Bài giảng Kế toán, kiểm toán - Chapter 5: International financial reporting standards: part II

Chapter 5: International Financial Reporting Standards: Part IILearning ObjectivesDescribe and apply the requirements of IFRS related to the financial reporting of current liabilities, provisions, employee benefits, share-based payment, income taxes, revenue, and financial instrumentsExplain and analyze the effect of major differences between IFRS and U.S. GAAP related to the financial reporting of current liabilities, provisions, employee benefits, share-based payment, income taxes, revenue, and financial instruments5-2Current LiabilitiesIAS 1, Presentation of Financial Statements, requires classification of liabilitiesCurrent liabilitiesNoncurrent liabilitiesCurrent liabilitiesExpected to settle in normal operating cycleHeld for trading purposeSettled within 12 months of balance sheet dateNot deferred until 12 months after balance sheet date5-3Differences in IFRS and U.S. GAAP: Current LiabilitiesRefinanced short-term debtIFRS: Long-term, if refinanced prior to balance sheet dateU.S. GAAP: Long-term, if refinancing is agreed prior to balance sheetAccounts payable on demand due to violation of debt covenantsIFRS: Current, unless lender issued waiver of 12 months by balance sheet dateU.S. GAAP: Current, unless lender issued waiver obtained by annual report issuance dateBank overdraftsIFRS: Long-term, if integral part of cash management netted against cash U.S. GAAP: Always treated as current liabilities5-4Provisions, Contingent Liabilities, and Contingent AssetsIAS 37, Provisions, Contingent Liabilities and Contingent Assets, provides guidance for:Reporting liabilities and assets of uncertain timing, amount, or existenceEnvironmental and nuclear decommissioning costs5-5Contingent Liability Recognized under IFRS, when:There is a present obligations from past eventsIt is probable that there will be an outflow of resourcesA reliable estimate of the obligation can be madeConstructive obligation: arise from past actions or current statements indicating that a company will accept certain responsibilitiesNo concept of constructive obligation in U.S. GAAP5-6Contingent Liability As defined by IAS 37Possible obligation confirmed by occurrence or nonoccurrence of future eventPresent obligation not recognized because:No probable outflow of resourcesAmount cannot be measured reliablyRecognized under U.S. GAAP when outflow is probableOnly disclosed if outflow possible, and not probable5-7Provisions IAS 37The best estimate of the expenditure required to settle the present obligationProbability-weighted expected valueDiscounted to present valueRecognized under U.S. GAAP at the low end of the range of possible amountsProvision is reversed when outflow of resources is not probable5-8Onerous ContractUnavoidable costs of obligation exceed economic benefits to be receivedRecognize provision for lower of Cost of fulfillmentPenalty from non-fulfillmentIf onerous from entity's own action, no recognition until that action happens5-9RestructuringA program planned and controlled by management that changes either:Scope of business Manner in which business is conductedUnder IAS 37, a restructuring provision is recognized when:Formal restructuring plan existsThere is a valid expectation of the restructuringU.S. GAAP does not allow recognition until liability has been incurred5-10Employee BenefitsIAS 19, Employee Benefits, covers all forms of employee compensation and benefitsExcludes share-based compensationFour types of employee benefitsShort-term benefits (compensated absences and bonuses)Post-employment (pensions and medical benefits)Other long-term benefits (deferred compensation and disability)Termination benefits (severance and early retirement)5-11Employee BenefitsShort-term benefits recognize expense and liability at the time employees provide serviceAmount recognized is undiscountedCompensated absences (for sick/vacation pay) accrue when services are provided only if:The compensated absences accumulate over time They can be carried forward to future periodsFor nonaccumulating compensating balances, an expense and liability are recognizedProfit sharing and bonus plansAn expense and a liability are accrued if:There are present legal or constructive obligation o make such payments The amount can be reasonably measured5-12Employee BenefitsPost-employment benefitsIAS 19 distinguishes between defined contribution plans and defined benefit plansDefined contribution planBenefits accrue when services are