This document provides an introduction and overview of the FRS 102 Illustrative Financial Statements publication. It explains that the publication contains example annual financial statements for a fictional UK private company that has applied FRS 102. The introduction provides background on FRS 102 and the formats used in the illustrative financial statements. It also lists various abbreviations used in the publication.
IFRS 9 – What is the purpose of (Financial Reporting Standards) IFRS 9?Zabeel Institute
IFRS 9 is an International Financial Coverage Standard (IFRS) published by the International Audit Requirement Board (IASB). It includes 3 main subjects: category and measurement of economic tools, disability of financial properties, and hedge bookkeeping.
Climate Investor One is an innovative investment platform that provides comprehensive financing for renewable energy projects in emerging markets. It combines three funds to finance projects at different stages - a Development Fund for early support, a Construction Equity Fund for building projects, and a Refinancing Fund for long-term operational debt. By offering a single source of financing from development through operations, Climate Investor One aims to accelerate renewable energy development in emerging markets.
The FIP is a closed-end mutual fund structure under Brazilian law that allows qualified investors to pool funds for private equity and venture capital projects. At least 90% of a FIP's assets must be invested in stocks, debentures, and other securities of special purpose companies. FIPs are mainly governed by CVM Instruction 391 and can be used for various sectors and tax planning purposes. Notable features include a fixed maturity, different quota classes, and investment limits for pension funds.
The document provides an introduction and overview of illustrative financial statements prepared in accordance with FRS 102. It summarizes that the financial statements are meant to provide guidance but not be a substitute for completing disclosure checklists or consulting professional advisors. Key areas introduced by FRS 102 or differing from UK GAAP are highlighted. Appendices provide examples of alternative statement formats permitted by FRS 102. Source references for disclosures are included in the financial statements.
US Tax Abroad - Expatriate Form Schedule BDiane Siriani
This document is an IRS Schedule B form for reporting interest and ordinary dividends for tax year 2011. It contains instructions for reporting interest income, including interest from seller-financed mortgages. It also contains sections to report ordinary dividends, foreign accounts and trusts, and provides definitions for key terms like foreign financial accounts. The form must be attached to Form 1040 or 1040A to report over $1,500 of taxable interest or dividends, interest from seller-financed mortgages, or if the taxpayer had foreign accounts or was involved with foreign trusts.
Another example of an FSA/FCA final notice, this time given to individuals. The FSA is often seen as an unfair, heavy-handed regulator that damages small to medium size businesses - they're easier targets. So much so, it's scheduled to be disbanded in early 2013.
Exposing Opportunities in China A50 using CFDPhillip CFD
This document provides an overview of investing in China using contracts for difference (CFDs) on the FTSE China A50 index. It defines CFDs as derivative products that allow traders to profit from price movements in underlying assets without owning the assets. The document then discusses why China is a good investment opportunity due to its economic growth and policies. It introduces the FTSE China A50 index and describes how to trade it using CFDs, including features like leverage, short selling ability, and competitive spreads. Risks of trading CFDs are also outlined.
This document provides an introduction and overview of the FRS 102 Illustrative Financial Statements publication. It explains that the publication contains example annual financial statements for a fictional UK private company that has applied FRS 102. The introduction provides background on FRS 102 and the formats used in the illustrative financial statements. It also lists various abbreviations used in the publication.
IFRS 9 – What is the purpose of (Financial Reporting Standards) IFRS 9?Zabeel Institute
IFRS 9 is an International Financial Coverage Standard (IFRS) published by the International Audit Requirement Board (IASB). It includes 3 main subjects: category and measurement of economic tools, disability of financial properties, and hedge bookkeeping.
Climate Investor One is an innovative investment platform that provides comprehensive financing for renewable energy projects in emerging markets. It combines three funds to finance projects at different stages - a Development Fund for early support, a Construction Equity Fund for building projects, and a Refinancing Fund for long-term operational debt. By offering a single source of financing from development through operations, Climate Investor One aims to accelerate renewable energy development in emerging markets.
The FIP is a closed-end mutual fund structure under Brazilian law that allows qualified investors to pool funds for private equity and venture capital projects. At least 90% of a FIP's assets must be invested in stocks, debentures, and other securities of special purpose companies. FIPs are mainly governed by CVM Instruction 391 and can be used for various sectors and tax planning purposes. Notable features include a fixed maturity, different quota classes, and investment limits for pension funds.
The document provides an introduction and overview of illustrative financial statements prepared in accordance with FRS 102. It summarizes that the financial statements are meant to provide guidance but not be a substitute for completing disclosure checklists or consulting professional advisors. Key areas introduced by FRS 102 or differing from UK GAAP are highlighted. Appendices provide examples of alternative statement formats permitted by FRS 102. Source references for disclosures are included in the financial statements.
US Tax Abroad - Expatriate Form Schedule BDiane Siriani
This document is an IRS Schedule B form for reporting interest and ordinary dividends for tax year 2011. It contains instructions for reporting interest income, including interest from seller-financed mortgages. It also contains sections to report ordinary dividends, foreign accounts and trusts, and provides definitions for key terms like foreign financial accounts. The form must be attached to Form 1040 or 1040A to report over $1,500 of taxable interest or dividends, interest from seller-financed mortgages, or if the taxpayer had foreign accounts or was involved with foreign trusts.
Another example of an FSA/FCA final notice, this time given to individuals. The FSA is often seen as an unfair, heavy-handed regulator that damages small to medium size businesses - they're easier targets. So much so, it's scheduled to be disbanded in early 2013.
Exposing Opportunities in China A50 using CFDPhillip CFD
This document provides an overview of investing in China using contracts for difference (CFDs) on the FTSE China A50 index. It defines CFDs as derivative products that allow traders to profit from price movements in underlying assets without owning the assets. The document then discusses why China is a good investment opportunity due to its economic growth and policies. It introduces the FTSE China A50 index and describes how to trade it using CFDs, including features like leverage, short selling ability, and competitive spreads. Risks of trading CFDs are also outlined.
The document provides an overview of IFRS 2 Share-based Payment, which was issued in February 2004 by the International Accounting Standards Board to specify accounting for share-based payment transactions. Key points include:
- IFRS 2 covers the recognition and measurement of share-based payment transactions, including transactions with employees settled in cash, assets, or equity instruments.
- The standard establishes measurement principles for three types of share-based payment transactions: equity-settled, cash-settled, and transactions with a cash alternative.
- For equity-settled transactions, goods and services received are measured at the fair value of the equity instruments granted, unless fair value is not reliably estimable, in which case a
Rodel S. Navarro Business and Management Consultant and Director RODEL SY NAVARRO BUSINESS CONSULTANCY SERVICES (RSNBCS) Tel / Mobile: +63-0917-7333563 Email: rsnbcs@gmail.com http://www.slideshare.net/RSNBCS (About Business Laws compilation): http://www.slideshare.net/BUSINESSLAWSPH Email: businesslawsph@gmail.com
This document summarizes the key changes made to International Accounting Standard 16 (IAS 16) on Property, Plant and Equipment over time. The standard was originally issued in 1982 and has since been revised and amended on multiple occasions. The most recent revision in 2003 made changes to scope, recognition criteria for subsequent costs, measurement of asset dismantlement costs, and depreciation guidance. Further amendments in 2014 prohibited revenue-based depreciation and included bearer plants in agricultural activities within the scope of IAS 16. Other standards have also made minor amendments to IAS 16.
