2018 interim illustrative disclosures

85 Pages·2017·2.08 MB·English

Illustrative
disclosures
Guide to condensed interim fnancial statements
IFRS® Standards
March 2018
kpmg.com/ifrs
Contents
About this guide 2
References and abbreviations 6
Independent auditors’ report on review of condensed
consolidated interim fnancial statements 7
Condensed consolidated interim fnancial statements 9
Condensed consolidated statement of fnancial
position 10
Condensed consolidated statement of proft or loss
and OCI 12
Condensed consolidated statement of changes
in equity 14
Condensed consolidated statement of cash fows 18
Notes to the condensed consolidated interim
fnancial statements 20
Appendices
I New standards or amendments for 2018 and
forthcoming requirements 73
II Presentation of comprehensive income –
Two-statement approach 75
III Condensed consolidated statement of proft or
loss and OCI – Quarterly reporter 77
Keeping in touch 80
Acknowledgements 82
Notes to the condensed consolidated interim
fnancial statements
Basis of preparation 20
1. Reporting entity 20
2. Basis of accounting 20
3. Use of judgements and estimates 20
4. Changes in signifcant accounting policies 22
Performance for the period 38
5. Operating segments 38
6. Revenue 40
7. Discontinued operation 43
8. Other income/expenses 44
Employee benefts 45
9. Share-based payment arrangements 45
10. Employee benefts 46
Income taxes 47
11. Income tax expense 47
Alternative performance measure 48
12. Adjusted earnings before interest, tax,
depreciation and amortisation (adjusted EBITDA) 48
Asets 49
13. Inventories 49
14. Disposal group held for sale 49
15. Property, plant and equipment 50
16. Intangible assets and goodwill 51
Equity and liabilities 53
17. Capital and reserves 53
18. Loans and borrowings 53
19. Provisions 55
Financial instruments 56
20. Financial instruments – Fair values and risk
management 56
Group composition 65
21. Acquisition of subsidiary 65
22. Acquisition of NCI 68
Other information 69
23. Contingencies 69
24. Related parties 70
25. Subsequent event 70
26. Standards issued but not yet effective 71
2 | Guide to condensed interim fnancial statements – Illustrative disclosures
About this guide
This guide has been produced by the KPMG International Standards Group (part
of KPMG IFRG Limited).
The guide is intended to help entities to prepare and present condensed
consolidated interim fnancial statements in accordance with IAS® 34 Interim
Financial Reporting by illustrating one possible format for fnancial statements
for a fctitious multinational corporation involved in general business activities.
This hypothetical reporting entity has been applying IFRS for some time – i.e. it
is not a frst-time adopter of IFRS. For more information on adopting IFRS for the
frst time, see Chapter 6.1 in the 14th edition 2017/18 of our publication Insights
into IFRS.
Content This guide assumes that the hypothetical reporting entity:
– chooses to publish a set of condensed interim fnancial statements;
– has previously issued annual fnancial statements and the users of the interim
fnancial statements will have access to the last annual fnancial statements;
– provides only signifcant updates to the information that was reported in the
notes to the last annual fnancial statements;
– prepares its interim fnancial statements on a consolidated basis;
– applies the same accounting policies as in its last annual fnancial statements,
except if mentioned otherwise; and
– prepares a half-yearly interim report, but does not prepare quarterly
interim reports.
Standards covered This guide refects standards, amendments and interpretations (broadly referred
to in this guide as ‘standards’) that have been issued by the International
Accounting Standards Board (the Board) as at 15 March 2018 and that are
required to be applied by an entity with an annual reporting period beginning
on 1 January 2018 (‘currently effective requirements’). Standards other than
IAS 34 are not illustrated in this guide, except in the context of disclosures in
the notes to the condensed interim fnancial statements. The early adoption of
standards that are effective for annual periods beginning after 1 January 2018
(‘forthcoming requirements’) has not been illustrated.
In addition, IFRS and its interpretation change over time. Accordingly, this guide
should not be used as a substitute for referring to the standards and other
relevant interpretative guidance.
Preparers should also consider applicable local legal and regulatory
requirements. This guide does not consider the requirements of any particular
jurisdiction – e.g. IFRS does not require the presentation of separate fnancial
statements for the parent entity. Consequently, this guide includes only
consolidated fnancial statements.
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Appendices Notes Primary statements Auditors’ report INTRODUCTION
About this guide | 3
IFRS 9 and IFRS 15
What’s new in 2018?
IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with
Customers are effective for the frst time for entities with an annual reporting
period beginning on or after 1 January 2018.
