REVIEW OF IAS AND SIC INTERPRETATIONS FOR THEIR POSSIBLE IMPACT ON by fionan

VIEWS: 9 PAGES: 30

									               FEE /EUROSTAT STUDY on
  POSSIBLE IMPACT OF IAS and SIC INTERPRETATIONS ON
           STRUCTURAL BUSINESS STATISTICS


                                14 February 2002


This document contains:

1. The questionnaire used for the survey (pp. 2-18)
    Introductory notes
    Question A: present statistical returns
    Question B: possible extensions in the use of IAS
    Question C: Business Statistics Variables
    Explanatory notes

2. Tables summarizing the responses to questions in B (pp 19-20)

3. A review of IAS and SIC interpretations for their possible impact on Structural
   Business Statistics variables (pp. 21-30).




                                                                                1
                          SURVEY FORM
revised 30 October 2001




Contacts:

FEE
Saskia Slomp tel (0032) 2285 40 74   e-mail saskia_slomp@fee.be

Eurostat
David Lewis tel (00352) 4301 32003   e-mail david.lewis@cec.eu.int




                                                                     2
                        INTRODUCTORY NOTES

1 Eurostat is the EU statistical office forming part of the European
Commission. It promotes harmonisation of EU statistical methods and
definitions, collects statistical information from Member State statistical
offices covering a wide range of economic and social fields, and publishes EU
level aggregates showing breakdowns at country or regional level. In the
economic field, Member States draw data directly from companies in statistical
returns, but also from administrative sources such as company financial returns,
tax files, and national insurance records.

2 The aim of this pilot survey is to shed light on the likely impact on EU
business statistics of the planned introduction of IAS for all EU quoted
companies from 2005 onwards. As a starting point, we wish to identify those
accounting areas where differences between IAS and existing national
standards suggest that we can expect changes in returned statistical data from
2005 onwards.

3 Generalising on the impact of the move towards IAS on financial results is not
straightforward for many reasons:

      the starting point for companies can differ - some could be already on
       IAS, others national GAAP, and so on
      current national requirements differ, partly through applications of
       different options in the EU Directives, but also through individual national
       standards
      when IAS becomes a requirement for EU quoted companies, Member
       States will make use of national freedom to permit or require other
       companies to adopt IAS - how this freedom will be used is not yet clear
      many other factors remain unclear - whether subsidiaries of quoted
       companies will voluntarily adopt IAS (if permitted), whether those moving
       towards IAS will change before the 2005 deadline, how SME thresholds
       will be applied, and so on.

4 Results of this pilot survey will assist in the design of more detailed future
surveys focussing on individual companies.



FEE and Eurostat




                                                                                   3
A Present statistical returns

Businesses currently make statistical returns to Member State statistical offices. From your personal experience and knowledge, what
normally is the basis of information given in these returns?

                                                         please tick only one box


                          National GAAP and EU Directives                     Some other specific source (please specify)

                                                       IAS                                        A mixture of the above

                       Internal company books and ledgers                                                     Don't know


B Introduction of IAS - Member State options

Under present plans, adoption of IAS will be required for EU quoted companies from 2005 onwards. It seems likely that Member
States will be free to extend this to other companies, either as a legal requirement or as a voluntary option. From your personal
experience and knowledge, what do you see as the likely outcome in your country?

                                                         please tick only one box


                      No extensions permitted or required                                IAS permitted for all companies

         IAS permitted but only for consolidated accounts                           Some other outcome (please specify)

                   IAS required for consolidated accounts                                                     Don't know




                                                                                                                                    4
C BUSINESS STATISTICS VARIABLES

Please indicate whether, for each item shown below, you would expect the introduction of IAS to affect figures supplied by companies
to Member State statistical offices:


                        Title                                   NB TO BE COMPLETED ONLY WHERE SOME CHANGE IS EXPECTED
                                               Is some     which    reasons for the change - direction and scale of likely change - whether
                                               change       IAS         change is more likely to arise in particular types of company or
                                                likely     apply?    particular sectors - whether all size firms are similarly affected, etc
                                               (Y/N)?
       TURNOVER
  1    Total turnover of which from
       industrial, services, and trading
       activities