Rodel S. Navarro Business and Management Consultant and Director RODEL SY NAVARRO BUSINESS CONSULTANCY SERVICES (RSNBCS) Tel / Mobile: +63-0917-7333563 Email: rsnbcs@gmail.com http://www.slideshare.net/RSNBCS (About Business Laws compilation): http://www.slideshare.net/BUSINESSLAWSPH Email: businesslawsph@gmail.com
The document summarizes the history and amendments made to IAS 38 Intangible Assets. Key points include:
- IAS 38 was originally issued in 1998 and has been amended multiple times, most recently in 2016.
- Amendments have clarified definitions, recognition criteria, measurement of useful life, treatment of subsequent expenditures, and disclosure requirements.
- The amendments were made primarily as part of the IASB's Business Combinations project and Annual Improvements process.
This document summarizes the history and purpose of IFRS 7, which establishes disclosure requirements for financial instruments.
1) IFRS 7 was issued in 2005 to replace and enhance disclosure standards IAS 30 and IAS 32. It requires disclosures about the significance of financial instruments for an entity's financial position and performance, as well as risks from financial instruments.
2) IFRS 7 has been amended multiple times to improve fair value and liquidity risk disclosures, transfers of financial assets, offsetting financial assets and liabilities, and hedge accounting. Other standards have also amended IFRS 7 with minor changes.
3) The objective of IFRS 7 is to require disclosures that
Rodel S. Navarro Business and Management Consultant and Director RODEL SY NAVARRO BUSINESS CONSULTANCY SERVICES (RSNBCS) Tel / Mobile: +63-0917-7333563 Email: rsnbcs@gmail.com http://www.slideshare.net/RSNBCS (About Business Laws compilation): http://www.slideshare.net/BUSINESSLAWSPH Email: businesslawsph@gmail.com
This document summarizes the history and development of IFRS 3, the standard on accounting for business combinations:
1. IFRS 3 was first adopted in 2001 and has undergone several revisions since then to improve guidance and converge with US GAAP standards. The most recent revision was issued in 2008.
2. IFRS 3 establishes principles for how an acquirer must recognize and measure the identifiable assets acquired, liabilities assumed, and any non-controlling interest in a business combination. It also provides guidance on recognizing and measuring goodwill or gain from a bargain purchase.
3. IFRS 3 requires all business combinations to be accounted for using the acquisition method, whereby the acquirer recognizes and
Rodel S. Navarro; Business and Management Consultant and Director; RODEL SY NAVARRO BUSINESS CONSULTANCY SERVICES (RSNBCS); Tel / Mobile: +63-0917-7333563; Email: rsnbcs@gmail.com http://www.slideshare.net/RSNBCS; (About Business Laws compilation): http://www.slideshare.net/BUSINESSLAWSPH Email: businesslawsph@gmail.com; https://www.slideshare.net/FREEPDFBOOKSPH; freepdfbooksph@gmail.com; www.slideshare.net/IFRS_IAS_COMPILED; ifrs.ias.compiled@gmail.com
RBI has made assured returns to foreign investors on their investments in India illegal through a recent circular. The circular provides that foreign investors can exit their investments after a one year lock-in period, but cannot expect any assured returns. For listed companies, the exit price will be the prevailing market price. For unlisted companies, the exit price will be calculated based on return on equity or internationally accepted pricing methods for convertible instruments. Existing agreements providing for assured returns will be invalid to that extent. While this clarifies regulations, experts believe it may discourage foreign investment and make exits difficult.
Vietnam Accounting Standards - VAS 10 Effects of changes in foreign exchange ...AC&C Consulting Co., Ltd.
1) This document outlines accounting standards for foreign currency transactions and the conversion of financial statements for overseas activities. It addresses the initial recognition, reporting, and recognition of exchange rate differences for foreign currency transactions, as well as the conversion of financial statements for overseas subsidiaries and branches.
2) Exchange rate differences arising from an enterprise's net investment in foreign subsidiaries are classified as owners' equity until the investment is liquidated. Monetary items relating to long-term receivables or loans from foreign subsidiaries, which do not have a defined settlement date, are also considered part of the net investment.
3) Exchange rate differences from foreign currency liabilities that hedge risks of a net investment in a foreign subsidiary are also
please advise Indicate whether the following statements are true or fa.docxcgraciela1
please advise
Indicate whether the following statements are true or false: 1) Under IFRS the payment of dividends may be reported as either an investing activity or a financing activity. 2) Significant financing and investing activities that do not affect cash are not reported in the statement of cash flows or any other place. 3) Land held for speculation is reported in the property, plant, and equipment section of the statement of financial position. 4) The equity section of an IFRS statement of financial position includes share capital, share premium, and retained earnings in that order 5) Companies determine cash provided by operating activities by converting net income on an accrual basis to a cash basis. 6) An asset which is expected to be converted into cash, sold, or consumed within one year of the statement date is always reported as a current asset. 7) Companies frequently describe the terms of all long-term liability agreements in notes to the financial statements. 8) The account form and the report form of the statement of financial position are both acceptable under IFRS. 9) Borrowing of a loan is reported as an investing activity in the statement of cash flows. 10) The primary purpose of a statement of cash flows is to report only the cash effects of operations during a period. 11) Under IFRS the statement of financial position is often referred to as the statement of changes in equity
.
Vietnam Accounting Standards - VAS 07 Accounting for Investment in associatesAC&C Consulting Co., Ltd.
This document outlines accounting standards for investments in associates. It defines key terms like associate, significant influence, equity method, and cost method. It provides guidance on using the equity method to account for associates in consolidated financial statements versus the cost method in separate financial statements. It also addresses recognizing the investor's share of profits/losses, impairment testing, income taxes, contingencies, and disclosure requirements related to investments in associates.
This standard provides guidance on how to account for foreign currency transactions and foreign operations in financial statements. It addresses how to determine the functional currency, how to translate foreign currency transactions and monetary items, and how to translate the financial statements of foreign operations. The objective is to prescribe how to include foreign currency transactions and foreign operations in financial statements and how to translate financial statements into a presentation currency.
Separate financial statements are those presented by an entity in addition to consolidated financial statements or financial statements using the equity method. In separate financial statements, investments in subsidiaries, joint ventures, and associates must be accounted for either at cost or in accordance with IFRS 9, or using the equity method described in IAS 28. Separate financial statements must comply with all applicable IFRSs and include certain disclosures such as a list of significant investments, the accounting methods used, and the reasons for preparing separate statements if not required by law.
The document provides an overview of IFRS 2 Share-based Payment, which was issued in February 2004 by the International Accounting Standards Board to specify accounting for share-based payment transactions. Key points include:
- IFRS 2 covers the recognition and measurement of share-based payment transactions, including transactions with employees settled in cash, assets, or equity instruments.
- The standard establishes measurement principles for three types of share-based payment transactions: equity-settled, cash-settled, and transactions with a cash alternative.
