Illustrative IFRS consolidated ... prepared in accordance with International Financial Reporting...

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  • Illustrative IFRS consolidated financial statements for 2012 year ends

    Global Accounting Consulting Services PricewaterhouseCoopers LLP

    Published by

  • Bloomsbury Professional, an imprint of Bloomsbury Publishing Plc, Maxwelton House, 41–43 Boltro Road, Haywards Heath, West Sussex, RH16 1BJ

    This book has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this book without obtaining specific professional advice. Accordingly, to the extent permitted by law, PricewaterhouseCoopers LLP (and its members, employees and agents) and publisher accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining from acting, in reliance on the information contained in this document or for any decision based on it, or for any consequential, special or similar damages even if advised of the possibility of such damages.

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    ISBN 9781780431048

    British Library Cataloguing-in-Publication Data. A catalogue record for this book is available from the British Library.

    # 2012 PricewaterhouseCoopers

    Printed in Great Britain

  • IFRS GAAP plc – year ended 31 December 2012

    PwC – Illustrative IFRS consolidated financial statements for 2012 year ends iii

  • iv PwC – Illustrative IFRS consolidated financial statements for 2012 year ends

  • Introduction

    This publication provides an illustrative set of consolidated financial statements, prepared in accordance with International Financial Reporting Standards (IFRS), for a fictional manufacturing, wholesale and retail group (IFRS GAAP plc).

    IFRS GAAP plc is an existing preparer of IFRS consolidated financial statements; IFRS 1, ‘First-time adoption of International Financial Reporting Standards’, is not applicable. Guidance on financial statements for first-time adopters of IFRS is available at www.pwc.com/ifrs

    This publication is based on the requirements of IFRS standards and interpretations for financial years beginning on or after 1 January 2012.

    PwC commentary has been provided, in grey boxes, to explain the detail behind the presentation of a number of challenging areas. We draw your attention in particular to our commentary on the income statement, statement of comprehensive income, balance sheet, statement of changes in equity, statement of cash flows, statement of significant accounting policies and financial risk management.

    Areas in which we have made significant changes to presentation since 2011 have been highlighted in pink.

    We have attempted to create a realistic set of financial statements for a corporate entity. However, by necessity we illustrate disclosures that for many entities may be immaterial. Determining the level of disclosure is a matter of judgement, and naturally disclosure of immaterial items is not required. Certain types of transaction have been excluded, as they are not relevant to the group’s operations. The example disclosures, if material, for some of these additional items have been included in appendix III. The forthcoming IFRS requirements are outlined in a table in appendix IV.

    The example disclosures should not be considered the only acceptable form of presentation. The form and content of each reporting entity’s financial statements are the responsibility of the entity’s management. Alternative presentations to those proposed in this publication may be equally acceptable if they comply with the specific disclosure requirements prescribed in IFRS.

    These illustrative financial statements are not a substitute for reading the standards and interpretations themselves or for professional judgement as to fairness of presentation. They do not cover all possible disclosures that IFRS requires. Further specific information may be required in order to ensure fair presentation under IFRS. We recommend that readers refer to our publication IFRS disclosure checklist 2012.

    PwC – Illustrative IFRS consolidated financial statements for 2012 year ends v

  • Abbreviations

    IFRS1p37 = International Financial Reporting Standard [number], paragraph number.

    7p22 = International Accounting Standards [number], paragraph number.

    SIC-15p5 = Standing Interpretations Committee [number], paragraph number.

    DV = Disclosure Voluntary. Disclosure is encouraged but not required and therefore represents best practice.

    vi PwC – Illustrative IFRS consolidated financial statements for 2012 year ends

  • Contents

    Page Financial statements ..................................................................................................... 1 Notes to the consolidated financial statements: .................................................... 19 1 General information ............................................................................................... 19 2 Summary of significant accounting policies: ....................................................... 19

    2.1 Basis of preparation .................................................................................. 19 2.2 Consolidation ............................................................................................. 21 2.3 Segment reporting ..................................................................................... 23 2.4 Foreign currency translation ...................................................................... 23 2.5 Property, plant and equipment .................................................................. 24 2.6 Intangible assets ....................................................................................... 25 2.7 Impairment of non-financial assets ........................................................... 26 2.8 Non-current assets (or disposal groups) held for sale .............................. 27 2.9 Financial assets ........................................................................................ 27 2.10 Offsetting financial instruments ................................................................. 28 2.11 Impairment of financial assets ................................................................... 28 2.12 Derivative financial instruments and hedging activities ............................. 29 2.13 Inventories ................................................................................................. 31 2.14 Trade receivables ...................................................................................... 31 2.15 Cash and cash equivalents ....................................................................... 31 2.16 Share capital ............................................................................................. 31 2.17 Trade payables ......................................................................................... 31 2.18 Borrowings ................................................................................................ 32 2.19 Borrowing costs ......................................................................................... 32 2.20 Compound financial instruments ............................................................... 32 2.21 Current and deferred income tax .............................................................. 33 2.22 Employee benefits ..................................................................................... 33 2.23 Share-based payments ............................................................................. 35 2.24 Provisions .................................................................................................. 36 2.25 Revenue recognition ................................................................................. 36 2.26 Interest income .......................................................................................... 37 2.27 Dividend income ........................................................................................ 37 2.28 Leases ....................................................................................................... 37 2.29 Dividend distribution .................................................................................. 38 2.30 Exceptional items ...................................................................................... 38

    3 Financial risk management ................................................................................... 41 4 Critical accounting estimates and judgements .................................................... 54 5 Segment information ............................................................................................. 57 6 Exceptional items ................................................................................................... 61 7 Other income ...................................................................................................