  2    Other income

       PURCHASES
  3    Total purchases of goods and
       services
  4    Purchases of goods and services for
       resale in the same condition as
       received




                                                                                                                                       5
     STOCKS
5    Change in stocks of goods and
     services purchased for resale in the
     same condition as received
6    Change in stocks of finished products
     and work in progress manufactured
     by the unit
7    Change in stocks of raw materials and
     consumables

     PERSONNEL COSTS
8    Wages and salaries

9    Social security costs



10   Contributions to pensions funds
     (included in 9 above)

     OTHER CURRENT COSTS
11   Payments for long term rental and
     operational leasing of goods
12   Payments to sub-contractors




                                             6
     INVESTMENT
13   Gross investment in land
14   Gross investment in existing buildings
     and structures
15   Gross investment in construction and
     alteration of buildings
16   Gross investment in machinery and
     equipment
17   Value of tangible goods acquired
     through financial leasing
18   Gross investment in concessions,
     patents, licences, trade marks and
     similar rights
19   Gross investment in purchased
     software
20   Gross investment in software
     produced by the unit
21   Sales of tangible investment goods

     OTHER ENTRIES
22   Total intramural R&D expenditure
23   Investment in equipment and plant
     for pollution control, and special anti-
     pollution accessories (mainly end of
     pipe equipment)




                                                7
     FINANCIAL FLOWS - net
     acquisition of:
24   Securities other than shares
25   Loans
26   Shares and other equities

     FINANCIAL STOCKS - assets and
     liabilities:
27   Securities other than shares
28   Loans
29   Shares and other equity




                                     8
            IMPACT OF IAS ON EU STATISTICS


                 PILOT SURVEY NOVEMBER 2001


                               NOTES

                  The following notes are taken from four main sources:

             1 Definitions for Structural Business Surveys available at Europa
                    site (Official docs/Eur-Lex/Regulation 1998 2700)
              2 System of National Accounts (ESA 1995) available at Europa
                    site (Official docs/Eur-Lex/Regulation 1996 2223)
               3 Eurostat CODED scheme available through CIRCA web site
                            http://forum.europa.eu.int/ then "Eurostat"
              4 The Office for National Statistics (UK) Structural Business
                               Survey questionnaire and notes




revised 30 October 2001

Contacts:

FEE
Saskia Slomp tel (0032) 2285 40 74      e-mail saskia_slomp@fee.be

Eurostat
David Lewis tel (00352) 4301 32003      e-mail david.lewis@cec.eu.int




                                                                             9
          Title                                                   notes

    TURNOVER
1   Total turnover    Include sales of goods of own production, value of work done on customers' materials, value
                      of industrial services (eg repairs, maintenance, installation done by you), value of non-
                      industrial services provided by you (eg advertising revenue), and value of goods purchased
                      and resold without further processing. Exclude interest and similar income and extra-
                      ordinary income. Values should be net selling value ie the amount charged to customers
                      whether valued ex-works or delivered, less VAT, trade discounts, cash discounts, and
                      allowances on returned goods.

                      Income classified as other operating income, financial income and extra-ordinary income in
                      company accounts is excluded from turnover. Operating subsidies received from public
                      authorities or the institutions of the European Union are also excluded.

2   Other income      Include value of insurance claims received, and any other operating income recorded in your
                      profit and loss.

    PURCHASES
3   Total purchases   Give amounts payable excluding employment costs, bad debt, depreciation, interest
    of goods and      payments, amounts charged to capital account. Includes purchases of energy products for
    services          own consumption, water supplied for own consumption, sewerage charges, cost of waste
                      disposal, goods and materials (including stationery and consumables, goods bought for resale,
                      payments to sub-contractors, value of industrial services purchased (including printing
                      services, installation, repairs and maintenance, hiring, leasing or renting of plant, machinery
                      and vehicles, commercial insurance premiums paid, road transport services,




                                                                                                                        10
                         telecommunication services, computer and related services, advertising and marketing
                         services, and payments to employment agencies.