- For equity-settled transactions, goods and services received are measured at the fair value of the equity instruments granted, unless fair value is not reliably estimable, in which case a
Rodel S. Navarro Business and Management Consultant and Director RODEL SY NAVARRO BUSINESS CONSULTANCY SERVICES (RSNBCS) Tel / Mobile: +63-0917-7333563 Email: rsnbcs@gmail.com http://www.slideshare.net/RSNBCS (About Business Laws compilation): http://www.slideshare.net/BUSINESSLAWSPH Email: businesslawsph@gmail.com
This document summarizes the key changes made to International Accounting Standard 16 (IAS 16) on Property, Plant and Equipment over time. The standard was originally issued in 1982 and has since been revised and amended on multiple occasions. The most recent revision in 2003 made changes to scope, recognition criteria for subsequent costs, measurement of asset dismantlement costs, and depreciation guidance. Further amendments in 2014 prohibited revenue-based depreciation and included bearer plants in agricultural activities within the scope of IAS 16. Other standards have also made minor amendments to IAS 16.
Rodel S. Navarro Business and Management Consultant and Director RODEL SY NAVARRO BUSINESS CONSULTANCY SERVICES (RSNBCS) Tel / Mobile: +63-0917-7333563 Email: rsnbcs@gmail.com http://www.slideshare.net/RSNBCS (About Business Laws compilation): http://www.slideshare.net/BUSINESSLAWSPH Email: businesslawsph@gmail.com
The document summarizes the history and amendments made to IAS 38 Intangible Assets. Key points include:
- IAS 38 was originally issued in 1998 and has been amended multiple times, most recently in 2016.
- Amendments have clarified definitions, recognition criteria, measurement of useful life, treatment of subsequent expenditures, and disclosure requirements.
- The amendments were made primarily as part of the IASB's Business Combinations project and Annual Improvements process.
This document summarizes the history and purpose of IFRS 7, which establishes disclosure requirements for financial instruments.
1) IFRS 7 was issued in 2005 to replace and enhance disclosure standards IAS 30 and IAS 32. It requires disclosures about the significance of financial instruments for an entity's financial position and performance, as well as risks from financial instruments.
2) IFRS 7 has been amended multiple times to improve fair value and liquidity risk disclosures, transfers of financial assets, offsetting financial assets and liabilities, and hedge accounting. Other standards have also amended IFRS 7 with minor changes.
3) The objective of IFRS 7 is to require disclosures that
Rodel S. Navarro Business and Management Consultant and Director RODEL SY NAVARRO BUSINESS CONSULTANCY SERVICES (RSNBCS) Tel / Mobile: +63-0917-7333563 Email: rsnbcs@gmail.com http://www.slideshare.net/RSNBCS (About Business Laws compilation): http://www.slideshare.net/BUSINESSLAWSPH Email: businesslawsph@gmail.com
This document summarizes the history and development of IFRS 3, the standard on accounting for business combinations:
1. IFRS 3 was first adopted in 2001 and has undergone several revisions since then to improve guidance and converge with US GAAP standards. The most recent revision was issued in 2008.
2. IFRS 3 establishes principles for how an acquirer must recognize and measure the identifiable assets acquired, liabilities assumed, and any non-controlling interest in a business combination. It also provides guidance on recognizing and measuring goodwill or gain from a bargain purchase.
3. IFRS 3 requires all business combinations to be accounted for using the acquisition method, whereby the acquirer recognizes and
Rodel S. Navarro; Business and Management Consultant and Director; RODEL SY NAVARRO BUSINESS CONSULTANCY SERVICES (RSNBCS); Tel / Mobile: +63-0917-7333563; Email: rsnbcs@gmail.com http://www.slideshare.net/RSNBCS; (About Business Laws compilation): http://www.slideshare.net/BUSINESSLAWSPH Email: businesslawsph@gmail.com; https://www.slideshare.net/FREEPDFBOOKSPH; freepdfbooksph@gmail.com; www.slideshare.net/IFRS_IAS_COMPILED; ifrs.ias.compiled@gmail.com
RBI has made assured returns to foreign investors on their investments in India illegal through a recent circular. The circular provides that foreign investors can exit their investments after a one year lock-in period, but cannot expect any assured returns. For listed companies, the exit price will be the prevailing market price. For unlisted companies, the exit price will be calculated based on return on equity or internationally accepted pricing methods for convertible instruments. Existing agreements providing for assured returns will be invalid to that extent. While this clarifies regulations, experts believe it may discourage foreign investment and make exits difficult.
Vietnam Accounting Standards - VAS 10 Effects of changes in foreign exchange ...AC&C Consulting Co., Ltd.
1) This document outlines accounting standards for foreign currency transactions and the conversion of financial statements for overseas activities. It addresses the initial recognition, reporting, and recognition of exchange rate differences for foreign currency transactions, as well as the conversion of financial statements for overseas subsidiaries and branches.
2) Exchange rate differences arising from an enterprise's net investment in foreign subsidiaries are classified as owners' equity until the investment is liquidated. Monetary items relating to long-term receivables or loans from foreign subsidiaries, which do not have a defined settlement date, are also considered part of the net investment.
3) Exchange rate differences from foreign currency liabilities that hedge risks of a net investment in a foreign subsidiary are also
please advise Indicate whether the following statements are true or fa.docxcgraciela1
please advise
Indicate whether the following statements are true or false: 1) Under IFRS the payment of dividends may be reported as either an investing activity or a financing activity. 2) Significant financing and investing activities that do not affect cash are not reported in the statement of cash flows or any other place. 3) Land held for speculation is reported in the property, plant, and equipment section of the statement of financial position. 4) The equity section of an IFRS statement of financial position includes share capital, share premium, and retained earnings in that order 5) Companies determine cash provided by operating activities by converting net income on an accrual basis to a cash basis. 6) An asset which is expected to be converted into cash, sold, or consumed within one year of the statement date is always reported as a current asset. 7) Companies frequently describe the terms of all long-term liability agreements in notes to the financial statements. 8) The account form and the report form of the statement of financial position are both acceptable under IFRS. 9) Borrowing of a loan is reported as an investing activity in the statement of cash flows. 10) The primary purpose of a statement of cash flows is to report only the cash effects of operations during a period. 11) Under IFRS the statement of financial position is often referred to as the statement of changes in equity
.
Vietnam Accounting Standards - VAS 07 Accounting for Investment in associatesAC&C Consulting Co., Ltd.
This document outlines accounting standards for investments in associates. It defines key terms like associate, significant influence, equity method, and cost method. It provides guidance on using the equity method to account for associates in consolidated financial statements versus the cost method in separate financial statements. It also addresses recognizing the investor's share of profits/losses, impairment testing, income taxes, contingencies, and disclosure requirements related to investments in associates.
This standard provides guidance on how to account for foreign currency transactions and foreign operations in financial statements. It addresses how to determine the functional currency, how to translate foreign currency transactions and monetary items, and how to translate the financial statements of foreign operations. The objective is to prescribe how to include foreign currency transactions and foreign operations in financial statements and how to translate financial statements into a presentation currency.
Separate financial statements are those presented by an entity in addition to consolidated financial statements or financial statements using the equity method. In separate financial statements, investments in subsidiaries, joint ventures, and associates must be accounted for either at cost or in accordance with IFRS 9, or using the equity method described in IAS 28. Separate financial statements must comply with all applicable IFRSs and include certain disclosures such as a list of significant investments, the accounting methods used, and the reasons for preparing separate statements if not required by law.