In addition to the new disclosures that are explicitly required in condensed
interim fnancial statements, entities will have to apply signifcant judgement
in determining how much additional disclosure is necessary to meet the
objectives of IAS 34 – i.e. ensuring that the interim fnancial statements include
all information that is relevant to understanding any signifcant changes since
the last annual reporting date, and an entity’s fnancial position and performance
during the interim period.
– Disclosure of the nature and effect of changes in accounting policies:
IAS 34 requires an entity to disclose the nature and effect of changes in
accounting policies. However, it does not provide specifc guidance on how
an entity achieves this. Entities may therefore consider the transitional
disclosure requirements specifed in the new standards and disclosure
requirements in paragraph 28 of IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors, as appropriate. In particular, when providing
disclosures about the nature and effect of changes in accounting policies
as a result of the adoption of IFRS 15 in the condensed interim fnancial
statements, an entity that applies the standard using the cumulative effect
method considers the impact disclosures in paragraph C8 of IFRS 15 in order
to meet the objectives of IAS 34.
Note 4 illustrates one possible way of providing these disclosures.
– Ongoing disclosures: ‘Business as usual’ disclosures in IFRS 7 Financial
Instruments: Disclosures (as introduced by IFRS 9) and IFRS 15 are not
explicitly required in condensed interim fnancial statements (except for
disclosure of disaggregation of revenue from contracts with customers in
paragraphs 114–115 of IFRS 15), so judgement is needed to determine what
information is relevant to an understanding of an entity’s fnancial position and
performance during the interim period.
The appropriate level of disclosure will ultimately depend on the entity’s facts
and circumstances, the extent to which it is affected by the new standards, and
regulators’ expectations, if applicable.
Other new standards
A number of other standards are also effective for the frst time in 2018 (see
Appendix I). Although these standards do not contain specifc disclosure
requirements for interim fnancial statements, additional disclosures may be
considered necessary in light of the objectives of IAS 34.
The hypothetical entity has no transactions that would be affected by these
other standards or its accounting policies are already consistent with their new
requirements. As such, these are not illustrated in this guide.
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Appendices Notes Primary statements Auditors’ report INTRODUCTION
4 | Guide to condensed interim fnancial statements – Illustrative disclosures
Forthcoming new standards
While two major standards become effective in 2018, other standards become
effective in future periods. Specifcally, users and regulators have shown a
growing interest in the possible impact of IFRS 16 Leases on entities’ fnancial
statements. Regulators are expecting that, as the implementation of the new
standard progresses, more information about its impact should be reasonably
estimable and so preparers should be able to provide progressively more entity-
specifc qualitative and quantitative information about the application of the new
standard in their fnancial statements.
Therefore, although pre-transition impact disclosures are not specifcally
required by IAS 34, an entity may consider making them in its interim fnancial
statements. The appropriate level of disclosure will ultimately depend on the
status of the entity’s preparations to adopt IFRS 16, as well as the extent of
disclosure in the last annual fnancial statements.
Note 26 illustrates one possible way of meeting the objectives of IAS 34.

This guide is part of our suite of publications – Guides to fnancial
Need for judgement
statements – and specifcally focuses on compliance with IAS 34. Although it is
not exhaustive, it illustrates the disclosures required by IAS 34 for a hypothetical
reporting entity, merely for illustrative purposes and, as such, largely without
regard to materiality.
The preparation and presentation of fnancial statements requires the preparer
to exercise judgement in view of the objectives of IAS 34 – e.g. in terms of the
choice of accounting policies, the ordering of notes to the fnancial statements,
how the disclosures should be tailored to refect the reporting entity’s specifc
circumstances, and the relevance of disclosures considering the needs of
the users.
Specifc guidance on materiality and its application to interim fnancial
Materiality
statements is included in paragraphs 23–25 of IAS 34.
Materiality is relevant to the presentation and disclosure of items in the interim
fnancial statements and should be assessed based on interim period fnancial
information, not the full annual reporting period. The overriding goal is to
ensure that an interim fnancial report includes all information that is relevant to
understanding an entity’s fnancial position on the interim reporting date and its
fnancial performance during the interim period.
Preparers also need to take care not to reduce the understandability of their
fnancial statements by obscuring material information with immaterial
information or by aggregating material information that is different by nature or
function. Individual disclosures that are not material to the fnancial statements
do not have to be presented – even if they are a specifc requirement of a
standard. Preparers need to consider the appropriate level of disclosure based
on materiality for the interim period.
