IFRS Illustrative Consolidated Financial Statements

Transcription

1 IFRS Illustrative Consolidated Financial Statements For the year ended 31 December 2013 Connect to RSM IFRS experts and connect for success

2 IFRS Illustrative Consolidated Financial Statements RSM International Limited has prepared a model set of consolidated financial statements for a fictitious company called IFRS Statements Limited which, for the purpose of the exercise, is described as a company listed in Big City Stock Exchange and incorporated and domiciled in a fictitious country, Newland. No such company or jurisdiction exists and any preparers of financial statements will need to ensure that their financial statements comply with local laws as well as all relevant International Financial Reporting Standards ( IFRS ). In addition, it should be noted that this company operates in a fictitious environment which does not replicate the economic environment that characterised the year Hence, the preparation of IFRS consolidated financial statements in the 2012 and 2013 economic environment might require specific considerations and disclosures that have not been contemplated while designing these illustrative consolidated and comparative financial statements. The consolidated financial statements assume that IFRS Statements Limited is an existing IFRS preparer and is trading internationally as well as in its own country of incorporation and actively expanding. Accordingly, it is not a first-time adopter of IFRS. First-time adopters should instead refer to IFRS1 First-time Adoption of International Financial Reporting Standards. The illustrative financial statements do not include separate financial statements for the parent, which may be required by local laws or regulations, or may be prepared voluntarily. Where an entity presents separate financial statements that comply with IFRS, the requirements of IAS 27 Separate Financial Statements will then apply to those separate financial statements. The IFRS consolidated financial statements have been prepared according to all relevant standards and interpretations in force as at 31 December Where applicable, we have illustrated the effects of adopting a number of new, revised or amended pronouncements in 2013 (see Note 2A for details). Suggested disclosures are cross-referenced to the underlying requirements in the texts of the relevant standards and interpretations. References are generally to the version of the relevant standard or interpretation mandatorily effective for the 2013 financial statements (unless specified otherwise). Whilst the illustrative financial statements illustrate many presentation and disclosure requirements for the consolidated financial statements of the fictitious group of companies that report under International Financial Reporting Standards, the financial statements do not purport to be all inclusive. No single set of example financial statements can illustrate all possible presentations or required disclosures. Common additional and alternative disclosures are illustrated in the appendices. In practice, many entities will have followed special transitional rules that depended on when individual new standards were adopted or IFRS were applied for the first time. The model financial statements represent one form of presentation. Alternative presentations of IFRS may be appropriate and acceptable. The preparation of financial statements complying with IFRS is the responsibility of the management of the relevant entity. Accordingly, the model financial statements provided cannot be taken as a definitive reference; they do not replace the need for professional judgement having regard to relevant standards and other requirements and all the relevant circumstances relating to the issue under review. For the avoidance of doubt, the model financial statements are not based on any actual legal framework in any one or more jurisdictions. Although the illustrative consolidated financial statements have been prepared by RSM International Limited, the views expressed are the consolidated views of a group of professionals known as RSM IFRS Leadership Group for illustrative purposes only and not those of any Member Firm of RSM International Limited itself. The copyright in this published work belongs to and vests in RSM International Association and all rights are reserved. No part of this publication may be reproduced, stored in any system or transmitted in any form or by any means whether electronic, mechanical, photocopying, recording or otherwise without the prior permission in writing of RSM International Association.

3 CONTENTS CONSOLIDATED FINANCIAL STATEMENTS Page Consolidated Statement of Profit or Loss 1 Consolidated Statement of Comprehensive Income 2 Consolidated Statement of Financial Position 3 Consolidated Statement of Changes in Equity 4 Consolidated Statement of Cash Flows 5 Notes 6 APPENDICES APPENDIX 1 Consolidated Statement of Profit or Loss by nature of expense 63 APPENDIX 2 Consolidated Statement of Profit or Loss using a columnar approach to discontinued operations 65 APPENDIX 3 Consolidated Statement of Financial Position in order of liquidity 66 APPENDIX 4 Financial Instruments under IFRS 9 68 APPENDIX 5 Investment Properties 70 APPENDIX 6 Construction Contracts 72 KEY TO DISCLOSURE REFERENCES IASXpY IFRSXpY IFRICX SIC-X Paragraph Y of International Accounting Standard X Paragraph Y of International Financial Reporting Standard X International Financial Reporting Interpretations Committee number X Standing Interpretations Committee number X These consolidated financial statements are presented in CU. Unless otherwise stated, all amounts are expressed in thousands of CU. Decimal symbol is dot (. ) and digit-grouping symbol is comma (, )