4   Purchases of         Purchases for resale are purchases of goods for resale to third parties without further
    goods and services   processing. It also includes purchases of services by "invoicing" service companies, i.e. those
    for resale in the    whose turnover is composed not only of agency fees charged on a service transaction (as in
    same condition as    the case of estate agents) but also the actual amount involved in the service transaction, e.g.
    received             transport purchases by travel agents. The value of goods and services which are sold to
                         third parties on a commission basis are excluded since these goods are neither bought nor
                         sold by the agent receiving the commission.

                         When services for resale are referred to here, the services concerned are the output from
                         service activities, rights to use pre-determined services, or physical supports for services.
                         Purchases of goods and services purchased for resale in the same condition as received are
                         valued at the purchase price excluding deductible VAT and other deductible taxes linked
                         directly to turnover. All other taxes and duties on the products are therefore not deducted
                         from the valuation of the purchases of goods and services.

    STOCKS
5   Change in stocks     This variable is defined as the change in stocks at purchaser's prices exclusive of VAT
    of goods and         between the end and the beginning of the reference period. The change in stocks may be
    services             measured by the value of entries into stocks of products purchased for resale less the value
    purchased for        of withdrawals and the value of any recurrent losses of goods held in stocks.
    resale in the same
    condition as         Included in these stocks are goods and services bought for the sole purpose of reselling
    received             them in the same condition. Excluded are stocks of goods and services which are provided to
                         third parties on a commission basis.




                                                                                                                           11
                        Products purchased for resale and stocked by services enterprises can include goods
                        (industrial equipment in the case of "turnkey" engineering contracts, or buildings in the case
                        of property development, etc.) as well as services (rights to use advertising space, transport,
                        accommodation, etc.).

                        When services are stocked the services concerned are the output from service activities,
                        rights to use pre-determined services, or physical supports for services.

6   Change in stocks    This variable is defined as the change in the value of the stocks of finished products or in
    of finished         the course of production, which have been produced by the unit and which have not yet been
    products and work   sold, between the first and last days of the reference period.
    in progress
    manufactured by     These products include work in progress belonging to the unit, even if the products in
    the unit            question are still in the possession of third parties. Equally, products held by the unit which
                        belong to third parties are however excluded.

                        Stocks are valued at production cost, and are valued prior to value adjustments (such as
                        depreciation).



7   Change in stocks    This variable is defined as the change in stocks at purchaser's prices exclusive of VAT
    of raw materials    between the end and the beginning of the reference period. Change in stocks of raw
    and consumables     materials consist of all commodities held in stock with the intention of using them as
                        intermediate inputs in production. These positive or negative changes in stocks enable value
                        added to be calculated.




                                                                                                                          12
                      Products stocked for incorporation into the production process may involve either goods or
                      services.


    PERSONNEL
    COSTS
8   Wages and         Wages and salaries are defined as "the total remuneration, in cash or in kind, payable to all
    salaries          persons counted on the payroll (including home workers), in return for work done during the
                      accounting period" regardless of whether it is paid on the basis of working time, output or
                      piecework and whether it is paid regularly or not.

                      Wages and salaries include the values of any social contributions, income taxes, etc. payable
                      by the employee even if they are actually withheld by the employer and paid directly to
                      social insurance schemes, tax authorities, etc. on behalf of the employee. Wages and salaries
                      do not include social contributions payable by the employer.

                      Wages and salaries include: all gratuities, bonuses, ex gratia payments, "thirteenth month
                      payments", severance payments, lodging, transport, cost-of-living, and family allowances,
                      tips, commission, attendance fees, etc. received by employees, as well as taxes, social
                      security contributions and other amounts payable by employees and withheld at source by
                      the employer. Wages and salaries which the employer continues to pay in the event of illness,
                      occupational accident, maternity leave or short-time working may be recorded here or under
                      social security costs, dependent upon the unit's accounting practices.

                      Payments for agency workers are not included in wages and salaries.

9   Social security   Employers' social security costs correspond to an amount equal to the value of the social




                                                                                                                      13
      costs                  contributions incurred by employers in order to secure for their employees the entitlement
                             to social benefits.

