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Файл:Стандарты финансовой отчетности в корпоративном бизнесе. Учебное пособие на английском языке
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Dilution is a reduction in earnings per share or an increase in loss per
share resulting from the assumption that convertible instruments are converted,
that options or warrants are exercised, or that ordinary shares are issued upon
the satisfaction of specified conditions.
Options, warrants and their equivalents are financial instruments that
give the holder the right to purchase ordinary shares.
An ordinary share is an equity instrument that is subordinate to all other
classes of equity instruments.
A potential ordinary share is a financial instrument or other contract that
may entitle its holder to ordinary shares.
Put options on ordinary shares are contracts that give the holder the right
to sell ordinary shares at a specified price for a given period.
Ordinary shares participate in profit for the period only after other types
of shares such as preference shares have participated. An entity may have more
than one class of ordinary shares. Ordinary shares of the same class have the
same rights to receive dividends.
Examples of potential ordinary shares are:
a) financial liabilities or equity instruments, including preference shares,
that are convertible into ordinary shares;
b) options and warrants;
c) shares that would be issued upon the satisfaction of conditions result-
ing from contractual arrangements, such as the purchase of a business or other
assets.
Measurement
Basic earnings per share
An entity shall calculate basic earnings per share amounts for profit or
loss attributable to ordinary equity holders of the parent entity.
Basic earnings per share shall be calculated by dividing profit or loss at-
tributable to ordinary equity holders of the parent entity (the numerator) by the
weighted average number of ordinary shares outstanding (the denominator)
during the period.
Earnings
For the purpose of calculating basic earnings per share, the amounts at-
tributable to ordinary equity holders of the parent entity in respect of:
a) profit or loss from continuing operations attributable to the parent entity;
b) profit or loss attributable to the parent entity
shall be the amounts in (a) and (b) adjusted for the after-tax amounts of
preference dividends, differences arising on the settlement of preference
shares, and other similar effects of preference shares classified as equity.
Shares
For the purpose of calculating basic earnings per share, the number of or-
dinary shares shall be the weighted average number of ordinary shares outstanding during the period.
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Using the weighted average number of ordinary shares outstanding dur-
ing the period reflects the possibility that the amount of shareholders’ capital
varied during the period as a result of a larger or smaller number of shares being outstanding at any time. The weighted average number of ordinary shares
outstanding during the period is the number of ordinary shares outstanding at
the beginning of the period, adjusted by the number of ordinary shares bought
back or issued during the period multiplied by a time-weighting factor. The
time-weighting factor is the number of days that the shares are outstanding as a
proportion of the total number of days in the period; a reasonable approximation of the weighted average is adequate in many circumstances.
Shares are usually included in the weighted average number of shares
from the date consideration is receivable (which is generally the date of their
issue), for example:
(a) ordinary shares issued in exchange for cash are included when cash is
receivable;
(b) ordinary shares issued on the voluntary reinvestment of dividends on
ordinary or preference shares are included when dividends are reinvested;
(c) ordinary shares issued as a result of the conversion of a debt instru-
ment to ordinary shares are included from the date that interest ceases to accrue;
(d) ordinary shares issued in place of interest or principal on other finan-
cial instruments are included from the date that interest ceases to accrue;
(e) ordinary shares issued in exchange for the settlement of a liability of
the entity are included from the settlement date;
(f) ordinary shares issued as consideration for the acquisition of an asset
other than cash are included as of the date on which the acquisition is recognised;
(g) ordinary shares issued for the rendering of services to the entity are
included as the services are rendered.
Diluted earnings per share
An entity shall calculate diluted earnings per share amounts for profit or
loss attributable to ordinary equity holders of the parent entity and, if presented,
profit or loss from continuing operations attributable to those equity holders.
For the purpose of calculating diluted earnings per share, an entity shall
adjust profit or loss attributable to ordinary equity holders of the parent entity,
and the weighted average number of shares outstanding, for the effects of all
dilutive potential ordinary shares.
For the purpose of calculating diluted earnings per share, the number of
ordinary shares shall be the weighted average number of ordinary shares plus
the weighted average number of ordinary shares that would be issued on the
conversion of all the dilutive potential ordinary shares into ordinary shares.
Dilutive potential ordinary shares shall be deemed to have been converted into
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ordinary shares at the beginning of the period or, if later, the date of the issue
of the potential ordinary shares.
Potential ordinary shares shall be treated as dilutive when, and only
when, their conversion to ordinary shares would decrease earnings per share or
increase loss per share from continuing operations.
Potential ordinary shares are antidilutive when their conversion to ordi-
nary shares would increase earnings per share or decrease loss per share from
continuing operations.