4 IAS1p10(b);10A CONSOLIDATED STATEMENT OF PROFIT OR LOSS This illustrates the presentation of comprehensive income in two statements, by function of expense. IAS1p10(ea) (restated) IAS1p113;51(d),(e) Notes CU'000 CU'000 IAS1p82(a) Revenue 3 22,803 15,160 IAS1p99;103 Cost of sales 4 (18,697) (11,720) IAS1p85 GROSS PROFIT 4,106 3,440 IAS1p99;103 Distribution costs 4 (889) (747) IAS1p99;103 Administrative expenses 4 (1,222) (1,015) IAS1p99;103 Other operating expenses 4 (42) (130) IAS1p82(b) Finance costs 5 (91) (95) IAS1p82(c) Share of the profit (loss) of associates IAS1p85;94 Gain (loss) on disposal of available-for-sale financial assets IFRS3p42 Gain (loss) on revaluation of an associate becoming a subsidiary IAS1p85 PROFIT BEFORE TAX 2,555 1,771 IAS1p82(d) Income tax expense 7 (682) (562) IAS1p85 PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS 1,873 1,209 IAS1p82(ea) LOSS FOR THE YEAR FROM DISCONTINUED OPERATIONS 21 (110) (226) IAS1p81A(a) PROFIT FOR THE YEAR 1, PROFIT FOR THE YEAR ATTRIBUTABLE TO: IAS1p81B(a)(ii) Owners of the parent company 1, IAS1p81B(a)(i) Non-controlling interests , EARNINGS PER SHARE Cents Cents BASIC 8 IAS33p66;67;67A Continuing operations IAS33p68;68A;69 Discontinued operations (0.27) (0.69) IAS33p66;67;67A Total basic earnings per share DILUTED 8 IAS33p66;67;67A Continuing operations IAS33p68;68A;69 Discontinued operations (0.26) (0.65) IAS33p66;67;67A Total diluted earnings per share Page 1

5 IAS1p10(b);10A CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME IAS1p10(ea) (restated) IAS1p113;51(d),(e) Notes CU'000 CU'000 IAS1p10A;81A(a) PROFIT FOR THE YEAR 1, IAS1p82A(a) OTHER COMPREHENSIVE INCOME ITEMS THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS IAS19p120(c) Remeasurement of the net defined benefit liability / asset 26 (100) (36) IAS1p90;91(b) Income tax relating to items that will not be reclassified IAS1p82A(b) ITEMS THAT WILL BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS WHEN SPECIFIC CONDITIONS ARE MET (100) (36) IAS1p82A Exchange translation difference IAS1p82A Gains on available-for-sale financial assets IAS1p92;94 Reclassification adjustments on disposal of available-for-sale financial assets 2 6 (63) (18) IAS1p82A Cash flow hedges IAS1p82A Net investment hedge IAS1p90;91(b) Income tax relating to items that may be reclassified 1 7 (28) (17) IAS1p81A(b) OTHER COMPREHENSIVE INCOME FOR THE YEAR - NET OF TAX IAS1p81A(c) TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,826 1,090 TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO: IAS1p81B(b)(ii) Owners of the parent company 1,731 1,047 IAS1p81B(b)(i) Non-controlling interests ,826 1,090 IAS1p90 1 Alternatively each component of other comprehensive income can be presented net of tax effect, with income tax relating to each component disclosed in the notes. IAS1p94 2 Alternatively reclassification adjustments may be presented in the notes. Page 2

