Presented to: University of Groningen, Faculty of Economics
in fulfillment of the thesis requirement for the Master Diploma in Accountancy
Author: Vinci, S.C. Ee
Student ID: S1519301
Appendix 1 The list of IFRSs and IASs as at 31 December 2005
IFRSs issued by IASB
IFRS 1 First-time Adoption of International Financial Reporting Standards IFRS 2 Share-based Payment
IFRS 3 Business Combinations IFRS 4 Insurance Contracts
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations IFRS 6 Exploration for and Evaluation of Mineral Resources
IASs issued and amended by IASC
IAS 1 Presentation of Financial Statements IAS 2 Inventories
IAS 7 Cash Flow Statements
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors IAS 10 Events After the Balance Sheet Date
IAS 11 Construction Contracts IAS 12 Income Taxes
IAS 14 Segment Reporting
IAS 16 Property, Plant and Equipment IAS 17 Leases
IAS 18 Revenue
IAS 19 Employee Benefits
IAS 20 Accounting for Government Grants and Disclosure of Government Assistance IAS 21 The Effects of Changes in Foreign Exchange Rates
IAS 23 Borrowing Costs
IAS 24 Related Party Disclosures
IAS 26 Accounting and Reporting by Retirement Benefit Plans IAS 27 Consolidated and Separate Financial Statements IAS 28 Investments in Associates
IAS 29 Financial Reporting in Hyperinflationary Economies
IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions IAS 31 Interests in Joint Ventures
IAS 32 Financial Instruments: Disclosure and Presentation see also IAS 33 Earnings per Share
IAS 34 Interim Financial Reporting IAS 36 Impairment of Assets
IAS 37 Provisions, Contingent Liabilities and Contingent Assets IAS 38 Intangible Assets
IAS 39 Financial Instruments: Recognition and Measurement IAS 40 Investment Property
IAS 41 Agriculture
Appendix 2 International accounting standards in the European Union
The following standards are applicable in the European Union from 1 January 2005
Revised/Amended
IAS 1 Presentation of Financial Statements March 2004
IAS 2 Inventories March 2004
IAS 7 Cash Flow Statements March 2004
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors March 2004
IAS 10 Events after the Balance Sheet Date March 2004
IAS 11 Construction Contracts January 1995
IAS 12 Income Taxes March 2004
IAS 14 Segment Reporting March 2004
IAS 16 Property, Plant and Equipment March 2004
IAS 17 Leases March 2004
IAS 18 Revenue March 2004
IAS 19 Employee Benefits March 2004
IAS 20 Accounting for Government Grants
and Disclosure of Government Assistance March 2004 IAS 21 The Effects of Changes in Foreign Exchange Rates March 2004
IAS 23 Borrowing Costs March 2004
IAS 24 Related Party Disclosures March 2004
IAS 26 Accounting and Reporting by Retirement Benefit Plans January 1988 IAS 27 Consolidated and Separate Financial Statements March 2004
IAS 28 Investments in Associates March 2004
IAS 29 Financial Reporting in Hyperinflationary Economies March 2004 IAS 30 Disclosures in the Financial Statements of Banks
and Similar Fin. Institutions March 2004
IAS 31 Interests in Joint Ventures March 2004
IAS 32 Financial Instruments: Disclosure and Presentation March 2004
IAS 33 Earnings per Share March 2004
IAS 34 Interim Financial Reporting March 2004
IAS 36 Impairment of Assets March 2004
IAS 37 Provisions, Contingent Liabilities and Contingent Assets March 2004
IAS 38 Intangible Assets March 2004
IAS 39 Financial Instruments: Recognition and Measurement* March 2004
IAS 40 Investment Property March 2004
IAS 41 Agriculture March 2004
IFRS 1 First-time Adoption of International Financial Reporting Standards March 2004
IFRS 2 Share-based Payment March 2004
IFRS 3 Business Combinations March 2004
IFRS 4 Insurance Contracts March 2004
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations March 2004 Footnote
* IAS 39 contains carve outs in the following paragraphs:
Standard: Paragraphs 9 b, 35 and 81A. In june 2005, an revised version of fair value option on IAS39 is adopted.
