Transcript Mr Robert R Alleyne- Audit Partner

Role of IFRS in Financial
Statement Preparation
Presentation to the 2006 CAIB Conference
AUDIT
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CAIB - 1
Role of IFRSs
Provides specific guidance on:
Definition
Recognition
Measurement
Disclosure
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CAIB - 2
Summary of IFRS
Framework
IAS
(30)
IFRS
(7)
SIC
(11)
IFRIC
(7)
IFRSs are for general purpose financial reporting by
profit-oriented entities
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CAIB - 3
Agenda
IFRS Framework
IAS 1
Financial Instruments Standards
Future Developments
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CAIB - 4
Framework
Consistency of IFRSs
Assist in development of future IFRSs and review of
existing IASs
Assist national standard setting bodies in developing
national standards
Assist preparers and users in preparing and
interpreting IFRS financial statements and with the
issues not covered by standards
Strict guidance in IAS 8 applies
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CAIB - 5
Objective of financial statements
The objective is to
Provide information about financial position,
performance, and changes in financial position of an
entity:
…that is useful to a wide range of users in making economic
decisions
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CAIB - 6
Users of financial statements
Investors,
Present & potential
Lenders
Employees
Financial
statements
Suppliers and other
trade creditors
Customers
Public
Governments and
their agencies
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CAIB - 7
Underlying assumptions
Accrual basis
Going concern
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CAIB - 8
Qualitative characteristics of financial
statements
Understandability
Relevance
Reliability
Comparability
Materiality
Faithful
representation
Substance
over form
Neutrality
Prudence
Completeness
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True
and
fair view
/ fair
presentation
CAIB - 9
Qualitative characteristics of financial
statements (continued)
Constraints on relevant and reliable information
Timeliness
Balance between benefit and cost
Balance between qualitative characteristics
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CAIB - 10
Assets & Liabilities: Definition and
recognition
Expenses
Income
Asset
Liability
Income
Expenses
The matching concept less important
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CAIB - 11
Assets, liabilities and equity: definitions
Asset
Liability
Equity
Residual interest in the assets
of the entity
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CAIB - 12
Agenda
IFRS Framework
IAS 1
Financial Instruments Standards
Future Developments
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CAIB - 13
Objective and scope
Objective: ensure comparability between years and
entities
Scope: all financial statements (FS) prepared in
accordance with IFRSs:
All financial statements, including interims (IAS 34)
All types of entities
Separate FS
Consolidated FS
Individual FS
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CAIB - 14
Required components of financial statements
Balance sheet
Income statement
Either:
Statement showing all changes in equity; or
Statement of recognised income and expense
(SoRIE)
Cash flow statement
Notes
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CAIB - 15
Other components of financial reports
Not within scope of IFRSs, but often presented
outside financial statements:
Financial review by management
performance
financial position
uncertainties
Environmental reports, value added statements etc
The financial statements must be clearly identified
and distinguished from other information in annual
report
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CAIB - 16
Overall considerations
Going concern
Fair presentation
Compliance
with IFRS
Financial
Statements
Comparative
information
Accrual basis
of accounting
Materiality and
aggregation
Offsetting
Consistency
of presentation
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CAIB - 17
Offsetting
Assets and liabilities should not be offset unless:
Required or permitted by a standard or interpretation
Items of income and expense should not be offset
unless:
Required or permitted by a standard or interpretation,
or
Gains, losses and related expenses arising from the
same or similar items not material
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CAIB - 18
Compliance with IFRSs
“Explicit and unreserved statement of compliance” in
notes
Disclose application of standards or interpretations
before effective date
Compliance with all standards and interpretations.
Inappropriate accounting treatments not rectified by
disclosure
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CAIB - 19
Fair presentation
Achieved by appropriate application of IFRSs
Requires faithful representation of effects of
transactions, events and conditions in accordance
with recognition criteria set out in the Framework
If compliance with a standard or interpretation
misleading, departure from that standard required
(extremely rare)
Comprehensive disclosure requirements
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CAIB - 20
Assets – Suggested Presentation
Cash and cash equivalents
Trading assets
Pledged assets
Derivative assets held for risk management
Loans and advances to banks
Loans and advances to customers
Investment securities
Property and equipment
Intangible assets
Deferred tax assets
Other assets
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CAIB - 21
Liabilities – Suggested Presentation
Trading liabilities
Derivative liabilities held for risk management
Deposits from banks
Deposit from customers
Debt securities issued
Subordinated liabilities
Provisions
Current tax liabilities
Deferred tax liabilities
Other liabilities
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CAIB - 22
Other Elements of the Financial Statements
Total assets
Total liabilities
Equity
Share capital and share premium
Retained earnings
Other reserves
Total equity attributable to equity holders of the Bank
Minority interest
Total equity
Total liabilities and equity
© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative.
All rights reserved. The KPMG logo and name are trade marks of KPMG International.
CAIB - 23
Agenda
IFRS Framework
IAS 1
Financial Instruments Standards
Future Developments
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All rights reserved. The KPMG logo and name are trade marks of KPMG International.
CAIB - 24
Overview of currently effective financial
instruments standards
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CAIB - 25
IFRS 7 Financial Instruments: Disclosures
The disclosure requirements for financial instruments
have been amended by IFRS 7, which was issued in
August 2005 and supersedes IAS 30 and the disclosure
requirements in IAS 32.
In particular, the IASB removed unnecessarily onerous
or duplicate disclosures from IAS 30 and IAS 32 and
located in one IFRS all disclosure requirements relating
to financial instruments.
© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative.
All rights reserved. The KPMG logo and name are trade marks of KPMG International.
CAIB - 26
Agenda
IFRS Framework
IAS 1
Financial Instruments Standards
Future Developments
© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative.
All rights reserved. The KPMG logo and name are trade marks of KPMG International.
CAIB - 27
Future developments
Discussion paper Management Commentary
Guidance on management commentary in financial
report
Prerequisite for compliance with IFRSs?
Exposure Draft of Proposed Amendments to IAS 1
Presentation of Financial Statements – A Revised
Presentation
Focus on performance (total recognised income and
expense) rather than on profit or loss
Statement of financial position (balance sheet) for
three periods
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CAIB - 28
Trends in recent IFRS
strict application:
no“IFRS lite”
increased
complexity
increased
disclosure
limited
options
increased use
of fair values
© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative.
All rights reserved. The KPMG logo and name are trade marks of KPMG International.
CAIB - 29
Presenter’s contact details
Robert Alleyne
1 868 623 1081-3
[email protected]
www.kpmg.co.tt
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All rights reserved.