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Appendices Notes Primary statements Auditors’ report INTRODUCTION
About this guide | 5
Financial reporting is not just about technical compliance, but also effective
Explaining the change
communication. Investors continue to ask for a step-up in the quality of
business reporting, so preparers should be careful not to become buried
in compliance to the exclusion of relevance. In preparing their fnancial
statements, entities need to focus on improving their communication by
reporting fnancial information in a meaningful way.
With the application of IFRS 9 and IFRS 15 in 2018, the interim fnancial
statements will be the frst opportunity to communicate the nature and
effect of the change after the date of initial application. Even if entities are not
signifcantly impacted by the new accounting standards, new incremental
disclosures will need to be provided (i.e. disaggregation of revenue). The quality
and clarity of explanations of changes in accounting policies are key. Also,
disclosure of key judgements and estimates will be useful to investors. Entities
should embrace the opportunity to better explain the change.
Entities may also consider innovating their fnancial statement presentation
and disclosure in the broader context of better business reporting. For more
information, see our Better business reporting website.
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Appendices Notes Primary statements Auditors’ report INTRODUCTION
6 | Guide to condensed interim fnancial statements – Illustrative disclosures
References and abbreviations
References are included in the left-hand margin of this guide to identify
their sources. Generally, they relate only to presentation and disclosure
requirements.
IAS 34.15 Paragraph 15 of IAS 34.
[IFRS 2.45] Paragraph 45 of IFRS 2. The square brackets indicate that the
paragraph relates to presentation or disclosure requirements
in annual fnancial statements. Such presentation or
disclosures are not specifcally required in condensed interim
fnancial statements, unless they are judged to be material to
an understanding of the interim period.
Insights 2.3.60.10 Paragraph 2.3.60.10 of the 14th Edition 2017/18 of our
publication Insights into IFRS.
The following markings in the left-hand margins indicate the following.
Disclosures that apply only to entities in the scope of IFRS 8 Operating
Segments and IAS 33 Earnings per Share.
Major changes since the previous edition of this guide that relate to:
– new disclosure requirements in IAS 34 (refecting consequential
amendments introduced by new or revised standards); or
– updates of information disclosed in relation to changes in accounting
policies, and events and transactions that are considered signifcant to an
understanding of the changes in fnancial position and performance of the
hypothetical entity since the end of the last annual reporting period.
The following abbreviations are used often in this guide.
CGU Cash-generating unit
EBITDA Earnings before interest, tax, depreciation and amortisation
ECL Expected credit loss
FVOCI Fair value through other comprehensive income
FVTPL Fair value through proft or loss
NCI Non-controlling interests
Notes Notes to the condensed consolidated interim fnancial
statements
OCI Other comprehensive income
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Appendices Notes Primary statements Auditors’ report INTRODUCTION
Independent auditors’ report on review of condensed interim fnancial information | 7
[Name of the Company]
Independent auditors’ report on
review of condensed consolidated
interim financial statements
© 2018 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
Appendices Notes Primary statements AUDITORS’ REPORT Introduction
8 | Guide to condensed interim fnancial statements – Illustrative disclosures
Independent auditors’ report on review of condensed
a
consolidated interim financial statements
To the Shareholders of [Name of the Company]
Introduction
We have reviewed the accompanying condensed consolidated statement of fnancial position of
[name of the Company] as at 30 June 2018, the condensed consolidated statements of proft or
loss and other comprehensive income, changes in equity and cash fows for the six-month period
then ended, and notes to the interim fnancial statements (‘the condensed consolidated interim
fnancial statements’). Management is responsible for the preparation and presentation of these
condensed consolidated interim fnancial statements in accordance with IAS 34 Interim Financial
Reporting. Our responsibility is to express a conclusion on these condensed consolidated interim
fnancial statements based on our review.
Scope of review
We conducted our review in accordance with the International Standard on Review
Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor
of the Entity. A review of interim fnancial statements consists of making inquiries, primarily of
persons responsible for fnancial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in accordance with
International Standards on Auditing and consequently does not enable us to obtain assurance that
we would become aware of all signifcant matters that might be identifed in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the
accompanying condensed consolidated interim fnancial statements as at and for the six months
ended 30 June 2018 are not prepared, in all material respects, in accordance with IAS 34 Interim
Financial Reporting.
KPMG
[Address]
[Date of report]
a. This example report has been prepared based on International Standards on Review Engagements 2410 Review
of Interim Financial Information Performed by the Independent Auditor of the Entity. Its format does not refect
the legal requirements of any particular jurisdiction.
© 2018 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
Appendices Notes Primary statements AUDITORS’ REPORT Introduction