This document discusses hedge accounting under IFRS 9. It defines hedge accounting and its qualifying criteria. It describes the three types of hedging relationships - fair value hedges, cash flow hedges, and hedges of a net investment. It explains how to account for qualifying hedges and the required disclosures. Key differences between IAS 39 and IFRS 9 are noted, making IFRS 9 better aligned with risk management objectives.
The committee was constituted to rationalize the definition of foreign direct investment (FDI) and foreign institutional investment (FII) based on an announcement by the Finance Minister. The committee met several times and studied conceptual frameworks for FDI and portfolio investment. It recommended merging various portfolio investment forms under a single foreign portfolio investment (FPI) definition. Investments of less than 10% would be considered FPI, while those of 10% or more would be FDI. The committee also provided other recommendations regarding foreign venture capital investors, non-resident Indian investors, and concluded that the classifications should ultimately be simplified to FPI and FDI investors.
This document summarizes the key aspects of Ind AS 27 regarding separate financial statements. Ind AS 27 prescribes the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements. It allows investments to be accounted for either at cost or in accordance with Ind AS 109. The standard also provides definitions, guidance on preparation of separate financial statements for investment entities, and disclosure requirements.
Question 12 20 pts Explain five criteria of Statement No. 52 in deter.pdfexpressionnoveltiesk
Question 12 20 pts Explain five criteria of Statement No. 52 in determining the foreign currency
as the functional currency. HTML Editor Paragraph ?
Solution
Answer) Application of this Statement will affect financial reporting of most companies
operating in foreign countries. The differing operating and economic characteristics of varied
types of foreign operations will be distinguished in accounting for them. Adjustments for
currency exchange rate changes are excluded from net income for those fluctuations that do not
impact cash flows and are included for those that do. The requirements reflect these general
conclusions:
The economic effects of an exchange rate change on an operation that is relatively self-contained
and integrated within a foreign country relate to the net investment in that operation. Translation
adjustments that arise from consolidating that foreign operation do not impact cash flows and are
not included in net income.
The economic effects of an exchange rate change on a foreign operation that is an extension of
the parent\'s domestic operations relate to individual assets and liabilities and impact the parent\'s
cash flows directly. Accordingly, the exchange gains and losses in such an operation are included
in net income.
Contracts, transactions, or balances that are, in fact, effective hedges of foreign exchange risk
will be accounted for as hedges without regard to their form.
More specifically, this Statement replaces FASB Statement No. 8, Accounting for the
Translation of Foreign Currency Transactions and Foreign Currency Financial Statements, and
revises the existing accounting and reporting requirements for translation of foreign currency
transactions and foreign currency financial statements. It presents standards for foreign currency
translation that are designed to (1) provide information that is generally compatible with the
expected economic effects of a rate change on an enterprise\'s cash flows and equity and (2)
reflect in consolidated statements the financial results and relationships as measured in the
primary currency in which each entity conducts its business (referred to as its \"functional
currency\").
An entity\'s functional currency is the currency of the primary economic environment in which
that entity operates. The functional currency can be the dollar or a foreign currency depending on
the facts. Normally, it will be the currency of the economic environment in which cash is
generated and expended by the entity. An entity can be any form of operation, including a
subsidiary, division, branch, or joint venture. The Statement provides guidance for this key
determination in which management\'s judgment is essential in assessing the facts.
A currency in a highly inflationary environment (3-year inflation rate of approximately 100
percent or more) is not considered stable enough to serve as a functional currency and the more
stable currency of the reporting parent is to be used instead.
The functio.
Derivatives are financial instruments whose value is based on an underlying variable such as interest rates or commodity prices. There are two key accounting concepts for derivatives - changes in fair value are recognized in earnings unless the derivative is used for hedging, in which case changes may be recorded in other comprehensive income. Derivatives are used to manage financial risks like price, credit, interest, and foreign exchange risk. To qualify for hedge accounting, the hedging relationship must meet effectiveness criteria where the items' value changes offset. Embedded derivatives are components of hybrid contracts that affect cash flows like standalone derivatives.
The document provides an introduction to accounting standards for financial instruments including MFRS 139, MFRS 132 and MFRS 7. It discusses key concepts such as recognition and measurement of financial assets and liabilities, classification and subsequent measurement of financial assets, and derecognition of financial assets and liabilities. The document also provides an overview of hedge accounting, describing the three types of hedges (fair value hedge, cash flow hedge and hedge of a net investment) and hedge accounting requirements. Examples are provided to illustrate journal entries for fair value hedge and cash flow hedge.
This document outlines Accounting Standard 20 on earnings per share (EPS) in India. It provides definitions and guidelines for calculating basic EPS and diluted EPS. Basic EPS is calculated by dividing net profit by the weighted average number of outstanding shares. Diluted EPS is also required to be disclosed, though small and medium companies are exempt from this requirement. The standard aims to improve comparability of financial performance across companies and periods.
Annual update deliver by Paul Rhodes to the IFRS staff group at Crowe Soberman LLP.
Topics covered were estimation and judgment calls for functional currency; strategic investments; business combinations; impairments and going concern
The document provides summaries of several International Accounting Standards (IAS). It begins by explaining that IAS were formerly issued by the International Accounting Standards Committee to provide guidance on reflecting transactions and events in financial statements, and are now known as International Financial Reporting Standards issued by the IASB. It then summarizes the objectives and key requirements of several individual IAS standards, including IAS 1 on financial statement presentation, IAS 2 on inventories, IAS 7 on statements of cash flows, IAS 8 on accounting policies and errors, IAS 11 on construction contracts, and several others dealing with topics like income taxes, property and equipment, leases, revenue, and employee benefits.
Part-2-Chapter-1 Auditing and Assurance .pptxGadoMaAlleileeG
1. The document discusses the audit of investments, including the classification, valuation, and risks associated with different types of investments. Equity investments can be classified at fair value through profit or loss or other comprehensive income, while debt investments can be classified at fair value, amortized cost, or fair value through other comprehensive income.
2. Inherent risks of investments include improper valuation, incorrect recording of value changes, impairment issues, and incorrect accounting treatments. Control risks relate to authorization, segregation of duties, reconciliation, and valuation/classification policies.
3. Audit procedures address existence, completeness, valuation, rights and obligations, and presentation/disclosure, including confirmation, examination of ownership evidence, analytical procedures,
The document summarizes key changes to foreign exchange laws in India regarding foreign direct investment in Limited Liability Partnerships (LLPs). It outlines eligibility requirements for foreign investors and LLPs to receive foreign investment, including that the LLP must operate in a sector that allows 100% foreign ownership. It also details pricing requirements, payment methods, reporting obligations, restrictions on downstream investments, and other conditions like ECB restrictions. Foreign investment in LLPs now requires prior government or Foreign Investment Promotion Board approval.
12 steps to transform your organization into the agile org you deservePierre E. NEIS
During an organizational transformation, the shift is from the previous state to an improved one. In the realm of agility, I emphasize the significance of identifying polarities. This approach helps establish a clear understanding of your objectives. I have outlined 12 incremental actions to delineate your organizational strategy.