Appendix 3 Guidelines 2005 Issued by DASB
Guidelines 2005 Issued by DASB for large and medium-sized entities:
FRAMEWORK
Framework for the preparation and presentation of financial statements GENERAL PRINCIPLES
100 Introduction
110 Objectives and basic assumptions 115 Recognition criteria
120 Measurement principles 121 Impairments of fixed assets 122 Foreign exchange (Guideline) 122 Foreign exchange (Draft Guideline) 135 Revenue recognition
140 Changes in accounting policies 145 Changes in accounting estimates 150 Correction of fundamental errors 160 Events after the balance sheet date 190 Other general matters
ITEMS OF THE ANNUAL ACCOUNTS 210 Intangible fixed assets
212 Tangible fixed assets (Guideline) 212 Tangible fixed assets (Draft Guideline) 213 Investment property
214 Financial fixed assets 215 Joint ventures
216 Mergers and acquisitions 217 Consolidation
220 Stocks (Guideline) 220 Stocks (Draft Guideline)
221 Work in progress on construction contracts 222 Debtors
224 Prepayments and accrued income 226 Securities
228 Cash and cash equivalents 240 Shareholders’ equit y 250 Liabilities-general
252 Provisions, contingent liabilities and contingent assets 254 Long-term liabilities
256 Current liabilities
258 Accruals and deferred income
260 Revenue recognition on intercompany transactions 265 Comprehensive income
270 Profit and loss account 271 Employee benefits 272 Taxation
273 Interest
274 Government grants and comparable facilities 290 Financial instruments
291 Financial instruments: recognition and measurement 292 Leasing (Guideline)
292 Leasing (Draft Guideline)
NOTES
300 Function and arrangement 305 Exemptions for group companies
315 Exemptions for small and medium-sized legal entities 330 Related parties (Guidelines)
330 Related parties (Draft Guidelines) 340 Earnings per share
345 Discontinued operations 350 Segment information 360 Cash flow statement 370 Added-value statement
390 Additional information to be included in the notes 394 Interim reports
396 Publication 398 Audit
DIRECTORS’ REPORT, OTHER INFORMATION AND OTHER ITEMS 400 Directors’ report
410 Other information
420 Profit appropriation and treatment of losses 430 Key figures, ratios and historical summaries SPECIAL SECTORS
600 Banks
605 Insurance companies 610 Pension funds
615 Investments institutions 620 Cooperatives
630 Commercial foundations and assoc iations 640 Non-profit organisations
645 Officially recognised social housing institutions 650 Fund-raising institutions
655 Welfare institutions (2005) 655 Welfare institutions (2006)
Source: DASB http://www.rjnet.nl/pdf/Table_of_contents_large.pdf
Appendix 4 Summary of Main Provisions under IFRS 1
Scope and application
IFRS 1 sets out the procedures that an entity must follow when it adopts IFRS for the first time as the basis for preparing its general-purpose financial statements. IFRS 1 applies if an entity’s first IFRS financial statements are for a period beginning on or after 1 January 2004.
Adjustment made in opening IFRS Balance Sheet
An entity must adjust the following in its opening IFRS balance sheet:
• The entity should eliminate previous -GAAP assets and liabilities from the opening balance sheet if they do not qualify for recognition under IFRS.
• The entity should recognise all assets and liabilities required to be recognised by IFRS even if they were never recognised under previous GAAP
• The entity should reclassify previous -GAAP opening balance sheet items into the appropriate IFRS classification
• The entity should apply IFRSs in measuring all recognised assets and liabilities.
• Adjustments made at the time of first-time adoption should be recognised directly in retained earnings or, if appropriate, another category of equity at the date of transition to IFRS.
Comparative information
IFRS 1 requires that, in an entity’s first IFRS financial statements, one year of comparative information be presented in accordance with IFRS. The date of transition to IFRS is defined as the beginning of the earliest period for which an entity presents full comparative information under IFRSs in its first IFRS financial statements. All comparative information subsequent to the date of transition is restated and presented in accordance with IFRS.
Entities that adopt IFRS before 1 January 2006 are allowed not to apply IAS 32, IAS39 and IFRS4 to the comparative information presented in their first IFRS financial statements. If a first-time adopter makes this election its date of transition for the purposes of IAS 32, IAS 39 and IFRS 4 is the beginning of the current reporting period.