                             Social security costs for the employer include the employer's social security contributions
                             to schemes for retirement pensions, sickness, maternity, disability, unemployment,
                             occupational accidents and diseases, family allowances as well as other schemes.

                             Included are the costs for all employees including home-workers and apprentices.

                             Charges are included for all schemes, regardless of whether they are statutory, collectively
                             agreed, contractual or voluntary in nature. Wages and salaries which the employer continues
                             to pay in the event of illness, occupational accident, maternity leave or short-time working
                             may be recorded here or under wages and salaries, dependent upon the unit's accounting
                             practices.

 10   Contributions to       Should represent actual net amounts rather than notional values. Include payments into
      pensions funds         pension funds providing retirement benefits or death benefits for employees, including
      (included above)       former employees or their dependants. Exclude top ups of pension funds or withdrawals
                             from pension funds

      OTHER CURRENT         COSTS
11    Payments for long      The payments for long-term rental include all charges relative to the renting of tangible
      term rental and        goods for a period greater than one year. Operational leases are those leases which do not
      operational leasing    transfer substantially all the risks and rewards incident to legal ownership to the lessee.
      of goods               Under an operational lease, the lessee acquires the right to use a durable good for a certain
                             period of time, which may be long or short and not necessarily settled in advance. When the
                             leasing period expires, the lessor expects to receive his good back in more or less the same




                                                                                                                             14
                          condition as when he hired it out, apart from normal wear and tear. Thus the leasing period
                          does not cover all, or a predominant part of, the good’s economic lifetime. Payments for the
                          operational leasing of goods relate to the cost of using the tangible goods made available to
                          the unit through these contracts.

12   Payments to sub-     Payments to subcontractors are payments made by the unit to third parties in return for
     contractors          industrial goods and services supplied as part of a subcontracting relationship defined as
                          follows.
                          Two enterprises are linked by a subcontracting relationship whenever conditions A and B are
                          met together:

                                 A. the customer enterprise, also said main-contractor, participates in the conception
                                 of the product providing, even partially, technical specifications to the supplier
                                 enterprise, also said subcontractor, and/or provides it with the materials to be
                                 processed;
                                 B. the customer enterprise sells the subcontracted product, either as such or as part
                                 of a more complex product, and takes on the after-sales liability for the product.

                          Note: The mere stipulation of a colour, size or catalogue number does not constitute a
                          technical specification in itself. The manufacture of a tailor-made product does not of itself
                          necessarily imply a subcontracting relationship.

     INVESTMENT
                          Investment during the reference period in all tangible goods. Included are new and existing
     (general guidance)   tangible capital goods, whether bought from third parties or produced for own use (i.e.
                          capitalised production of tangible capital goods), having a useful life of more than one year
                          including non-produced tangible goods such as land. The threshold for the useful life of a




                                                                                                                           15
good that can be capitalised may be increased according to company accounting practices
where these practices require a greater expected useful life than the 1 year threshold
indicated above.

All investments are valued prior to (i.e. gross of) value adjustments, and before the
deduction of income from disposals. Purchased goods are valued at purchase price, i.e.
transport and installation charges, fees, taxes and other costs of ownership transfer are
included. Own produced tangible goods are valued at production cost. Goods acquired through
restructurations (such as mergers, take-overs, break-ups, split-off) are excluded. Purchases
of small tools which are not capitalised are included under current expenditure.

Also included are all additions, alterations, improvements and renovations which prolong the
service life or increase the productive capacity of capital goods.

Current maintenance costs are excluded as is the value and current expenditure on capital
goods used under rental and lease contracts. Investment in intangible and financial assets
are excluded.

Concerning the recording of investments where the invoicing, delivery, payment and first use
of the good may take place in different reference periods, the following method is proposed
as an objective:

1. investments are recorded when the ownership is transferred to the unit that intends to
use them. Capitalised production is recorded when produced. Concerning the recording of in-
vestments made in identifiable stages, each part-investment should be recorded in the
reference period in which they are made.