Specific ServPoints should be tailored for restaurants in all food service segments. Your ServPoints should be the centerpiece of brand delivery training (guest service) and align with your brand position and marketing initiatives, especially in high-labor-cost conditions.
408-784-7371
Foodservice Consulting + Design
Org Design is a core skill to be mastered by management for any successful org change.
Org Topologies™ in its essence is a two-dimensional space with 16 distinctive boxes - atomic organizational archetypes. That space helps you to plot your current operating model by positioning individuals, departments, and teams on the map. This will give a profound understanding of the performance of your value-creating organizational ecosystem.
Employment PracticesRegulation and Multinational CorporationsRoopaTemkar
Employment PracticesRegulation and Multinational Corporations
Strategic decision making within MNCs constrained or determined by the implementation of laws and codes of practice and by pressure from political actors. Managers in MNCs have to make choices that are shaped by gvmt. intervention and the local economy.
Comparing Stability and Sustainability in Agile SystemsRob Healy
Copy of the presentation given at XP2024 based on a research paper.
In this paper we explain wat overwork is and the physical and mental health risks associated with it.
We then explore how overwork relates to system stability and inventory.
Finally there is a call to action for Team Leads / Scrum Masters / Managers to measure and monitor excess work for individual teams.
A presentation on mastering key management concepts across projects, products, programs, and portfolios. Whether you're an aspiring manager or looking to enhance your skills, this session will provide you with the knowledge and tools to succeed in various management roles. Learn about the distinct lifecycles, methodologies, and essential skillsets needed to thrive in today's dynamic business environment.
Colby Hobson: Residential Construction Leader Building a Solid Reputation Thr...dsnow9802
Colby Hobson stands out as a dynamic leader in the residential construction industry. With a solid reputation built on his exceptional communication and presentation skills, Colby has proven himself to be an excellent team player, fostering a collaborative and efficient work environment.
Enriching engagement with ethical review processesstrikingabalance
New ethics review processes at the University of Bath. Presented at the 8th World Conference on Research Integrity by Filipa Vance, Head of Research Governance and Compliance at the University of Bath. June 2024, Athens
Sethurathnam Ravi: A Legacy in Finance and LeadershipAnjana Josie
Sethurathnam Ravi, also known as S Ravi, is a distinguished Chartered Accountant and former Chairman of the Bombay Stock Exchange (BSE). As the Founder and Managing Partner of Ravi Rajan & Co. LLP, he has made significant contributions to the fields of finance, banking, and corporate governance. His extensive career includes directorships in over 45 major organizations, including LIC, BHEL, and ONGC. With a passion for financial consulting and social issues, S Ravi continues to influence the industry and inspire future leaders.
Integrity in leadership builds trust by ensuring consistency between words an...Ram V Chary
Integrity in leadership builds trust by ensuring consistency between words and actions, making leaders reliable and credible. It also ensures ethical decision-making, which fosters a positive organizational culture and promotes long-term success. #RamVChary
Ganpati Kumar Choudhary Indian Ethos PPT.pptx, The Dilemma of Green Energy Corporation
Green Energy Corporation, a leading renewable energy company, faces a dilemma: balancing profitability and sustainability. Pressure to scale rapidly has led to ethical concerns, as the company's commitment to sustainable practices is tested by the need to satisfy shareholders and maintain a competitive edge.
1. IFRIC Interpretation 16
Hedges of a Net Investment in a Foreign
Operation
In July 2008 the International Accounting Standards Board issued IFRIC 16 Hedges of a Net
Investment in a Foreign Operation. It was developed by the Interpretations Committee.
Other Standards have made minor consequential amendments to IFRIC 16. They include
IFRS 11 Joint Arrangements (issued May 2011), IFRS 9 Financial Instruments (Hedge Accounting
and amendments to IFRS 9, IFRS 7 and IAS 39) (issued November 2013) and IFRS 9 Financial
Instruments (issued July 2014).
IFRIC 16
IFRS Foundation A1445
2. CONTENTS
from paragraph
IFRIC INTERPRETATION 16
HEDGES OF A NET INVESTMENT IN A FOREIGN OPERATION
REFERENCES
BACKGROUND 1
SCOPE 7
ISSUES 9
CONSENSUS 10
Nature of the hedged risk and amount of the hedged item for which a
hedging relationship may be designated 10
Where the hedging instrument can be held 14
Disposal of a hedged foreign operation 16
EFFECTIVE DATE 18
TRANSITION 19
APPENDIX
Application guidance
FOR THE ACCOMPANYING DOCUMENTS LISTED BELOW, SEE PART B OF
THIS EDITION
ILLUSTRATIVE EXAMPLE
BASIS FOR CONCLUSIONS
IFRIC 16
IFRS FoundationA1446
3. IFRIC Interpretation 16 Hedges of a Net Investment in a Foreign Operation (IFRIC 16) is set out
in paragraphs 1–19 and the Appendix. IFRIC 16 is accompanied by an illustrative
example and a Basis for Conclusions. The scope and authority of Interpretations are set
out in paragraphs 2 and 7–16 of the Preface to International Financial Reporting Standards.
IFRIC 16
IFRS Foundation A1447
4. IFRIC Interpretation 16
Hedges of a Net Investment in a Foreign Operation
References
● IFRS 9 Financial Instruments
● IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
● IAS 21 The Effects of Changes in Foreign Exchange Rates
Background
1 Many reporting entities have investments in foreign operations (as defined in
IAS 21 paragraph 8). Such foreign operations may be subsidiaries, associates,
joint ventures or branches. IAS 21 requires an entity to determine the
functional currency of each of its foreign operations as the currency of the
primary economic environment of that operation. When translating the results
and financial position of a foreign operation into a presentation currency, the
entity is required to recognise foreign exchange differences in other
comprehensive income until it disposes of the foreign operation.
2 Hedge accounting of the foreign currency risk arising from a net investment in a
foreign operation will apply only when the net assets of that foreign operation
are included in the financial statements.1
The item being hedged with respect to
the foreign currency risk arising from the net investment in a foreign operation
may be an amount of net assets equal to or less than the carrying amount of the
net assets of the foreign operation.
3 IFRS 9 requires the designation of an eligible hedged item and eligible hedging
instruments in a hedge accounting relationship. If there is a designated hedging
relationship, in the case of a net investment hedge, the gain or loss on the
hedging instrument that is determined to be an effective hedge of the net
investment is recognised in other comprehensive income and is included with
the foreign exchange differences arising on translation of the results and
financial position of the foreign operation.
4 An entity with many foreign operations may be exposed to a number of foreign
currency risks. This Interpretation provides guidance on identifying the foreign
currency risks that qualify as a hedged risk in the hedge of a net investment in a
foreign operation.
5 IFRS 9 allows an entity to designate either a derivative or a non-derivative
financial instrument (or a combination of derivative and non-derivative
financial instruments) as hedging instruments for foreign currency risk. This
1 This will be the case for consolidated financial statements, financial statements in which
investments such as associates or joint ventures are accounted for using the equity method and
financial statements that include a branch or a joint operation as defined in IFRS 11 Joint
Arrangements.
IFRIC 16
IFRS FoundationA1448
5. Interpretation provides guidance on where, within a group, hedging
instruments that are hedges of a net investment in a foreign operation can be
held to qualify for hedge accounting.