6 IAS1p10(a) IAS1p10(ea),(f) CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER /12/13 31/12/12 (restated) 01/01/12 (restated) 1 IAS1p113;51(d),(e) Notes CU'000 CU'000 CU'000 ASSETS IAS1p60 NON-CURRENT ASSETS IAS1p54(a) Property, plant and equipment 10 5,800 5,520 6,066 IAS1p55 Goodwill 11 1, IAS1p54(c) Other intangible assets 12 2, IAS1p54(e) Investments in associates IAS1p54(d) Available-for-sale financial assets IAS1p54(o);56 Deferred tax assets IAS1p60 CURRENT ASSETS Total non-current assets 10,341 7,586 7,983 IAS1p54(g) Inventories 18 2,623 1,995 1,713 IAS1p54(h) Trade and other receivables 19 2,586 1,517 1,437 IAS1p54(i) Cash and cash equivalents ,831 3,872 3,456 IAS1p54(j) Non-current assets classified as held for sale 21 1, Total current assets 6,847 3,872 3,456 TOTAL ASSETS 17,188 11,458 11,439 EQUITY AND LIABILITIES EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT COMPANY IAS1p54(r) Capital 31 2,596 1,870 1,810 IAS1p54(r) Reserves 32 1, IAS1p54(r) Retained earnings 6,309 5,151 4,725 9,940 7,316 6,599 IAS1p54(q) NON-CONTROLLING INTERESTS IAS1p60 TOTAL EQUITY 10,246 7,351 6,641 NON-CURRENT LIABILITIES IAS1p55 Long-term borrowings 22 2, IAS1p54(m) Derivative financial instruments IAS1p54(k) Trade and other payables IAS1p55 Long-term retirement benefit obligations IAS1p54(o);56 Deferred tax liabilities IAS1p54(l) Long-term provisions IAS1p55 Other non-current liabilities IAS1p60 CURRENT LIABILITIES Total non-current liabilities 3,792 1,735 1,584 IAS1p55 Short-term borrowings ,527 IAS1p54(m) Derivative financial instruments IAS1p54(k) Trade and other payables 24 1,017 1,045 1,175 IAS1p55 Short-term retirement benefit obligations IAS1p54(n) Current tax payable IAS1p54(l) Short-term provisions ,850 2,372 3,214 IAS1p54(p) Liabilities directly associated with non-current assets classified as held for sale Total current liabilities 3,150 2,372 3,214 TOTAL LIABILITIES 6,942 4,107 4,798 TOTAL EQUITY AND LIABILITIES 17,188 11,458 11,439 IAS1p40A 1 Although the retrospective changes in accounting policies, restatements or reclassifications of items as detailed in Note 2A do not have a material effect on the information in the Group s statement of financial position at the beginning of the preceding period, a third statement of financial position as at 1 January 2012 is presented for illustration purposes only. Page 3

7 IAS1p10(c);106 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Capital Reserves Retained Earnings Attributable to Owners of the Parent Noncontrolling Interests TOTAL EQUITY IAS1p113;51(d),(e) Notes CU 000 CU 000 CU 000 CU 000 CU 000 CU 000 At 1 January 2012 (as previously reported) 1, ,722 6, ,638 IAS1p106(b) Impact of changes in accounting policies 2A At 1 January 2012 (restated) 1, ,725 6, ,641 Profit for the year Other comprehensive income for the year (115) 116 (9) 107 Total comprehensive income for the year , ,090 Share options Equity dividends paid (470) (470) (50) (520) At 31 December 2012 (restated) 1, ,151 7, ,351 Profit for the year - - 1,658 1, ,763 Other comprehensive income for the year (119) 73 (10) 63 Total comprehensive income for the year ,539 1, ,826 Ordinary shares issued on acquisition of subsidiary Share options Issue of convertible bonds Equity dividends paid (405) (405) (384) (789) Purchase of treasury shares 31 (110) - - (110) - (110) Non-controlling interest adjustment due to an associate becoming a subsidiary At 31 December ,596 1,035 6,309 9, ,246 Page 4

8 IAS1p10(d) CONSOLIDATED STATEMENT OF CASH FLOWS This illustrates the direct method of reporting cash flows from operating activities IAS1p10(ea) IAS1p113;51(d),(e) Notes CU'000 CU'000 CASH FLOWS FROM OPERATING ACTIVITIES IAS7p10 Receipts from customers 22,563 15,300 Payments to suppliers and employees (20,164) (12,857) Net cash flow generated from operations 2,399 2,443 IAS7p31 Interest paid (115) (108) IAS7p35 Income taxes paid (447) (250) Net cash generated by operating activities 37 1,837 2,085 IAS7p10 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of subsidiary (net of cash acquired) 17 (303) - Delayed payment for earlier acquisition 30 (100) - Disposal of subsidiary (net of cash disposed of) Proceeds from sale of property, plant and equipment Proceeds from sale of intangible assets Purchase of property, plant and equipment 10 (1,841) (902) Purchase of intangible assets 12 (1,713) (307) Available-for-sale investments: 15 - bought (75) - - sold 80 - IAS7p31 Interest received IAS7p31 Dividends received Net cash used in investing activities (3,384) (895) IAS7p10 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Proceeds from issue of convertible bonds 22 1,572 - Purchase of treasury shares 31 (110) - Proceeds of new bank loans and derivatives Net fresh factor borrowings Repayment of bank loans 22 - (599) Finance lease repayments 22 (51) (44) IAS7p31 Dividends paid to owners of the parent company 9 (500) (470) Net cash generated by (used in) financing activities 1,744 (961) CASH AND CASH EQUIVALENTS 20 At 1 January 223 (4) Net increase in the year IAS7p28 Effect of exchange rate changes on cash and cash equivalents held - (2) At 31 December COMPRISING Cash in hand and at bank Short-term investments CASH AND CASH EQUIVALENTS PER THE STATEMENT OF FINANCIAL POSITION Less bank overdrafts (202) (137) CASH AND CASH EQUIVALENTS FOR THE STATEMENT OF CASH FLOWS PURPOSES Page 5