For the purpose of calculating diluted earnings per share, an entity shall
assume the exercise of dilutive options and warrants of the entity. The assumed
proceeds from these instruments shall be regarded as having been received
from the issue of ordinary shares at the average market price of ordinary shares
during the period. The difference between the number of ordinary shares issued and the number of ordinary shares that would have been issued at the
average market price of ordinary shares during the period shall be treated as an
issue of ordinary shares for no consideration.
Options and warrants have a dilutive effect only when the average market
price of ordinary shares during the period exceeds the exercise price of the
options or warrants (ie they are ‘in the money’). Previously reported earnings
per share are not retroactively adjusted to reflect changes in prices of ordinary
shares.
Convertible preference shares are antidilutive whenever the amount of
the dividend on such shares declared in or accumulated for the current period
per ordinary share obtainable on conversion exceeds basic earnings per share.
Similarly, convertible debt is antidilutive whenever its interest (net of tax and
other changes in income or expense) per ordinary share obtainable on conversion exceeds basic earnings per share.
Retrospective adjustments
If the number of ordinary or potential ordinary shares outstanding in-
creases as a result of a capitalisation, bonus issue or share split, or decreases as
a result of a reverse share split, the calculation of basic and diluted earnings
per share for all periods presented shall be adjusted retrospectively. If these
changes occur after the reporting period but before the financial statements are
authorised for issue, the per share calculations for those and any prior period
financial statements presented shall be based on the new number of shares. The
fact that per share calculations reflect such changes in the number of shares
shall be disclosed. In addition, basic and diluted earnings per share of all periods presented shall be adjusted for the effects of errors and adjustments resulting from changes in accounting policies accounted for retrospectively.
Disclosure
An entity shall disclose the following:
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(a) the amounts used as the numerators in calculating basic and diluted
earnings per share, and a reconciliation of those amounts to profit or loss attributable to the parent entity for the period. The reconciliation shall include
the individual effect of each class of instruments that affects earnings per
share.
(b) the weighted average number of ordinary shares used as the denomi-
nator in calculating basic and diluted earnings per share, and a reconciliation of
these denominators to each other. The reconciliation shall include the individual effect of each class of instruments that affects earnings per share.
(c) instruments (including contingently issuable shares) that could poten-
tially dilute basic earnings per share in the future, but were not included in the
calculation of diluted earnings per share because they are antidilutive for the
period(s) presented.
(d) a description of ordinary share transactions or potential ordinary share
transactions, other than those accounted, that occur after the reporting period
and that would have changed significantly the number of ordinary shares or
potential ordinary shares outstanding at the end of the period if those transactions had occurred before the end of the reporting period.
Control questions for self-examination
1. What forms a basis for tax base determination of a property, plant and
equipment on IFRS 12?
2. The deductible temporary difference leads to formation of a deferred
tax asset or the liability?
3. What rate is used in case of application to different types and the
amounts of taxable profit of various rates of taxes?
4. Whether it is necessary to discount dismissal wages in case of payment
them in time, exceeding 12 months after a reporting date?
5. Give definition of a provision.
6. How provisions are reflected in the reporting?
7. Give an example of monetary items.
8. Give an example of not monetary items.
9. Whether is now the Russian ruble is hyper inflation and whether the
IFRS 29 in Russia are applied?
10. Whether it is right, what the currency is hyperinflation if the cumula-
tive inflation index for 3 years is approximately equal or exceeds 100%?
11. How balance sheet items for the purposes of adjustment of accounting
data on the inflation index (consumer prices) are classified by IFRS 29?
12. If the financial reporting contains both consolidated financial state-
ments of the parent organization, and separate financial statements of the parent organization where segment information shall be reflected?
13. Characterize concept of the antidilutive effect.
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14. Whether it is right, what the basic earnings per share are determined
by division of numerator into number of the common shares which are in circulation (denominator)?
15. In what case calculation of diluted earnings per share is required?
16. What standard doesn't require disclosure of information?
17. How the difference between book value of an overpriced asset and its
tax base is called?
18. What is called as a binding event?
19. What currency is considered currency of the reporting?
20. What date is considered transaction date?
21. How to determine a rate on a reporting date?
22. Whether the cash on hand, market debt securities, taxes included at a
source to payment by cash items are?
23. How balance sheet items for the purposes of adjustment of accounting
data on the inflation index (consumer prices) are classified by IFRS 29?
24. What size the cumulative indicator of the income provided with re-
porting segments shall constitute?
25. In case of increase in the prices the cost of money (a general purchas-
ing capability) increases or decreases? Why?
26. Market equity securities, investments into associated organizations, a
property, plant and equipment, intangible assets, liabilities, equity are examples of monetary or non-monetary items?
5. IFRS ON NON-CURRENT ASSETS
AND LIABILITIES
5.1. IAS 16 "Property, plant and equipment".
5.2. IAS 38 "Intangible assets".
5.3. IAS 36 "Impairment of asset ". IAS 40 "Investment property".
5.4. IAS 17 "Leases". IAS 11 "Construction contracts". IAS 20 "Account-
ing for government grants and disclosure of government assistance".