6 IAS 21 and IFRS 9 require cumulative amounts recognised in other
comprehensive income relating to both the foreign exchange differences arising
on translation of the results and financial position of the foreign operation and
the gain or loss on the hedging instrument that is determined to be an effective
hedge of the net investment to be reclassified from equity to profit or loss as a
reclassification adjustment when the parent disposes of the foreign operation.
This Interpretation provides guidance on how an entity should determine the
amounts to be reclassified from equity to profit or loss for both the hedging
instrument and the hedged item.
Scope
7 This Interpretation applies to an entity that hedges the foreign currency risk
arising from its net investments in foreign operations and wishes to qualify for
hedge accounting in accordance with IFRS 9. For convenience this
Interpretation refers to such an entity as a parent entity and to the financial
statements in which the net assets of foreign operations are included as
consolidated financial statements. All references to a parent entity apply
equally to an entity that has a net investment in a foreign operation that is a
joint venture, an associate or a branch.
8 This Interpretation applies only to hedges of net investments in foreign
operations; it should not be applied by analogy to other types of hedge
accounting.
Issues
9 Investments in foreign operations may be held directly by a parent entity or
indirectly by its subsidiary or subsidiaries. The issues addressed in this
Interpretation are:
(a) the nature of the hedged risk and the amount of the hedged item for which a
hedging relationship may be designated:
(i) whether the parent entity may designate as a hedged risk only
the foreign exchange differences arising from a difference
between the functional currencies of the parent entity and its
foreign operation, or whether it may also designate as the hedged
risk the foreign exchange differences arising from the difference
between the presentation currency of the parent entity’s
consolidated financial statements and the functional currency of
the foreign operation;
(ii) if the parent entity holds the foreign operation indirectly,
whether the hedged risk may include only the foreign exchange
differences arising from differences in functional currencies
between the foreign operation and its immediate parent entity,
or whether the hedged risk may also include any foreign
IFRIC 16
IFRS Foundation A1449
6. exchange differences between the functional currency of the
foreign operation and any intermediate or ultimate parent entity
(ie whether the fact that the net investment in the foreign
operation is held through an intermediate parent affects the
economic risk to the ultimate parent).
(b) where in a group the hedging instrument can be held:
(i) whether a qualifying hedge accounting relationship can be
established only if the entity hedging its net investment is a party
to the hedging instrument or whether any entity in the group,
regardless of its functional currency, can hold the hedging
instrument;
(ii) whether the nature of the hedging instrument (derivative or
non-derivative) or the method of consolidation affects the
assessment of hedge effectiveness.
(c) what amounts should be reclassified from equity to profit or loss as reclassification
adjustments on disposal of the foreign operation:
(i) when a foreign operation that was hedged is disposed of, what
amounts from the parent entity’s foreign currency translation
reserve in respect of the hedging instrument and in respect of
that foreign operation should be reclassified from equity to profit
or loss in the parent entity’s consolidated financial statements;
(ii) whether the method of consolidation affects the determination
of the amounts to be reclassified from equity to profit or loss.
Consensus
Nature of the hedged risk and amount of the hedged
item for which a hedging relationship may be designated
10 Hedge accounting may be applied only to the foreign exchange differences
arising between the functional currency of the foreign operation and the parent
entity’s functional currency.
11 In a hedge of the foreign currency risks arising from a net investment in a
foreign operation, the hedged item can be an amount of net assets equal to or
less than the carrying amount of the net assets of the foreign operation in the
consolidated financial statements of the parent entity. The carrying amount of
the net assets of a foreign operation that may be designated as the hedged item
in the consolidated financial statements of a parent depends on whether any
lower level parent of the foreign operation has applied hedge accounting for all
or part of the net assets of that foreign operation and that accounting has been
maintained in the parent’s consolidated financial statements.
12 The hedged risk may be designated as the foreign currency exposure arising
between the functional currency of the foreign operation and the functional
currency of any parent entity (the immediate, intermediate or ultimate parent
entity) of that foreign operation. The fact that the net investment is held
IFRIC 16
IFRS FoundationA1450
7. through an intermediate parent does not affect the nature of the economic risk
arising from the foreign currency exposure to the ultimate parent entity.
13 An exposure to foreign currency risk arising from a net investment in a foreign
operation may qualify for hedge accounting only once in the consolidated
financial statements. Therefore, if the same net assets of a foreign operation are
hedged by more than one parent entity within the group (for example, both a
direct and an indirect parent entity) for the same risk, only one hedging
relationship will qualify for hedge accounting in the consolidated financial
statements of the ultimate parent. A hedging relationship designated by one
parent entity in its consolidated financial statements need not be maintained by
another higher level parent entity. However, if it is not maintained by the
higher level parent entity, the hedge accounting applied by the lower level
parent must be reversed before the higher level parent’s hedge accounting is
recognised.
Where the hedging instrument can be held
14 A derivative or a non-derivative instrument (or a combination of derivative and
non-derivative instruments) may be designated as a hedging instrument in a
hedge of a net investment in a foreign operation. The hedging instrument(s)
may be held by any entity or entities within the group, as long as the
designation, documentation and effectiveness requirements of IFRS 9
paragraph 6.4.1 that relate to a net investment hedge are satisfied. In particular,
the hedging strategy of the group should be clearly documented because of the
possibility of different designations at different levels of the group.
15 For the purpose of assessing effectiveness, the change in value of the hedging
instrument in respect of foreign exchange risk is computed by reference to the
functional currency of the parent entity against whose functional currency the
hedged risk is measured, in accordance with the hedge accounting
documentation. Depending on where the hedging instrument is held, in the
absence of hedge accounting the total change in value might be recognised in
profit or loss, in other comprehensive income, or both. However, the assessment
of effectiveness is not affected by whether the change in value of the hedging
instrument is recognised in profit or loss or in other comprehensive income. As
part of the application of hedge accounting, the total effective portion of the
change is included in other comprehensive income. The assessment of
effectiveness is not affected by whether the hedging instrument is a derivative or
a non-derivative instrument or by the method of consolidation.
Disposal of a hedged foreign operation
16 When a foreign operation that was hedged is disposed of, the amount
reclassified to profit or loss as a reclassification adjustment from the foreign
currency translation reserve in the consolidated financial statements of the
parent in respect of the hedging instrument is the amount that IFRS 9
paragraph 6.5.14 requires to be identified. That amount is the cumulative gain
or loss on the hedging instrument that was determined to be an effective hedge.
17 The amount reclassified to profit or loss from the foreign currency translation
reserve in the consolidated financial statements of a parent in respect of the net
IFRIC 16
IFRS Foundation A1451
8. investment in that foreign operation in accordance with IAS 21 paragraph 48 is
the amount included in that parent’s foreign currency translation reserve in
respect of that foreign operation. In the ultimate parent’s consolidated financial
statements, the aggregate net amount recognised in the foreign currency
translation reserve in respect of all foreign operations is not affected by the
consolidation method. However, whether the ultimate parent uses the direct or
the step-by-step method of consolidation2
may affect the amount included in its
foreign currency translation reserve in respect of an individual foreign
operation. The use of the step-by-step method of consolidation may result in the
reclassification to profit or loss of an amount different from that used to
determine hedge effectiveness. This difference may be eliminated by
determining the amount relating to that foreign operation that would have
arisen if the direct method of consolidation had been used. Making this
adjustment is not required by IAS 21. However, it is an accounting policy choice
that should be followed consistently for all net investments.