renderedLiability reduces when contributions are madeDefined benefit planTwo major issues Calculation of the net defined benefit liability (or asset)Calculation of the defined benefit cost5-13Post-employment benefitsNet defined benefit liability (asset)Balance sheet amount calculated as:+ Present value of the defined benefit obligation (PVDBO)− Fair value of plan assets (FVPA)Asset recognized is limited to the larger ofSurplus Asset ceilingNo asset ceiling under U.S. GAAP5-14Post-employment benefitsDefined benefit cost reported in incomeComponents includeCurrent service costPast service cost and gains and losses on settlementsNet interest on the net defined benefit liability (asset)Remeasurements of net defined benefit liability (asset)Other comprehensive incomeNet income5-15Other post-employment benefitsIAS 19 does not provide separate guidance for other post-employment benefitsU.S. GAAP provides more guidance for measurement of post-employment medical benefits5-16Share-based PaymentIFRS 2, Share-based Payment, sets out measurement principles and specific requirements for three types of share-based payment transactionsEquity-settled share-based payment Cash-settled share-based payment Choice-of-settlement share-based paymentIFRS 2 and U.S. GAAP are substantially similar5-17Equity-Settled Share-Based PaymentPayments to non-employees for goods and servicesIFRS measurementFair value of goods or services, if determinedFair value of the equity instrumentU.S. GAAP measurementFair value of instrument at earlier ofCommitment for performanceWhen performance completed5-18Equity-Settled Share-Based PaymentPayments to employeesMeasured at the fair value of the equity instrumentsConsider vesting conditionsTotal compensation cost Recognized as compensation expenseEstimate of options vested to be revised throughout the vesting periodRecognition of associated compensation expenseStraight-line over service period for cliff vestingAmortize each installment (tranche) over their vesting period for Graded vestingU.S. GAAP allows choice of accelerated or straight-line recognition5-19Modification of Stock Option PlansTypes of modificationLength Vesting conditionsResult of fair value changeIncrease in fair valueIncrease compensation cost by the same amountDecrease in fair valueNo change in compensation cost deductedU.S. GAAPFair value determines compensation expenseNo minimum compensation as under IFRS5-20Cash-Settled Share-Based PaymentCash payment on stock price increase above predetermined levelRecognize fair value as a liability using option-pricing modelMeasure on each balance sheet dateUnder U.S. GAAP, classify certain cash-settled payments as equityUnder IFRS, classify as liability5-21Choice-of-settlement Share-based PaymentAllow entity to choose equity settlement or cash settlementIf present obligation to settle in cash, treat as cash-settledIf obligation settled in equity, treat as equity-settledTreat as compound financial instrument when receiving entity chooses equity settlement or cash settlementFair value split into separate debt and equity componentsRemeasure debt component must be remeasured at fair value balance sheet dateApply cash settlement against debt componentTransfer equity settlement to equity5-22Income TaxesIAS 12, Income Taxes, similar to U.S. GAAPAsset-and-liability approachDeferred tax assets and liabilities For temporary differencesFor operating loss tax credit carry forwardsUnder IFRS, measure on the basis of tax laws and rates enacted or substantively enactedUnder U.S. GAAP, measure on the basis of actually enacted tax laws and ratesAccount for double taxation effects and differences in rates5-23Income TaxesRecognition of Deferred Tax AssetUnder IFRS, recognize if future realization probableIAS 12 provides a more stringent thresholdU.S. GAAP, recognize if realization is more likely than notDisclosuresIFRS requiresExtensive disclosures of tax expense Explanation of hypothetical expense based on two approachesCompare statutory tax expense in the home country and effective tax expenseCompare weighted-average statutory tax rate across jurisdictions and tax expense based on the effective tax rateIFRS vs. U.S. GAAPIFRS application can cause temporary differences5-24Income TaxesFinancial Statement PresentationU.S. GAAPDeferred tax assets and liabilitiesCurrent Non-currentBased on underlying asset or liability Tax loss or credit carry-forwardsTiming of expected realizationIAS 1Deferred tax assets and liabilitiesOnly noncurrent5-25Revenue recognitionIAS 18, Revenue covers revenues