                                                                                               16
In practice this may not be possible and company accounting conventions may mean that the
following approximations to this method need to be used:

2. investments   are recorded in the reference period in which they are delivered;
3. investments   are recorded in the reference period in which they enter into the production
process;
4. investments   are recorded in the reference period in which they are invoiced;
5. investments   are recorded in the reference period in which they are paid for.




                                                                                                17
A. Present statistical returns
Businesses currently make statistical returns to Member State statistical offices. From your personal experience and knowledge, what normally is the
basis of information given in these returns?
                                                  COUNTRY
                                                             A    CZ     FIN     F      D     DK     H       I    IRL     L       NL   N   PL   RO   S        UK
RESPONSES

    National GAAP and EU Directives                          Y      Y     Y      Y      Y      Y     Y      Y           Y         Y        Y

    IAS                                                                          N                                        N

    Internal company books and ledgers                       Y            Y      Y1     Y            Y      Y             Y                Y    Y    Y        Y2

    Some other specific source (please specify)                                                             Y3

    A mixture of the above                                                                                         Y                   Y

    Don’t know




1
  In France, suspected that most statistics on enterprises are based on tax filings which are in conformity with national GAAP.
2
  Companies above a certain level
3
  Other sources can be management accounting and contracts



                                                                                                                                                         18
B. Introduction of IAS

Under present plans, adoption of IAS will be required for EU quoted companies from 2005 onwards. It seems likely that Member States will be free to
extend this to other companies, either as a legal requirement or as a voluntary option. From your personal experience and knowledge, what do you see as
the likely outcome in your country?

                                              COUNTRY
                                                           A    CZ     FIN     F     D     DK     H      I    IRL     L    NL      N     PL    RO     S        UK
RESPONSES

    No extensions permitted or required                                        Y

    IAS permitted but only for consolidated accounts       Y            Y            Y                                                                Y

    IAS required for consolidated accounts

    IAS permitted for all companies                                                         Y     Y     Y4            Y     Y            Y      Y              Y

    Some other outcome (please specify)                          Y5                                            Y6                 Y7           Y8

    Don’t know




4
  It is very difficult to predict the likely outcome in Italy
5
  IAS required for listed companies (also individual accounts)
6
  IAS required for all companies later, listed only now
7
  The Norwegian Accounting Act will be revised in 2003. “Under” discussion right now. The likely outcome is IAS in all consolidated accounts and in the
individual accounts of listed companies. For the individual accounts of other companies, it is really impossible to predict the outcome of the present
discussions
8
  Large companies required to use IAS from 2001



                                                                                                                                                          19
A review of IAS and SIC interpretations for their possible impact on Structural Business Statistics variables




IAS 1: Presentation of Financial Statements

No impact


IAS 2: Inventories

- Under the IASB improvements project the LIFO option may be closed. This will have an influence on all statistical variables under stocks (5, 6 and 7).
  There could be a large balance sheet effect since it could double the value of inventories. There is no large profit and loss impact expected. In Italy, LIFO
  or an elaboration of LIFO is no longer the only method allowed.
- Inclusion of overheads in costs: in some countries, it could be a reduction or an increase depending whether the starting point is direct or full cost. It will
  trigger a move towards full cost accounting.
- Lower of cost or market principle: under IAS, market means net realisable value. Nowadays, in some countries, it means replacement cost which could be
  lower.

IAS 7: Cash Flow Statements

No impact.


IAS 8: Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies

- The closure of the option to include the amount of the correction in the profit and loss for the current period may have an impact on other income.
- In addition, there could be a large impact as a result of first time application of standards in form of a one off charge. Under SIC 8, this will be in the
  equity section but SIC 8 will change. As a result of first time application, there will be several impacts such as on variables 9 and 10 in relation to IAS 19
  and on 5, 6 and 7 since inventories are measured in a different way.




                                                                                                                                                              20
IAS 10: Events After the Balance Sheet Date

The presentation of proposed dividends as liabilities will no longer be allowed. Equity will rise in a number of countries, including UK, Denmark, Ireland
and the Netherlands by the size of the proposed dividends.