9 NOTES Page 1 General information 7 2 Summary of significant accounting policies 7 3 Segment information 22 4 Analysis of expenses by nature 26 5 Finance income and costs 27 6 Gain / loss on available-for-sale financial assets 27 7 Income tax expense 28 8 Earnings per share 29 9 Dividends on equity shares Property, plant and equipment Goodwill Other intangible assets Investments in associates Joint arrangements Available-for-sale financial assets Subsidiaries Business combinations Inventories Trade and other receivables Cash and cash equivalents Non-current assets classified as held-for-sale and discontinued operations Borrowings Derivative financial instruments and hedge accounting Trade and other payables Information on financial risks Retirement benefit obligations Share-based payments Deferred tax Provisions Other non-current liabilities Equity capital Other reserves Related party transactions Key management compensation Commitments Contingent liabilities Reconciliation of profit to net cash flow generated from operations Events after the reporting period Significant judgements and key sources of estimation uncertainty 59 Page 6

10 NOTES IAS1p138 1 GENERAL INFORMATION IFRS Statements Limited is a corporation domiciled in, and registered under the laws of, the Republic of Newland, where the head office is located. IFRS Statements Limited together with its subsidiaries ( the Group ) is organised into three business segments: mechanical, electronic and chemicals. The Group operates in 40 countries worldwide, essentially in Europe, America and Asia. It includes 21 commercial subsidiaries across those three continents and 5 manufacturing plants in Europe and Asia. Markets where the Group is not present via a subsidiary and that are considered significant are served using local distributors. IFRS Statements Limited is listed on the Big City stock exchange in the Republic of Newland. IAS24p13 The Group is ultimately controlled by Newmagic Corporation domiciled in Newland, which holds 51% of the ordinary shares of IFRS Statements Limited. IAS1p117 IAS1p116 IAS1p16;25 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (A) BASIS OF PREPARATION These consolidated financial statements have been prepared on a going concern basis and in accordance with International Financial Reporting Standards ( IFRS ), being standards and interpretations issued by the International Accounting Standards Board ( IASB ), in force at 31 December The consolidated financial statements comprise a statement of profit or loss, a statement of comprehensive income, a statement of financial position, a statement of changes in equity, a statement of cash flows, and notes. Income and expenses, excluding the components of other comprehensive income, are recognised in the statement of profit or loss. Other comprehensive income is recognised in the statement of comprehensive income and comprises items of income and expenses (including reclassification adjustments) that are not recognised in the statement of profit or loss, as required or permitted by IFRS. Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in the current or previous periods. Transactions with the owners of the Group in their capacity as owners are recognised in the statement of changes in equity. IAS1p99 IAS1p117(a) IFRS13p9 IFRS13p61;67;69 IFRS13p72;73 IFRS13p95 The Group presents the statement of profit or loss using the classification by function of expenses. The Group believes this method provides more useful information to the readers of the financial statements as it better reflects the way operations are run from a business point of view. The statement of financial position format is based on a current / non-current distinction. Measurement bases The consolidated financial statements have been prepared under the historical cost convention, unless mentioned otherwise in the accounting policies below (eg certain financial instruments that are measured at fair value). Historical cost is generally based on the fair value of the consideration given in exchange for assets. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When measuring the fair value of an asset or a liability, the Group uses market observable data to the extent possible. If the fair value of an asset or a liability is not directly observable, it is estimated by the Group (working closely with external qualified valuers) using valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs (eg by use of the market comparable approach that reflects recent transaction prices for similar items, discounted cash flow analysis, or option pricing models refined to reflect the issuer s specific circumstances). Inputs used are consistent with the characteristics of the asset / liability that market participants would take into account. Fair values are categorised into different levels in a fair value hierarchy based on the degree to which the inputs to the measurement are observable and the significance of the inputs to the fair value measurement in its entirety: Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices). Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). Transfers between levels of the fair value hierarchy are recognised by the Group at the end of the reporting period during which the change occurred. Page 7