Important Optional Exemptions
There are some important exemptions are granted under IFRS 1 in specified areas. The following exemptions are individually optional, not mandatory:
• Business combinations and goodwill (IFRS3)
Business combinations that occurred before opening balance sheet date
a. An entity may keep the original previous-GAAP accounting, that is, not restate:
· previous mergers or goodwill written-off from reserves;
· the carrying amounts of assets and liabilities recognised at the date of acquisition or merger;
· how goodwill was initially determined (do not adjust the purchase price allocation on acquisition).
b. However, should it wish to do so, an entity can elect to restate all business combinations starting from a date it selects prior to the opening balance sheet date.
c. In all cases, the entity must make an initial IAS 36 impairment test of any remaining goodwill in the opening IFRS balance sheet, after reclassifying, as appropriate, previous GAAP intangibles to goodwill.
• Property, plant, and equipment, intangible assets, and investment property carried under the cost model
a. These assets may be measured at their fair value at the opening IFRS balance sheet date (this option applies to intangible assets only if an active market exists). Fair value becomes the “deemed cost” going forward under the IFRS cost model. “Deemed cost” is a surrogate for an actual cost measurement.
b. If, before the date of its first IFRS balance sheet, the entity had revalued any of these assets under its previous GAAP either to fair value or to a price-index-adjusted cost, that previous GAAP revalued amount at the date of the revaluation can become the deemed cost of the asset under IFRS.
c. If, before the date of its first IFRS balance sheet, the entity had made a one-time revaluation of assets or liabilities to fair value because of a privatisation or initial public offering, and the revalued amount became deemed cost under the previous GAAP, that amount (adjusted for any subsequent depreciation, amortisation, and impairment) would continue to be deemed cost after the initial adoption of IFRS.
• Employee benefits: actuarial gains and losses (IAS 19)
An entity may elect to recognise all cumulative actuarial gains and losses for all defined benefit plans at the opening IFRS balance sheet date (that is, reset any corridor recognised under previous GAAP to zero), even if it elects to use the IAS 19 corridor approach for actuarial gains and losses that arise after first-time adoption of IFRS. If an entity does not elect to apply this exemption, it must restate all defined benefit plans under IAS 19 since the inception of those plans (which may differ from the effective date of IAS 19).
• Accumulated translation reserves (IAS 21)
An entity may elect to recognise all translation adjustments arising on the translation of the financial statements of foreign entities in accumulated profits or losses at the opening IFRS balance sheet date (that is, reset the translation reserve included in equity under previous GAAP to zero). If the entity elects this exemption, the gain or loss on subseque nt disposal of the foreign entity will be adjusted only by those accumulated translation adjustments arising after the opening IFRS balance sheet date. If the entity does not elect to apply this exemption, it must restate the translation reserve for all foreign entities since they were acquired or created.
Important Mandatory Exemptions
There are also three important exemptions provided under IFRS 1 that are mandatory, not optional.
These are:
• Derecognition of financial instruments (IAS39)
A first-time adopter is not permitted to recognise financial assets or financial liabilities that had been derecognised under its previous GAAP in a financial year beginning before 1 January 2001 (the effective date of IAS 39). This is consistent with the transition provis ion in IAS 39.172(a).
However, if a special purpose entity (SPE) was used to effect the derecognition of financial instruments and the SPE is controlled at the opening IFRS balance sheet date, the SPE must be consolidated.
• Hedge accounting (IAS 39)
The conditions in IAS 39.122-152 for a hedging relationship that qualifies for hedge accounting are applied as of the opening IFRS balance sheet date. The hedge accounting practices, if any, that were used in periods prior to the opening IFRS balance sheet may not be retrospectively changed.
This is consistent with the transition provision in IAS 39.172(b). Some adjustments may be needed to take account of the existing hedging relationships under previous GAAP at the opening balance sheet date.
• Information to be used in preparing IFRS estimates retrospectively
In preparing IFRS estimates retrospectively, the entity must use the inputs and assumptions that had been used to determine previous GAAP estimates in prior periods, provided that those inputs and assumptions are consistent with IFRS. The entity is not permitted to use information that became available only after the previous GAAP estimates were made except to correct an error.
Disclosure in regards to the Transition from previous GAAP to IFRS
IFRS 1 requires disclosures that explain how the transition from previous GAAP to IFRS affected the entity’s reported financial position, financial performance, and cash flows. This includes:
1. Reconciliations of equity reported under previous GAAP to equity under IFRS both (a) at the date of the opening IFRS balance sheet and (b) the end of the last annual period reported under the previous GAAP. For an entity adopting IFRS for the first time in its 31 December 2005 financial statements, the reconciliations would be as of 1 January 2004 and 31 December 2004.