IAS 11: Construction Contracts

There will be a big impact in those countries where normally the completed contract method is used, or is even the only method that can be used. The use of
the percentage of completion method will give an increase in current assets (stocks), earlier recognition of profit and a different allocation of profit.


IAS 12: Income Taxes

There will be a major change for the UK and Ireland since a large number of extra liabilities would appear. There will be an impact on net equity (UK equity
will decrease). In Germany and Austria, there will be an impact on net assets because of recognition of deferred tax assets (as a result equity will increase).
This will however be a one off change with the adoption of IAS.


IAS 14: Segment Reporting

No impact.


IAS 15: Information Reflecting the Effects of Changing Prices

No impact.


IAS 16: Property, Plant and Equipment




                                                                                                                                                            21
-   Starting time of depreciation could change
-   Depreciation rates and real useful lifes could change
-   Allowed alternative of revaluation could have an impact (difference between this year’s and last year’s balance sheet)
-   Cost of dismantling: this will give higher costs than under National GAAP and may lead to big numbers in certain industries: oil industry, nuclear power
    industry, telecom industry, mining industry, etc. (dismantling costs can either be an investment or an expense).


IAS 17: Leases

Could potentially have a large effect on gross assets because of capitalisation of finance leases (Austria, Germany, Italy, France, etc.). There will also be an
increase in liabilities through recognition of the loans. It will result in huge increases in the balance sheet of some industries, such as the airline industry.


IAS 18: Revenue

The same would apply for long-term contracts as for construction contracts, see IAS 11. The impact will depend on the business involved.


IAS 19: Employee Benefits

There could be major changes in recognition of higher liabilities and in recognition of assets. When defined benefit systems are funded under IAS 19, net
assets are to be recognised (there will be a possible impact under loans and equity). There will be a possibility to use the corridor approach instead of
measuring the liability at real value. The main problems will be in the equity area.

It is unclear if line 10 of the statistical variables refers to expenses or payments. There is a risk of double counting. This needs to be clarified by Eurostat.

There will be major changes to cost in that they will be much larger. In some countries, the impact of IAS 19 will be low since there are mainly state
pensions and hardly any defined benefit schemes (France, Spain, Italy). In Germany and other countries, where there are defined liability schemes, both the
liabilities and the expenses will increase.




                                                                                                                                                                    22
IAS 20: Accounting for Government Grants and Disclosure of Government Assistance

Some countries include government grants in equity. This may involve large differences (it was observed that also the G4 + 1 paper advocates for recognition
in equity).


IAS 21: The Effects of Changes in Foreign Exchange Rates

In countries such as France where gains on revaluation are deferred, there will be impact on other income, and on sales and/or purchases (or financial
income). There will be in addition an impact on liabilities and debtors. In countries such as Austria and Germany, where the Hochwertsprinzip for liabilities
is applied, it may result in lower liabilities and higher receivable because of the use of the closing rate.


IAS 22: Business Combinations

No impact on the individual accounts.


IAS 23: Borrowing Costs

Under the improvement project of IASB, the option of capitalisation may be closed. This could potentially have a large impact on fixed assets and expenses.
The current IAS would not have a particular impact on the statistical variable.


IAS 24: Related Party Disclosures

No impact on the individual accounts.


IAS 26: Accounting and Reporting by Retirement Benefit Plans

No impact.




                                                                                                                                                          23
IAS 27: Consolidated Financial Statements

No impact on the individual accounts.


IAS 28: Investments in Associates

No impact on the individual accounts.


IAS 29: Financial Reporting in Hyperinflationary Economies

No impact.


IAS 30: Disclosures in the Financial Statements of Banks and Similar Financial Institutions

Disclosure standard, no impact other than on banks. However the non-performing loans could have an impact and this issue may need further investigation.


IAS 31: Financial Reporting of Interests in Joint Ventures

No impact.


IAS 32: Financial Instruments: Disclosure and Presentation

- Split accounting will have an impact on the liability side, in splitting between equity and debt (preference shares and redeemable shares become debt
  whereas convertible debenture becomes partly equity). The direction and size of the impact is not clear.
- The set off between financial assets and liabilities has a potential impact.