11 IAS8p28 Application of new and revised pronouncements For the preparation of these consolidated financial statements, the following new, revised or amended pronouncements are mandatory for the first time for the financial year beginning 1 January 2013 (the list does not include information about new or amended requirements that affect interim financial reporting or first-time adopters of IFRS since they are not relevant to IFRS Statements Limited). 1 Amendments to IAS 1 titled Presentation of Items of Other Comprehensive Income (issued in June 2011) - These amendments, that are effective retrospectively, enhance the presentation of the components of other comprehensive income. The Group is required to group items presented in OCI based on whether or not they will be reclassified to profit or loss subsequently. Although not mandatory, the Group has applied the new terminology for income statement, ie statement of profit or loss. The retrospective application of the amendments did not have any impact other than on the presentation of items of other comprehensive income. Amendments to IAS 1 Presentation of Financial Statements (Annual Improvements to IFRSs Cycle, issued in May 2012) - The amendments clarify that additional comparative information is not necessary for periods beyond the minimum required by IAS 1. However, if voluntarily presented, it should be in accordance with IFRS, without triggering a requirement to provide a complete set of financial statements. They also clarify that, in the case of changes in accounting policies retrospectively or a retrospective restatement or reclassification which has a material effect on the information in the statement of financial position at the beginning of the preceding period, the Group should present the statement of financial position at the end of the current period and the beginning and end of the preceding period. However, other than disclosure of certain specified information, related notes are not required to accompany the opening statement of financial position as at the beginning of the preceding period. Amendment to IAS 16 Property, Plant and Equipment (Annual Improvements to IFRSs Cycle, issued in May 2012) - The amendment clarifies that items such as spare parts, stand-by equipment and servicing equipment should be recognised as PPE when they meet the definition in IAS 16 and as inventory otherwise. It has had no impact on the Group s financial statements. Revised IAS 27 Separate Financial Statements (issued in May 2011) The revised and re-titled standard now only deals with the requirements for separate financial statements, which have been carried over largely unchanged from IAS 27 Consolidated and Separate Financial Statements. The standard mainly requires that when an entity prepares separate financial statements, investments in subsidiaries, associates, and joint ventures are accounted for either at cost, or in accordance with IFRS 9 Financial Instruments / IAS 39 Financial Instruments: Recognition and Measurement. It also deals with the recognition of dividends, certain group reorganisations and includes a number of disclosure requirements. It is not applicable to the Group as it deals only with separate financial statements. Revised IAS 28 Investments in Associates and Joint Ventures (issued in May 2011) The revised and re-titled standard prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. It defines significant influence, provides guidance on how the equity method of accounting is to be applied (including exemptions from applying the equity method in some cases) and prescribes how investments in associates and joint ventures should be tested for impairment. It has had no material effect on the Group s consolidated financial statements. Amendment to IAS 32 Financial instruments: Presentation (Annual Improvements to IFRSs Cycle, issued in May 2012) - The amendment clarifies that income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction should be accounted for in accordance with IAS 12. It is has had no impact on the Group s financial statements. Amendments to IFRS 7 titled Disclosures - Offsetting Financial Assets and Financial Liabilities (issued in December 2011) - The amendments allow investors to bridge differences in the offsetting reporting requirements of IFRS and US GAAP and introduce new disclosures that provide better information on how companies mitigate credit risk, including on related collateral pledged or received. They are applied retrospectively. As the Group does not have any offsetting arrangements in place, the application of the amendments has had no material effect on its consolidated financial statements. 1 Although some of these new/revised/ amended pronouncements did not significantly affect IFRS Statements Limited, they are given for illustration purposes. Only those changes that have an effect on the current period or any prior period, would have such an effect except that it is impracticable to determine the amount of the adjustment, or might have an effect on future periods, are required to be disclosed. Page 8