5.5. IFRS 5 "Non-current assets held for sale and discontinued operation".
5.1. IAS 16 "Property, plant and equipment"
The objective of IAS 16 is to prescribe the accounting treatment for prop-
erty, plant and equipment so that users of the financial statements can discern
information about an entity’s investment in its property, plant and equipment
and the changes in such investment.
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Definitions
Carrying amount is the amount at which an asset is recognised after de-
ducting any accumulated depreciation and accumulated impairment losses.
Cost is the amount of cash or cash equivalents paid or the fair value of
the other consideration given to acquire an asset at the time of its acquisition or
construction or, where applicable, the amount attributed to that asset when
initially recognised in accordance with the specific requirements of other
IFRSs, eg IFRS 2 “Share-based Payment”.
Depreciable amount is the cost of an asset, or other amount substituted
for cost, less its residual value.
Depreciation is the systematic allocation of the depreciable amount of an
asset over its useful life.
Entity-specific value is the present value of the cash flows an entity ex-
pects to arise from the continuing use of an asset and from its disposal at the
end of its useful life or expects to incur when settling a liability.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the
measurement date. (IFRS 13 “Fair Value Measurement”).
An impairment loss is the amount by which the carrying amount of an as-
set exceeds its recoverable amount.
Property, plant and equipment are tangible items that:
(a) are held for use in the production or supply of goods or services, for
rental to others, or for administrative purposes; and
(b) are expected to be used during more than one period.
Recoverable amount is the higher of an asset’s fair value less costs to sell
and its value in use.
The residual value of an asset is the estimated amount that an entity
would currently obtain from disposal of the asset, after deducting the estimated
costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.
Useful life is:
(a) the period over which an asset is expected to be available for use by
an entity; or
(b) the number of production or similar units expected to be obtained
from the asset by an entity.
Recognition
The cost of an item of property, plant and equipment shall be recognised
as an asset if, and only if:
– it is probable that future economic benefits associated with the item will
flow to the entity; and
– the cost of the item can be measured reliably.
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IAS 16 does not prescribe the unit of measure for recognition, ie what
constitutes an item of property, plant and equipment. Thus, judgement is re-
quired in applying the recognition criteria to an entity’s specific circumstances.
It may be appropriate to aggregate individually insignificant items, such as
moulds, tools and dies, and to apply the criteria to the aggregate value.
Measurement at recognition
An item of property, plant and equipment that qualifies for recognition as
an asset shall be measured at its cost.
Elements of cost
The cost of an item of property, plant and equipment comprises:
(a) its purchase price, including import duties and non-refundable pur-
chase taxes, after deducting trade discounts and rebates.
(b) any costs directly attributable to bringing the asset to the location and
condition necessary for it to be capable of operating in the manner intended by
management.
Examples of directly attributable costs are:
– costs of employee benefits (as defined in IAS 19) arising directly from
the construction or acquisition of the item of property, plant and equipment;
– costs of site preparation;
– initial delivery and handling costs;
– installation and assembly costs;
– costs of testing whether the asset is functioning properly, after deduct-
ing the net proceeds from selling any items produced while bringing the asset
to that location and condition
– professional fees.
Examples of costs that are not costs of an item of property, plant and
equipment are:
– costs of opening a new facility;
– costs of introducing a new product or service (including costs of adver-
tising and promotional activities);
– costs of conducting business in a new location or with a new class of
customer (including costs of staff training);
– administration and other general overhead costs.
Measurement after recognition
An entity shall choose either the cost model or the revaluation model as
its accounting policy and shall apply that policy to an entire class of property,
plant and equipment.
Cost model
After recognition as an asset, an item of property, plant and equipment
shall be carried at its cost less any accumulated depreciation and any accumulated impairment losses.
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Revaluation model
After recognition as an asset, an item of property, plant and equipment
whose fair value can be measured reliably shall be carried at a revalued
amount, being its fair value at the date of the revaluation less any subsequent
accumulated depreciation and subsequent accumulated impairment losses. Revaluations shall be made with sufficient regularity to ensure that the carrying
amount does not differ materially from that which would be determined using
fair value at the end of the reporting period.
If an item of property, plant and equipment is revalued, the entire class of
property, plant and equipment to which that asset belongs shall be revalued.
A class of property, plant and equipment is a grouping of assets of a simi-
lar nature and use in an entity’s operations. The following are examples of
separate classes:
(a) land;
(b) land and buildings;
(c) machinery;
(d) ships;
(e) aircraft;
(f) motor vehicles;
(g) furniture and fixtures;
(h) office equipment.
If an asset’s carrying amount is increased as a result of a revaluation, the
increase shall be recognised in other comprehensive income and accumulated
in equity under the heading of revaluation surplus. However, the increase shall
be recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss.
