IFRS Master Reference

IAS 2

Inventories

Core Principle: Inventories are measured at the lower of cost and net realisable value (NRV). Cost encompasses all expenditure incurred in bringing inventories to their present location and condition.

Scope — What Qualifies as Inventory

• Assets held for sale in the ordinary course of business (finished goods)
• Assets in the process of production for such a sale (work-in-progress)
• Materials and supplies consumed in the production process (raw materials)

Initial Measurement — Cost Components

Included in Cost

• Purchase price + import duties + non-refundable taxes less trade discounts and rebates
• Conversion costs: direct labour + systematically allocated fixed and variable production overheads (based on normal capacity)
• Other costs directly incurred in bringing inventories to their present location and condition

Excluded from Cost — Expensed as Incurred

• Abnormal waste of materials, labour or other production costs
• Storage costs (unless necessary in the production process, e.g., maturing whisky)
• Administrative and selling overheads not related to production
• Borrowing costs (unless the inventory is a qualifying asset under IAS 23)

Normal Capacity: Overheads are absorbed based on normal (not actual) production capacity. Fixed overhead under-absorbed during low-output periods is expensed — not deferred into inventory. This prevents inflating inventory values during inefficient periods.

Cost Formulas

Method	How It Works	IFRS Permitted?
FIFO	Oldest units are assumed consumed/sold first	✔ Yes
Weighted Average	Cost averaged over all units held; recalculated at each purchase	✔ Yes
LIFO	Most recent units assumed consumed first	✘ Not permitted under IFRS
Specific Identification	Track actual cost of each individual item	✔ Only for items not ordinarily interchangeable

Consistency Rule: The same cost formula must be applied to all inventories having a similar nature and use to the entity. Different formulas are only permitted for inventories with different natures or uses.

Subsequent Measurement — Lower of Cost and NRV

NRV = Estimated selling price in the ordinary course of business − Estimated costs of completion − Estimated costs necessary to make the sale

• NRV write-downs are recognized as an expense in the period of write-down
• NRV is reassessed at each subsequent reporting date — circumstances may have changed
• Reversals are required (not optional) when NRV subsequently increases, but only up to the original cost
• Inventory held for use in production: compare the replacement cost of raw materials (as a proxy for NRV of finished goods) to the NRV of the finished product, not the raw material in isolation

Never use LIFO under IFRSNever include abnormal waste in costAlways reassess NRV at each year-endIf NRV rises → reverse prior write-down (up to original cost)

IAS 16

Property, Plant and Equipment

Definition: Tangible items held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and expected to be used during more than one period.

Recognition Criteria

Note on Recognition vs. Definition: IAS 16 recognizes an item of PPE when: (1) it is probable that future economic benefits will flow to the entity, and (2) the cost can be measured reliably. "Control" is a Conceptual Framework-level element of the definition of an asset — it is not a stated recognition criterion within IAS 16 itself and should not be cited as one in exam or professional contexts.

Initial Measurement — Cost

• Purchase price (net of trade discounts) + import duties + non-refundable purchase taxes
• Directly attributable costs to bring the asset to its intended location and condition (installation, testing, professional fees)
• Initial estimate of decommissioning and site restoration costs (discounted if material), with the corresponding provision recognized under IAS 37

Excluded from Cost

• Administration and general overhead costs
• Costs of operating losses before the asset reaches full capacity
• Staff training costs
• Abnormal amounts of wasted materials or labour during construction

Subsequent Measurement — Two Models

Model	Carrying Amount	Gains / Losses
Cost Model	Cost − Accumulated depreciation − Accumulated impairment losses	N/A
Revaluation Model	Fair value at revaluation date − Subsequent accumulated depreciation − Subsequent accumulated impairment	See below

Revaluation Model — Treatment of Movements

• Upward revaluation: Recognized in OCI as a revaluation surplus — unless it reverses a previously recognized decrease in P&L (that portion reverses in P&L first)
• Downward revaluation: First deducted from the existing revaluation surplus in OCI; any excess beyond the surplus is charged to P&L
• Revaluations applied on a class-by-class basis; all assets within the class must be revalued with sufficient regularity to ensure carrying amount does not differ materially from FV
• On disposal: the revaluation surplus may be transferred directly to retained earnings (not recycled through P&L)

IAS 21 Interaction — Revaluation Model: Where PPE is denominated in a foreign currency and carried under the revaluation model, it is a non-monetary asset measured at fair value. Per IAS 21, it is translated at the rate when fair value was determined. The exchange difference is embedded in the revaluation movement and recognized in OCI — it must NOT be separated out as a standalone exchange gain or loss in P&L.