12 IFRS 10 Consolidated Financial Statements (issued in May 2011 and amended in June 2012 for its transitional provisions) The new standard replaces all of the guidance on control and consolidation in IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation Special Purpose Entities. The core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the consolidation procedures. IFRS 10 introduces a single consolidation model that identifies control as the basis for consolidation for all types of entities, where control is based on whether an investor has power over the investee, exposure / rights to variable returns from its involvement with the investee and the ability to use its power over the investee to affect the amount of the returns. The new standard also includes guidance on participating and protective rights and on agent / principal relationships. The application of the new standard has had no material effect on the Group s consolidated financial statements, as its scope of consolidation remains unchanged. IFRS 11 Joint Arrangements (issued in May 2011 and amended in June 2012 for its transitional provisions) The new standard (that replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities Non-Monetary Contributions by Venturers) requires a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations, and then account for those rights and obligations in accordance with that type of joint arrangement. Joint arrangements are either joint operations or joint ventures: o o In a joint operation, parties have rights to the assets and obligations for the liabilities relating to the arrangement. Joint operators recognise their assets, liabilities, revenue and expenses in relation to their interest in the joint operation. In a joint venture, parties have rights to the net assets of the arrangement. A joint venturer applies the equity method of accounting for its investment in a joint venture in accordance with IAS 28 Investments in Associates and Joint Ventures (2011). Unlike under IAS 31, the use of proportionate consolidation is not permitted. The effect of IFRS 11 on the Group s consolidated financial statements is immaterial given that the jointly controlled entities (set up as partnerships), previously accounted for under the proportionate consolidation method, were all assessed to be joint operations under IFRS 11, thus with similar accounting. IFRS 12 Disclosure of Interests in Other Entities (issued in May 2011 and amended in June 2012 for its transitional provisions) The new standard combines, enhances and replaces the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities. It requires extensive disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with, interests in other entities and the effects of those interests on the Group s financial position, financial performance and cash flows. Its application has resulted in more extensive disclosures in the Group s consolidated financial statements. IFRS 13 Fair Value Measurement (issued in May 2011) The new standard defines fair value, sets out a single framework for measuring fair value and requires disclosures about fair value measurements. IFRS 13 applies when other standards require or permit fair value measurements. It does not introduce any new requirements to measure an asset or a liability at fair value, change what is measured at fair value in IFRS or address how to present changes in fair value. The new requirements have been applied prospectively. In addition, specific transitional provisions were given to entities such that they need not apply the disclosure requirements set out in the Standard in comparative information provided for periods before the initial application of the Standard. Other than the additional disclosures required, the application of IFRS 13 has had no material effect on the Group s consolidated financial statements. Also, in accordance with the standard s transitional provisions, the Group has not made any new disclosures required by IFRS 13 for the 2012 comparative period. IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine (issued in October 2011) - The interpretation provides guidance on the accounting for waste removal (stripping) costs in the production phase of a mine. Such stripping costs should be recognised as an asset if they generate a benefit of improved access to an identifiable component of the ore body, it is probable that the benefits will flow to the entity and the costs can be measured reliably. Capitalised stripping costs are amortised over the useful life of the identified component. On transition, existing production stripping costs must be written off to retained earnings, unless they can be attributed to an identifiable component of an ore body. IFRIC 20 has had no effect on the Group. Revised IAS 19 Employee Benefits (issued in June 2011) - The key amendments include elimination of the corridor approach, modification of accounting for termination benefits and improvement of the recognition, presentation and disclosure requirements for defined benefit plans. The amendments have been applied retrospectively in accordance with IAS 8 (except for changes to the carrying value of assets that include employee benefit costs in the carrying amount). Besides the more extensive disclosures (see Note 26), the amendments had the following effect on the Group s consolidated financial statements. Page 9

13 IAS8p28(f)(i) IMPACT OF IAS 19 (AS REVISED IN 2011) ON TOTAL COMPREHENSIVE INCOME CU'000 CU'000 Increase in service costs (11) (8) Decrease in income tax expenses 1 - Decrease in profit for the year (10) (8) Increase in remeasurement of the net defined benefit liability / asset Increase in income tax relating to items of other comprehensive income - - Increase in other comprehensive income for the year Increase in total comprehensive income for the year 8 7 Decrease in profit for the year attributable to: Owners of the parent company (10) (8) Non-controlling interests - - (10) (8) Increase in total comprehensive income for the year attributable to: Owners of the parent company 8 7 Non-controlling interests IAS8p28(f)(ii) The above changes affected the Group s results from continuing operations only. Their effect on the amounts reported for both basic and diluted earnings per share was 0.18 cents in 2013 and 0.09 cents in /12/13 31/12/12 01/01/12 IAS8p28(f)(i) IMPACT OF IAS 19 (AS REVISED IN 2011) ON ASSETS, LIABILITIES AND EQUITY CU'000 CU'000 CU'000 Decrease in retirement benefit obligation Increase in deferred tax liabilities Increase in retained earnings Increase in equity IAS8p30,31 New and revised pronouncements in issue but not yet effective The Group has not applied the following new, revised or amended pronouncements that have been issued by the IASB but are not yet effective for the financial year beginning 1 January 2013 (the list does not include information about new requirements that affect interim financial reporting or first-time adopters of IFRS since they are not relevant to IFRS Statements Limited). The Directors anticipate that the new standards, amendments and interpretations will be adopted in the Group's consolidated financial statements when they become effective. The Group has assessed, where practicable, the potential impact of all these new standards, amendments and interpretations that will be effective in future periods. 1 1 Since this list of new/revised/amended standards and interpretations was drafted in September 2013, it should be extended to include all such changes up to the date of authorisation for issue of the 2013 financial statements. Page 10