Effective date
18 An entity shall apply this Interpretation for annual periods beginning on or
after 1 October 2008. An entity shall apply the amendment to paragraph 14
made by Improvements to IFRSs issued in April 2009 for annual periods beginning
on or after 1 July 2009. Earlier application of both is permitted. If an entity
applies this Interpretation for a period beginning before 1 October 2008, or the
amendment to paragraph 14 before 1 July 2009, it shall disclose that fact.
18A [Deleted]
18B IFRS 9, as issued in July 2014, amended paragraphs 3, 5–7, 14, 16, AG1 and AG8
and deleted paragraph 18A. An entity shall apply those amendments when it
applies IFRS 9.
Transition
19 IAS 8 specifies how an entity applies a change in accounting policy resulting
from the initial application of an Interpretation. An entity is not required to
comply with those requirements when first applying the Interpretation. If an
entity had designated a hedging instrument as a hedge of a net investment but
the hedge does not meet the conditions for hedge accounting in this
Interpretation, the entity shall apply IAS 39 to discontinue that hedge
accounting prospectively.
2 The direct method is the method of consolidation in which the financial statements of the foreign
operation are translated directly into the functional currency of the ultimate parent. The
step-by-step method is the method of consolidation in which the financial statements of the foreign
operation are first translated into the functional currency of any intermediate parent(s) and then
translated into the functional currency of the ultimate parent (or the presentation currency if
different).
IFRIC 16
IFRS FoundationA1452
9. Appendix
Application guidance
This appendix is an integral part of the Interpretation.
AG1 This appendix illustrates the application of the Interpretation using the
corporate structure illustrated below. In all cases the hedging relationships
described would be tested for effectiveness in accordance with IFRS 9, although
this testing is not discussed in this appendix. Parent, being the ultimate parent
entity, presents its consolidated financial statements in its functional currency
of euro (EUR). Each of the subsidiaries is wholly owned. Parent’s £500 million
net investment in Subsidiary B (functional currency pounds sterling (GBP))
includes the £159 million equivalent of Subsidiary B’s US$300 million net
investment in Subsidiary C (functional currency US dollars (USD)). In other
words, Subsidiary B’s net assets other than its investment in Subsidiary C are
£341 million.
Nature of hedged risk for which a hedging relationship
may be designated (paragraphs 10–13)
AG2 Parent can hedge its net investment in each of Subsidiaries A, B and C for the
foreign exchange risk between their respective functional currencies (Japanese
yen (JPY), pounds sterling and US dollars) and euro. In addition, Parent can
hedge the USD/GBP foreign exchange risk between the functional currencies of
Subsidiary B and Subsidiary C. In its consolidated financial statements,
Subsidiary B can hedge its net investment in Subsidiary C for the foreign
exchange risk between their functional currencies of US dollars and pounds
sterling. In the following examples the designated risk is the spot foreign
exchange risk because the hedging instruments are not derivatives. If the
hedging instruments were forward contracts, Parent could designate the
forward foreign exchange risk.
Parent
functional currency EUR
Subsidiary A
functional currency JPY
¥ 400,000 million
Subsidiary B
functional currency GBP
Subsidiary C
functional currency USD
£500 million
US$300 million
(£159 million equivalent)
IFRIC 16
IFRS Foundation A1453
10. Amount of hedged item for which a hedging relationship
may be designated (paragraphs 10–13)
AG3 Parent wishes to hedge the foreign exchange risk from its net investment in
Subsidiary C. Assume that Subsidiary A has an external borrowing of
US$300 million. The net assets of Subsidiary A at the start of the reporting
period are ¥400,000 million including the proceeds of the external borrowing of
US$300 million.
AG4 The hedged item can be an amount of net assets equal to or less than the
carrying amount of Parent’s net investment in Subsidiary C (US$300 million) in
its consolidated financial statements. In its consolidated financial statements
Parent can designate the US$300 million external borrowing in Subsidiary A as a
hedge of the EUR/USD spot foreign exchange risk associated with its net
investment in the US$300 million net assets of Subsidiary C. In this case, both
the EUR/USD foreign exchange difference on the US$300 million external
borrowing in Subsidiary A and the EUR/USD foreign exchange difference on the
US$300 million net investment in Subsidiary C are included in the foreign
currency translation reserve in Parent’s consolidated financial statements after
the application of hedge accounting.
AG5 In the absence of hedge accounting, the total USD/EUR foreign exchange
difference on the US$300 million external borrowing in Subsidiary A would be
recognised in Parent’s consolidated financial statements as follows:
● USD/JPY spot foreign exchange rate change, translated to euro, in profit
or loss, and
● JPY/EUR spot foreign exchange rate change in other comprehensive
income.
Instead of the designation in paragraph AG4, in its consolidated financial
statements Parent can designate the US$300 million external borrowing in
Subsidiary A as a hedge of the GBP/USD spot foreign exchange risk between
Subsidiary C and Subsidiary B. In this case, the total USD/EUR foreign exchange
difference on the US$300 million external borrowing in Subsidiary A would
instead be recognised in Parent’s consolidated financial statements as follows:
● the GBP/USD spot foreign exchange rate change in the foreign currency
translation reserve relating to Subsidiary C,
● GBP/JPY spot foreign exchange rate change, translated to euro, in profit
or loss, and
● JPY/EUR spot foreign exchange rate change in other comprehensive
income.
AG6 Parent cannot designate the US$300 million external borrowing in Subsidiary A
as a hedge of both the EUR/USD spot foreign exchange risk and the GBP/USD spot
foreign exchange risk in its consolidated financial statements. A single hedging
instrument can hedge the same designated risk only once. Subsidiary B cannot
apply hedge accounting in its consolidated financial statements because the
hedging instrument is held outside the group comprising Subsidiary B and
Subsidiary C.
IFRIC 16
IFRS FoundationA1454
11. Where in a group can the hedging instrument be held
(paragraphs 14 and 15)?
AG7 As noted in paragraph AG5, the total change in value in respect of foreign
exchange risk of the US$300 million external borrowing in Subsidiary A would
be recorded in both profit or loss (USD/JPY spot risk) and other comprehensive
income (EUR/JPY spot risk) in Parent’s consolidated financial statements in the
absence of hedge accounting. Both amounts are included for the purpose of
assessing the effectiveness of the hedge designated in paragraph AG4 because
the change in value of both the hedging instrument and the hedged item are
computed by reference to the euro functional currency of Parent against the
US dollar functional currency of Subsidiary C, in accordance with the hedge
documentation. The method of consolidation (ie direct method or step-by-step
method) does not affect the assessment of the effectiveness of the hedge.