fromSale of goods, rendering of servicesInterest, royaltiesDividendsU.S. GAAP 200 authoritative pronouncementsGeneral Measurement PrincipleFair value of consideration received or Receivable Multiple elements transactionSplit transaction into multiple elements orCombine multiple transactions into one5-26Revenue recognitionSale of Goods—5 CriteriaTransfer of significant risks and rewards to buyer No effective control maintained or management involvementCan measure revenue reliablyProbable future economic benefits flow to sellerSelling costs can be measured reliablyRendering of ServiceRevenue recognized in proportion to extent of services rendered U.S. GAAP Percentage-of-completion for service contracts not allowed 5-27Revenue recognitionInterest, Royalties and DividendsInterestRecognized on effective yield basisRoyaltiesRecognized on accrual basis Based on relevant agreementDividendsRecognized when shareholder’s right to payment establishedExchange of Goods or ServicesIf similar—no gain or lossIf dissimilar—recognize fair value of what is received adjusted for cash paid or received5-28Revenue recognitionConstruction ContractsRevenues and expenses recognized using the percentage-of-completion methodTwo typesFixed-price contractCost-plus contractCost-plus contract Economic benefits flow to the entityContract costs Clearly identified Reliably measured29Fixed-price contractRevenues measurableCosts and stage of completion measurable5-29IAS 18, RevenueIASB-FASB Revenue Recognition ProjectBoth boards working since 2002June 2010—joint Exposure Draft “Revenue from Contracts with Customers”5 steps:Identify the contractIdentify separate performance obligations in the contractDetermine the transaction priceAllocate the transaction price to the separate performance obligationsRecognize the revenue allocated to each performance obligation when the entity satisfies each performance obligation5-30Financial InstrumentsStandardsIAS 32, Financial Instruments: PresentationIAS 39, Financial Instruments: Recognition and MeasurementIFRS 7, Financial Instruments: DisclosureIFRS 9, Financial Instruments—issued in November 2009 to replace IAS 39—effective 2015DefinitionsIAS 32—a financial instrument is any contract that gives rise to both a financial asset of one entity and a financial liability or equity instrument of another entity5-31Financial InstrumentsDefinitionsIAS 32—a financial instrument gives rise toFinancial asset of one entity Financial liability or equity instrument of another entityFinancial asset CashContractual right to:Receive cash or other financial assetExchange financial assets or financial liabilities under potentially favorable conditionsAn equity instrument of another entityA contract that will or may be settled in entity’s own equity instruments5-32Financial InstrumentsFinancial liability A contractual obligation toDeliver cash or another financial assetExchange financial assets or financial liabilities Under potentially unfavorable conditionsA contract that will or may be settled in the equity’s own equity instruments5-33Financial InstrumentsLiability or EquityIAS 32Financial instruments to be classified As financial liabilities orEquity or both Compound Financial InstrumentsBoth a liability and equity element (e.g. convertible bond)Split accounting With and without method5-34Financial InstrumentsClassification of Financial Assets and LiabilitiesClassification of financial asset:Fair value through profit or loss (FVPL)Held-to-maturity investmentsLoans and receivablesAvailable-for-sale financial assetsFinancial liabilities:Fair value through profit or loss (FVPL)Measured at amortized costMeasurement of Financial InstrumentsInitial—fair value (normally = amount paid or received)Subsequent—cost, amortized cost, or fair value5-35Financial InstrumentsAvailable-for-Sale Financial Asset Denominated in a Foreign CurrencyTwo components The change in fair value in the foreign currency A foreign exchange gain or loss From exchange rate changesImpairmentIAS 39 requires assessment of impairementDerecognitionAppropriate ifContractual rights to the cash flows expiredFinancial asset has been transferred 5-36Financial InstrumentsDerivativesFinancial instruments swaps Whose value changes with change in A specified interest rate,financial instrument price,Commodity price, foreign exchange rate,Index, credit rating, or other variable. IFRS 39 Derivatives measured at fair valueReceivablesMeasuredInitially at fair valueSubsequently, at amortized cost using effective interest method5-37End of Chapter 55-38