If an asset’s carrying amount is decreased as a result of a revaluation, the
decrease shall be recognised in profit or loss. However, the decrease shall be
recognised in other comprehensive income to the extent of any credit balance
existing in the revaluation surplus in respect of that asset. The decrease recognised in other comprehensive income reduces the amount accumulated in equity under the heading of revaluation surplus.
Depreciation
Each part of an item of property, plant and equipment with a cost that is sig-
nificant in relation to the total cost of the item shall be depreciated separately.
A significant part of an item of property, plant and equipment may have a
useful life and a depreciation method that are the same as the useful life and
the depreciation method of another significant part of that same item. Such
parts may be grouped in determining the depreciation charge.
The depreciation charge for each period shall be recognised in profit or
loss unless it is included in the carrying amount of another asset.
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Depreciable amount and depreciation period
The depreciable amount of an asset shall be allocated on a systematic ba-
sis over its useful life.
The residual value and the useful life of an asset shall be reviewed at least
at each financial year-end and, if expectations differ from previous estimates,
the change(s) shall be accounted for as a change in an accounting estimate in
accordance with IAS 8.
Depreciation is recognised even if the fair value of the asset exceeds its
carrying amount, as long as the asset’s residual value does not exceed its carry-
ing amount. Repair and maintenance of an asset do not negate the need to depreciate it.
The depreciable amount of an asset is determined after deducting its re-
sidual value. In practice, the residual value of an asset is often insignificant and
therefore immaterial in the calculation of the depreciable amount.
The residual value of an asset may increase to an amount equal to or
greater than the asset’s carrying amount. If it does, the asset’s depreciation
charge is zero unless and until its residual value subsequently decreases to an
amount below the asset’s carrying amount.
Depreciation of an asset begins when it is available for use, ie when it is
in the location and condition necessary for it to be capable of operating in the
manner intended by management. Depreciation of an asset ceases at the earlier
of the date that the asset is classified as held for sale (or included in a disposal
group that is classified as held for sale) in accordance with IFRS 5 and the date
that the asset is derecognised. Therefore, depreciation does not cease when the
asset becomes idle or is retired from active use unless the asset is fully depreciated. However, under usage methods of depreciation the depreciation charge
can be zero while there is no production.
Depreciation method
The depreciation method used shall reflect the pattern in which the as-
set’s future economic benefits are expected to be consumed by the entity.
The depreciation method applied to an asset shall be reviewed at least at
each financial year-end and, if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the
asset, the method shall be changed to reflect the changed pattern. Such a
change shall be accounted for as a change in an accounting estimate in accordance with IAS 8.
A variety of depreciation methods can be used to allocate the depreciable
amount of an asset on a systematic basis over its useful life. These methods include the straight-line method, the diminishing balance method and the units of
production method. Straight-line depreciation results in a constant charge over
the useful life if the asset’s residual value does not change. The diminishing bal-
ance method results in a decreasing charge over the useful life. The units of production method results in a charge based on the expected use or output. The enti-
109
ty selects the method that most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. That method is applied consistently from period to period unless there is a change in the expected
pattern of consumption of those future economic benefits.
Derecognition
The carrying amount of an item of property, plant and equipment shall be
derecognised:
(a) on disposal; or
(b) when no future economic benefits are expected from its use or disposal.
The gain or loss arising from the derecognition of an item of property,
plant and equipment shall be included in profit or loss when the item is derecognised. Gains shall not be classified as revenue.
However, an entity that, in the course of its ordinary activities, routinely
sells items of property, plant and equipment that it has held for rental to others
shall transfer such assets to inventories at their carrying amount when they
cease to be rented and become held for sale. The proceeds from the sale of
such assets shall be recognised as revenue in accordance with IAS 18. IFRS 5
does not apply when assets that are held for sale in the ordinary course of business are transferred to inventories.
Disclosure
The financial statements shall disclose, for each class of property, plant
and equipment:
(a) the measurement bases used for determining the gross carrying
amount;
(b) the depreciation methods used;
(c) the useful lives or the depreciation rates used;
(d) the gross carrying amount and the accumulated depreciation (aggre-
gated with accumulated impairment losses) at the beginning and end of the
period; and
(e) a reconciliation of the carrying amount at the beginning and end of
the period showing:
(i) additions;
(ii) assets classified as held for sale or included in a disposal group classi-
fied as held for sale in accordance with IFRS 5 and other disposals;
(iii) acquisitions through business combinations;
(iv) increases or decreases resulting from revaluations and from impair-
ment losses recognised or reversed in other comprehensive income in accordance with IAS 36;
(v) impairment losses recognised in profit or loss in accordance with IAS 36;
(vi) impairment losses reversed in profit or loss in accordance with IAS 36;
(vii) depreciation;
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