2. Reconciliations of profit or loss for the last annual period reported under the previous GAAP to profit or loss under IFRS for the same period.
3. Explanation of material adjustments (including error corrections and impairment losses) that were made, in adopting IFRS for the first time, to the balance sheet, income statement, and cash flow statement.
4. Appropriate explanations if the entity has availed itself of any of the specific recognition and measurement exemptions permitted under IFRS 1 – for instance, if it used fair values as deemed cost.
Source: http://www.iasplus.com/iasplus/ifrs1summary.pdf
Appendix 5 Sample Dutch Companies
The list of surveyed AEX Dutch companies:
Company Name
Major player in the industry sector of
Website
ABN AMRO Holding N.V. Banking www.abnamro.com
Koninklijke Ahold N.V. Retail www.ahold.nl
Akzo Nobel Chemicals &
pharmaceuticals www.akzonobel.nl Koninklijke KPN N.V. Telecommunication www.kpn-corporate.com
Wolters-Kluwer Publishing www.wolterskluwer.com
Sources of information have used in this study:
Company Source documents
ABN AMRO Holding N.V.
• IFRS Press release of 30 March 2005
• IFRS Analyst & Investor Meeting of 18 November 2004 (Powerpoint sheets)
• Annual Report 2004 and 2005
Koninklijke Ahold N.V. • IFRS Technical Conversion Memo on 12 May 2005
• Annual Report 2004 and 2005
Akzo Nobel • IFRS-based Reporting of 19 April 2005
• Annual Report 2004 and 2005
Koninklijke KPN N.V. • IFRS Press release of 18 April 2005
• Annual Report 2004 and 2005
Wolters-Kluwer • Annual Report 2004 and 2005
• Transcript Wolters - Kluwer Conference Call on 8 March 2005
Appendix 6 Principal differences between IAS 19 and SFAS 87
Recognising actuarial gains and losses, when they arise, directly in the statement of equity IFRS: Permitted
US GAAP: Not permitted.
Multi-employer plan that is a defined benefit plan
IFRS: Should be accounted for as a defined benefit plan if necessary information is available, otherwise as a defined contribution plan.
US GAAP: Accounted for as a defined contribution plan.
Minimum liability recognition for benefits under defined benefit plans IFRS: No minimum liability requirement.
US GAAP: At a minimum, the unfunded accumulated benefit obligation is recognised.
Termination benefits
IFRS: No distinction between ‘special’ and other termination benefits. Termination benefits recognised when the employer is demonstrably committed to pay.
US GAAP: Recognise special (one-time) termination benefits when employees accept the offer and the amount can be reasonably estima ted. Recognise contractual termination benefits when it is probable that employees will be entitled and the amount can be reasonably estimated.
Recognition of past service costs related to benefits that have vested IFRS: Recognised immediately.
US GAAP: Amortised over the remaining service period or life expectancy.
Timing of recognition of curtailment gains
IFRS: Both curtailment gains and losses are recognised when the entity is demonstrably committed and a curtailment has been announced.
US GAAP: Curtailment loss is recognised when it is probable that a curtailment will occur and the effects are reasonably estimable. A curtailment gain is recognised when the relevant employees are terminated or the plan suspension or amendment is adopted, which could occur after the entity is demonstrably committed and a curtailment is announced.
Measurement of a curtailment
IFRS: A curtailment gain or loss comprises (a) the change in the present value of the defined benefit obligation, (b) any resulting change in fair value of the plan assets, and (c) a pro rata share of any related actuarial gains and losses, unrecognised transition amount, and past service cost that had not previously been recognised.
US GAAP: Unrecognised actuarial gains and losses arising subsequent to transition are not affected by a curtailment, while the amount of the gain or loss would be offset by any portion of the unrecognised transition asset or liability.
Limitation on recognition of pension assets
IFRS: Pension assets cannot be recognized in excess of the net total of unrecognized past service cost and actuarial losses plus the present value of benefits available from refunds or reduction of future contributions to the plan.
US GAAP: No limitation on the amount that can be recognized.
Source: Deloitte 2005, IFRSs and US GAAP A pocket comparision http://www.iasplus.com/dttpubs/2005ifrsus.pdf
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