation Section 13 measurement exemptions Section 13 does not apply to the measurement of inventories of producers of agricultural and forest products, agricultural produce after harvest, and minerals and mineral products, or commodity brokers and dealers when measured at fair value less costs to sell through profit or loss 19 Slide 20 2011 IFRS Foundation Section 13 measurement examples Are these inventories measured in accordance with Section 13? Ex 7*: A commodity broker-trader acquires wheat in anticipation of selling it in the short-term. The broker-trader measures such inventories at fair value less costs to sell Ex 8*: Same as Ex 7 except the broker trader measures inventories at cost * see example with the same number in Module 13 of the IFRS Foundation training material 20 Slide 21 2011 IFRS Foundation 21 Section 13 cost Cost = costs of purchase + costs of conversion + other costs incurred in bringing the inventories to their present location and condition Slide 22 2011 IFRS Foundation 22 Section 13 cost of purchase Cost of purchase = purchase price + import duties + other taxes (non-refundable in nature) + other direct costs costs of purchase is after deducting trade discounts, rebates etc if purchase arrangement effectively contains an unstated financing element, eg a difference between the purchase price for normal credit terms and the deferred settlement amount, the difference is recognised as interest expense over the period of the financing (ie it is not added to the cost of the inventories) Slide 23 2011 IFRS Foundation 23 Section 13 examples cost of purchase Ex 13*: A buys a good priced at CU500 per unit from Z. Z awards A a 20% discount on orders of +100 units and 10% discount when A buys +999 units in 1 year. The discounts apply to all units acquired in a year. A buys as follows: 800 units on 1/1/20X1 and 200 units on 24/12/20X1. On 31/12/20X1, 150 units were unsold (ie inventories of A). * see example 13 in Module 13 of the IFRS Foundation training material Slide 24 2011 IFRS Foundation 24 Section 13 examples cost of purchase Ex 13 continued : A measures the cost of the inventories in 20X1 at CU350,000 [ie 1,000 units (CU500 list price less 30%(CU500) volume discount)], because all units purchased in the year get the full 30% discount. A recognises: expense (cost of sales) of CU297,500 [ie 850 units sold (CU500 list price less 30%(CU500) volume discount)] in profit or loss in 20X1 asset (inventories) of CU52,500 [ie 150 units unsold (CU500 less 30%(CU500) discount)] at 31/12/20X1. Slide 25 2011 IFRS Foundation 25 Section 13 examples cost of purchase Ex 17*: A buys inventory for CU2,000,000 on 2 year interest free credit. Appropriate discount rate = 10% per year. The cost of the inventory is CU1,652,893 (ie the present value of the future payment). Calculation: CU2,000,000 future payment (1.1) 2. * see example 17 in Module 13 of the IFRS Foundation training material Slide 26 2011 IFRS Foundation 26 Section 13 cost of conversion Cost of conversion = direct costs + indirect costs (allocated production overheads) allocated production overheads = fixed production overheads + variable production overheads Slide 27 2011 IFRS Foundation 27 Section 13 examples conversion costs Ex 18*: A makes concrete

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