Amounts reclassified to profit or loss on disposal of a
foreign operation (paragraphs 16 and 17)
AG8 When Subsidiary C is disposed of, the amounts reclassified to profit or loss in
Parent’s consolidated financial statements from its foreign currency translation
reserve (FCTR) are:
(a) in respect of the US$300 million external borrowing of Subsidiary A, the
amount that IFRS 9 requires to be identified, ie the total change in value
in respect of foreign exchange risk that was recognised in other
comprehensive income as the effective portion of the hedge; and
(b) in respect of the US$300 million net investment in Subsidiary C, the
amount determined by the entity’s consolidation method. If Parent uses
the direct method, its FCTR in respect of Subsidiary C will be determined
directly by the EUR/USD foreign exchange rate. If Parent uses the
step-by-step method, its FCTR in respect of Subsidiary C will be
determined by the FCTR recognised by Subsidiary B reflecting the
GBP/USD foreign exchange rate, translated to Parent’s functional
currency using the EUR/GBP foreign exchange rate. Parent’s use of the
step-by-step method of consolidation in prior periods does not require it
to or preclude it from determining the amount of FCTR to be reclassified
when it disposes of Subsidiary C to be the amount that it would have
recognised if it had always used the direct method, depending on its
accounting policy.
Hedging more than one foreign operation
(paragraphs 11, 13 and 15)
AG9 The following examples illustrate that in the consolidated financial statements
of Parent, the risk that can be hedged is always the risk between its functional
currency (euro) and the functional currencies of Subsidiaries B and C. No matter
how the hedges are designated, the maximum amounts that can be effective
hedges to be included in the foreign currency translation reserve in Parent’s
consolidated financial statements when both foreign operations are hedged are
US$300 million for EUR/USD risk and £341 million for EUR/GBP risk. Other
changes in value due to changes in foreign exchange rates are included in
Parent’s consolidated profit or loss. Of course, it would be possible for Parent to
IFRIC 16
IFRS Foundation A1455
12. designate US$300 million only for changes in the USD/GBP spot foreign
exchange rate or £500 million only for changes in the GBP/EUR spot foreign
exchange rate.
Parent holds both USD and GBP hedging instruments
AG10 Parent may wish to hedge the foreign exchange risk in relation to its net
investment in Subsidiary B as well as that in relation to Subsidiary C. Assume
that Parent holds suitable hedging instruments denominated in US dollars and
pounds sterling that it could designate as hedges of its net investments in
Subsidiary B and Subsidiary C. The designations Parent can make in its
consolidated financial statements include, but are not limited to, the following:
(a) US$300 million hedging instrument designated as a hedge of the
US$300 million of net investment in Subsidiary C with the risk being the
spot foreign exchange exposure (EUR/USD) between Parent and
Subsidiary C and up to £341 million hedging instrument designated as a
hedge of £341 million of the net investment in Subsidiary B with the risk
being the spot foreign exchange exposure (EUR/GBP) between Parent and
Subsidiary B.
(b) US$300 million hedging instrument designated as a hedge of the
US$300 million of net investment in Subsidiary C with the risk being the
spot foreign exchange exposure (GBP/USD) between Subsidiary B and
Subsidiary C and up to £500 million hedging instrument designated as a
hedge of £500 million of the net investment in Subsidiary B with the risk
being the spot foreign exchange exposure (EUR/GBP) between Parent and
Subsidiary B.
AG11 The EUR/USD risk from Parent’s net investment in Subsidiary C is a different risk
from the EUR/GBP risk from Parent’s net investment in Subsidiary B. However,
in the case described in paragraph AG10(a), by its designation of the USD
hedging instrument it holds, Parent has already fully hedged the EUR/USD risk
from its net investment in Subsidiary C. If Parent also designated a GBP
instrument it holds as a hedge of its £500 million net investment in
Subsidiary B, £159 million of that net investment, representing the GBP
equivalent of its USD net investment in Subsidiary C, would be hedged twice for
GBP/EUR risk in Parent’s consolidated financial statements.
AG12 In the case described in paragraph AG10(b), if Parent designates the hedged risk
as the spot foreign exchange exposure (GBP/USD) between Subsidiary B and
Subsidiary C, only the GBP/USD part of the change in the value of its
US$300 million hedging instrument is included in Parent’s foreign currency
translation reserve relating to Subsidiary C. The remainder of the change
(equivalent to the GBP/EUR change on £159 million) is included in Parent’s
consolidated profit or loss, as in paragraph AG5. Because the designation of the
USD/GBP risk between Subsidiaries B and C does not include the GBP/EUR risk,
Parent is also able to designate up to £500 million of its net investment in
Subsidiary B with the risk being the spot foreign exchange exposure (GBP/EUR)
between Parent and Subsidiary B.
IFRIC 16
IFRS FoundationA1456
13. Subsidiary B holds the USD hedging instrument
AG13 Assume that Subsidiary B holds US$300 million of external debt the proceeds of
which were transferred to Parent by an inter-company loan denominated in
pounds sterling. Because both its assets and liabilities increased by
£159 million, Subsidiary B’s net assets are unchanged. Subsidiary B could
designate the external debt as a hedge of the GBP/USD risk of its net investment
in Subsidiary C in its consolidated financial statements. Parent could maintain
Subsidiary B’s designation of that hedging instrument as a hedge of its
US$300 million net investment in Subsidiary C for the GBP/USD risk (see
paragraph 13) and Parent could designate the GBP hedging instrument it holds
as a hedge of its entire £500 million net investment in Subsidiary B. The first
hedge, designated by Subsidiary B, would be assessed by reference to
Subsidiary B’s functional currency (pounds sterling) and the second hedge,
designated by Parent, would be assessed by reference to Parent’s functional
currency (euro). In this case, only the GBP/USD risk from Parent’s net investment
in Subsidiary C has been hedged in Parent’s consolidated financial statements by
the USD hedging instrument, not the entire EUR/USD risk. Therefore, the entire
EUR/GBP risk from Parent’s £500 million net investment in Subsidiary B may be
hedged in the consolidated financial statements of Parent.
AG14 However, the accounting for Parent’s £159 million loan payable to Subsidiary B
must also be considered. If Parent’s loan payable is not considered part of its net
investment in Subsidiary B because it does not satisfy the conditions in IAS 21
paragraph 15, the GBP/EUR foreign exchange difference arising on translating it
would be included in Parent’s consolidated profit or loss. If the £159 million
loan payable to Subsidiary B is considered part of Parent’s net investment, that
net investment would be only £341 million and the amount Parent could
designate as the hedged item for GBP/EUR risk would be reduced from
£500 million to £341 million accordingly.
AG15 If Parent reversed the hedging relationship designated by Subsidiary B, Parent
could designate the US$300 million external borrowing held by Subsidiary B as a
hedge of its US$300 million net investment in Subsidiary C for the EUR/USD risk
and designate the GBP hedging instrument it holds itself as a hedge of only up to
£341 million of the net investment in Subsidiary B. In this case the effectiveness
of both hedges would be computed by reference to Parent’s functional currency
(euro). Consequently, both the USD/GBP change in value of the external
borrowing held by Subsidiary B and the GBP/EUR change in value of Parent’s
loan payable to Subsidiary B (equivalent to USD/EUR in total) would be included
in the foreign currency translation reserve in Parent’s consolidated financial
statements. Because Parent has already fully hedged the EUR/USD risk from its
net investment in Subsidiary C, it can hedge only up to £341 million for the
EUR/GBP risk of its net investment in Subsidiary B.
IFRIC 16
IFRS Foundation A1457