                                                                                                                                                           24
IAS 33: Earnings per Share

No impact.


IAS 34: Interim Financial Reporting

No impact.


IAS 35: Discontinuing Operations

No impact as standard contains no measurement rules.


IAS 36: Impairment of Assets

There may be an effect on net assets and equity. It is however unclear where impairment costs are recorded for statistical purposes. Probably, there is only an
equity impact. The statistical variables seem also not to include depreciation.


IAS 37: Provisions, Contingent Liabilities and Contingent Assets

This may lead to reduced provisions given the stricter criteria in IAS 37, and a later recognition of certain provisions. There may also be some recognition of
new provisions such as for decommissioning costs in the oil and gaz industry. Moreover, future repairs can no longer be included in repairs. The total impact
and direction depend on the industry and company involved.


IAS 38: Intangible Assets




                                                                                                                                                            25
Although capitalisation of development costs is imposed by IAS 38 under specified conditions, no big impact is expected in practice. However, the larger
impact may come from other intangibles that will now disappear such as set-up costs, pre-operation costs, etc. It could be a major change for new economy
companies since also capitalisation of development costs is only possible under strict conditions. The impact of the change is difficult to predict.


IAS 39: Financial Instruments: Recognition and Measurement

There will be a major change in equity and there could be an impact on variables 27, 28 and 29 from differences in fair value with related changes to financial
assets and liabilities on the balance sheet (recognition of derivatives). Also the restriction of hedge accounting will have an impact. The direction of the total
impact is difficult to assess.


IAS 40: Investment Property

There is an option for fair value measurement and some companies may use it. The impact will be on gross assets (properties) and other income if a company
decides to move to fair value.


IAS 41: Agriculture

There will be an impact on the asset side, in particular in first time application. It could result in an increase of assets and have an enormous impact on
income for certain entities within the agriculture industry.




                                                                                                                                                               26
SIC Interpretations

For most SIC Interpretations, there will be no impact with the exception of:


SIC 8: First Time Application of IAS as the Primary Basis of Accounting (but to be replaced)


SIC 16: Share Capital – Reacquired Own Equity Instruments (Treasury Shares)

Would apply to all companies that have own shares, and result in reduced financial assets and reduced equity.


SIC 23: Property, Plant and Equipment – Major Inspection or Overhaul Costs


SIC 27: Substance of Transactions Involving the Legal Form of a Lease

May have an impact.


SIC 34: Financial Instruments - Instruments or Rights Redeemable by the Holder

Major impact on cooperative and mutual industries.




                                                                                                                27
                                    EXTRACTED FROM PROFIT AND LOSS
                                              which IAS apply?
                       P&L item

P1   Turnover                                     IAS 11
                                                 (IAS 17)
                                                  IAS 18
                                                  IAS 40
                                                 (IAS 41)
                                                  SIC 27
P2   Raw materials and consumables                 IAS 2
P3   Change in stocks and work in progress         IAS 2
                                                  IAS 11
                                                  IAS 18
                                                  IAS 23
                                                  IAS 41
P4   Own work capitalised                         IAS 16
                                                  IAS 38
                                                  IAS 40
                                                  IAS 41
                                                 (SIC 23)
P5   Other operating income                        IAS 8
                                                  IAS 17
                                                  IAS 18
                                                  IAS 21
                                                  IAS 40
                                                  IAS 41
P6   Staff costs                                  IAS 19




                                                                     28
          P7        Other external charges9                                               /
          P8        Depreciation and amortisation1                                        /




9
    not to be completed, captions are here to show that they are not included in other captions




                                                                                                  29
                                                        EXTRACTED FROM BALANCE SHEET

                                                                 which IAS apply?
                                     B/S item
                   NON-FINANCIAL FIXED ASSETS
     B1             Non-financial tangible assets                    IAS 16
                                                                     IAS 17
                                                                     IAS 23
                                                                     IAS 40
                                                                     IAS 41
                                                                     SIC 23
     B2              Intangible assets and similar items10           IAS 38




10
     such as deferred charges




                                                                                       30

								
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