14 Amendments to IAS 32 titled Offsetting Financial Assets and Financial Liabilities (issued in December 2011) The amendments address inconsistencies in current practice when applying the offsetting criteria in IAS 32, mainly by clarifying the meaning of currently has a legally enforceable right of set-off and that some gross settlement systems may be considered equivalent to net settlement. They are effective for annual periods beginning on or after 1 January 2014, with retrospective application. As the Group does not have offsetting arrangements in place, the Directors do not anticipate any effect on its consolidated financial statements. Amendments to IAS 36 titled Recoverable Amount Disclosures for Non-Financial Assets (issued in May 2013) The amendments reduce the circumstances in which the recoverable amount of assets or cash-generating units is required to be disclosed, clarify the disclosures required, and introduce an explicit requirement to disclose the discount rate used in determining impairment (or reversals) where recoverable amount (based on fair value less costs of disposal) is determined using a present value technique. They are effective for annual periods beginning on or after 1 January Amendments to IAS 39 titled Novation of Derivatives and Continuation of Hedge Accounting (issued in June 2013) The amendments permit the continuation of hedge accounting in a situation where the counterparty to a derivative designated as a hedging instrument is replaced by a new central counterparty (known as novation of derivatives ), as a consequence of laws or regulations, if specific conditions are met. They are effective for annual periods beginning on or after 1 January The Directors do not anticipate any effect on the Group s consolidated financial statements, in the absence of such transactions. Amendments to IFRS 10, IFRS 12 and IAS 27 titled Investment Entities (issued in October 2012) The amendments define investment entities and provide them an exemption from the consolidation of subsidiaries; instead, an investment entity is required to measure the investment in each eligible subsidiary at fair value through profit or loss in accordance with IFRS 9 / IAS 39 (the exception does not apply to subsidiaries that provide services relating to the investment entity s investment activities). An investment entity is required to account for its investment in a relevant subsidiary in the same way in its consolidated and separate financial statements, and additional disclosures are introduced. The amendments are effective for annual periods beginning on or after 1 January 2014, retrospectively with some transitional provisions. The Directors do not anticipate any effect on the Group s consolidated financial statements as the parent company is not an investment entity. IFRS 9 Financial Instruments (issued in November 2009 and amended in October 2010) - This standard introduces new requirements for the classification and measurement of financial assets and financial liabilities and for derecognition. o IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of each accounting period. All other debt investments and equity investments are measured at their fair value at the end of each accounting period. o The most significant effect of IFRS 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in fair value of a financial liability, that is designated as at fair value through profit or loss, attributable to changes in the credit risk of that liability. Specifically, under IFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognised in other comprehensive income, unless the recognition of the effects of changes in the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability's credit risk are not subsequently reclassified to profit or loss. Currently, under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss is recognised in profit or loss. o The derecognition provisions are carried over almost unchanged from IAS 39. IFRS 9 is effective for annual periods beginning on or after 1 January 2015, by which time it will include requirements and guidance on impairment and hedge accounting. The Directors anticipate that IFRS 9 will be adopted in the Group's consolidated financial statements when it becomes mandatory and that the application of the new standard might have a significant impact on amounts reported in respect of the Groups financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed. IFRIC 21 Levies (issued in May 2013) The interpretation provides guidance on when to recognise a liability for a levy imposed by a government. The obligating event for the recognition of a liability is the activity that triggers the payment of the levy in accordance with the relevant legislation. It also provides guidance on recognition of a liability to pay levies: the liability is recognised either progressively if the obligating event occurs over a period of time, or when the minimum threshold is reached if an obligation is triggered on reaching that minimum threshold. The interpretation is effective for annual periods beginning on or after 1 January 2014 and is not expected to impact the Group s consolidated financial statements. Page 11

15 IAS18p35(a) IAS18p14 IAS18IE10 IAS18IE11 IAS18p13 IAS18p30(a) IAS18p30(b) IAS18p30(c) (B) REVENUE RECOGNITION Revenue from the sale of goods Revenue from the sale of goods is recognised in the consolidated statement of comprehensive income on the date that goods are delivered to the customer and legal title has passed. Revenue is the fair value of the consideration received or receivable for goods and is net of estimated returns, trade discounts and sales-based taxes (eg value added tax). Installation fees Installation fees are recognised by reference to the stage of completion of the installation activity at the reporting date, unless they are incidental to the sale of a product, in which case they are recognised when the goods are sold. In general, the stage of completion is based on man-hours or cost incurred, the appropriate method depending on the type of contract. Servicing fees Servicing fees are recognised over the term of the servicing contract. Multiple element arrangements In certain circumstances, the products are sold together with other additional items ( package ). The package might include one or more of the following items: servicing, installation, future technical upgrades or other case-by-case items. In such cases, the recognition criteria specified above are applied to the separately identifiable components of the package in order to reflect the substance of the transaction. Interest income Interest income is recognised on a time-proportion basis using the effective interest method. Royalty income Fixed fee royalty income is recognised, in accordance with the substance of the agreement, on a straight-line basis over the period of the sub-licences and sales-linked royalty income is recognised in profit or loss when the products are sold by the licensee. Dividend income Dividend income is recognised when the right to receive the dividend is established. (C) BASIS OF CONSOLIDATION IFRS10AppendixA IFRS10pB47;B22 IFRS10pB86;20 IIFRS10p22 IFRS10pB94 IFRS10p23;B96 IFRS10pB98 Subsidiaries A subsidiary is an entity controlled by the Group, ie the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its current ability to direct the entity s relevant activities (power over the investee). The existence and effect of substantive potential voting rights that the Group has the practical ability to exercise (ie substantive rights) are considered when assessing whether the Group controls another entity. The Group s financial statements incorporate the results, cash flows, assets and liabilities of IFRS Statements Limited and all of its directly and indirectly controlled subsidiaries. Subsidiaries are consolidated from the effective date of acquisition, which is the date on which the Group effectively obtains control of the acquired business, until that control ceases. All intragroup transactions, balances, income and expenses are eliminated in full on consolidation. The non-controlling interests in the net assets and net results of consolidated subsidiaries are shown separately in the consolidated statement of financial position, consolidated statement of profit or loss, and consolidated statement of comprehensive income. Total comprehensive income (ie profit or loss and each component of other comprehensive income) is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Changes in the Group's ownership interest in a subsidiary that do not result in the Group losing control are accounted for as transactions with owners in their capacity as owners (ie equity transactions). The carrying amounts of the Group's and noncontrolling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the parent. Upon loss of control of a subsidiary, the Group s profit or loss is calculated as the difference between (i) the fair value of the consideration received and of any investment retained in the former subsidiary and (ii) the previous carrying amount of the assets (including any goodwill) and liabilities of the subsidiary and any non-controlling interests. Page 12

16 IFRS11p4;6;7;14 IFRS11AppendixA IFRS11p20;24 Joint arrangements A joint arrangement (ie either a joint operation or a joint venture, depending on the rights and obligations of the jointly controlling parties to the arrangement), is one in which the Group is party to an arrangement of which two or more parties have joint control, which is the contractually agreed sharing of control of the arrangement; it exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. In a joint operation, the parties with joint control have rights to the assets, and obligations for the liabilities, relating to the arrangement. Therefore, the Group recognises its share of the operation s assets, liabilities, income and expenses that are combined line by line with similar items in the Group s financial statements. In a joint venture, the parties with joint control have rights to the net assets of the arrangement. The Group s interests in joint ventures are recognised using the equity method in accordance with IAS 28 Investments in Associates and Joint Ventures (see next paragraph under Associates ). IAS28p3 IAS28p10 Associates Associates are entities over which the Group has the power to participate in the financial and operating policy decisions of the entity, but which is not control or joint control. Associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the investor s share of comprehensive income of the associate. On acquisition of the investment, any difference between the cost of the investment and the investor s share of the net fair value of the associate s identifiable assets, liabilities and contingent liabilities is accounted for in accordance with IFRS 3 Business Combinations. The goodwill (net of any accumulated impairment loss) relating to an investment in an associate is included within the carrying amount of that investment. The Group s share of its associates post-acquisition profits or losses is recognised in the statement of profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Distributions received from an investee reduce the carrying amount of the investment. IAS28p38;39 IAS28p28 IAS21p39 IAS21p40 If the Group s share of losses of an associate equals or exceeds its interest in the associate, the Group does not provide for additional losses, unless it has incurred obligations or made payments on behalf of the associate. Profits / losses on Group transactions with associates are eliminated to the extent of the Group s interest in the relevant associate. Translation of financial statements of foreign entities The assets and liabilities of foreign operations are translated into CU using exchange rates at the reporting date. The components of shareholders equity are stated at historical value. Average exchange rates for the period are used to translate income and expense items of foreign operations. However, if exchange rates fluctuate significantly, the exchange rates at the dates of the transactions are used. All resulting exchange differences are recognised in other comprehensive income and accumulated in a separate component of equity. IAS21p47 IAS21p48;48A;48B IAS21p48C IFRS3p4;18;21 Any goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of that foreign operation and, as such, translated at the closing rate. On the disposal of a foreign operation, all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the parent company are reclassified to profit or loss. The cumulative amount of the exchange differences relating to that foreign operation that had been attributed to the non-controlling interests are derecognised, but without reclassification to profit or loss. The same applies in case of loss of control, joint control or significant influence. On the partial disposal without loss of control of a subsidiary that includes a foreign operation, the proportionate share of exchange differences accumulated in the separate component of equity are re-attributed to non-controlling interests (they are not recognised in profit or loss). For any other partial disposal of foreign entity (ie associates or joint arrangements without loss of significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss. Business combinations The Group applies the acquisition method to account for all acquired businesses, whereby the identifiable assets acquired and the liabilities assumed are measured at their acquisition-date fair values (with few exceptions as required by IFRS 3 Business Combinations). Page 13