Depreciation

• Begins when the asset is available for use — in the location and condition intended by management. Not when actually brought into use
• Depreciable amount = Cost (or revalued amount) − Residual value
• Component accounting: Significant components with different useful lives must be depreciated separately (e.g., aircraft body vs. engines; building structure vs. roof)
• Residual value and useful life reviewed at each year-end — any change is a change in accounting estimate (prospective treatment per IAS 8)
• Land is not depreciated (indefinite life) — but can still be impaired under IAS 36

⚑ Exam Tips

• Depreciation on a revalued asset is based on the revalued amount over the remaining useful life
• A change in residual value is a change in estimate → apply prospectively (no restatement)
• An entity that uses the cost model for PPE must still disclose the fair value of PPE if materially different from carrying amount

Standard Links: IAS 16 ↔ IAS 36 (impairment testing of PPE) · IAS 16 ↔ IAS 40 (transfers to/from investment property) · IAS 16 ↔ IAS 23 (borrowing costs capitalization) · IAS 16 ↔ IFRS 5 (reclassification as held-for-sale) · IAS 16 ↔ IAS 21 (revaluation of foreign-currency PPE)

IAS 20

Accounting for Government Grants and Disclosure of Government Assistance

Core Principle: Government grants are recognized as income on a systematic basis over the periods in which the entity recognizes as expenses the related costs the grants are intended to compensate. They shall not be credited directly to equity.

Recognition Conditions

A grant is recognized only when there is reasonable assurance that:

1. The entity will comply with any conditions attached to the grant, and
2. The grant will be received

• Grants received before conditions are met → recognized as deferred income (a liability)
• Repayment of a grant: treated as a change in accounting estimate (prospective). First applied against unamortized deferred income; any excess recognized immediately as an expense in P&L

Presentation Options

Grant Type	Option A	Option B
Grant related to assets	Deferred income (released to P&L over the asset's useful life)	Deducted from asset's carrying amount (reduces future depreciation charge)
Grant related to income	Presented as "other income" separately or under a general heading	Deducted from the related expense

IAS 41 Override: Grants related to biological assets covered by IAS 41 follow IAS 41's specific rules — not IAS 20. Under IAS 41, unconditional grants are recognized in P&L when receivable; conditional grants when conditions are met.

IAS 23

Borrowing Costs

Core Principle: Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset must be capitalized as part of the cost of that asset. All other borrowing costs are expensed as incurred.

Qualifying Asset

An asset that necessarily takes a substantial period of time to get ready for its intended use or sale. Examples include: manufacturing plant, power generation facilities, investment property under construction, pipelines, and certain inventories (e.g., whisky, real estate developments). Routine inventory items are not qualifying assets.

Capitalization Period

Phase	Condition
Commence capitalization	ALL three conditions met: expenditures are being incurred, borrowing costs are being incurred, AND activities to prepare the asset are in progress
Suspend capitalization	During extended periods when active development is interrupted (not routine administrative delays)
Cease capitalization	When substantially all activities necessary to prepare the asset for its intended use or sale are complete

Calculation of Borrowing Costs to Capitalize

• Specific borrowing: Actual borrowing costs incurred during the period less any investment income earned on the temporary investment of those borrowed funds
• General borrowing pool: Apply the weighted average of borrowing costs (capitalization rate) to the expenditure incurred on the qualifying asset. Amount capitalized cannot exceed total borrowing costs incurred in the period

IAS 36

Impairment of Assets

Core Principle: An asset is impaired when its carrying amount exceeds its recoverable amount.
Recoverable Amount = higher of (a) Fair Value Less Costs of Disposal (FVLCD) and (b) Value in Use (VIU)

When to Test for Impairment

Asset Type	When to Test
PPE, finite-life intangibles, other assets	Only when impairment indicators exist (internal or external)
Goodwill from a business combination	Mandatory annual test, regardless of indicators
Intangible with indefinite useful life	Mandatory annual test, regardless of indicators
Intangible not yet available for use	Mandatory annual test, regardless of indicators

Impairment Indicators

External Indicators	Internal Indicators
Significant decline in market value beyond normal wear and tear	Evidence of physical damage or obsolescence
Adverse changes in technology, markets, economy or law	Asset is idle, being restructured or held for disposal
Market interest rate increases (raises discount rate, reduces VIU)	Internal reports show worse economic performance than expected
Carrying amount of net assets exceeds market capitalisation	Subsidiary acquired exclusively for resale

Value in Use (VIU)

• Present value of future cash flows expected from the asset in its existing condition
• Cash flow projections must NOT include future capital expenditure to improve or enhance performance beyond the originally assessed standard
• Discount rate: Pre-tax rate reflecting current market assessments of the time value of money and asset-specific risks. Do NOT use a post-tax rate
• Beyond a detailed 5-year projection period, extrapolate using a steady or declining growth rate; a declining rate is used unless a growing rate can be justified

Impairment Loss Recognition

• Individual asset: Charged to P&L — unless the asset is carried under the revaluation model, in which case the loss first reduces the existing revaluation surplus (OCI), with any excess charged to P&L
• After recognizing an impairment loss, the depreciation charge is recalculated on the new carrying amount over the remaining useful life

Cash-Generating Units (CGUs) and Goodwill Allocation

CGU Definition: The smallest identifiable group of assets that generates cash inflows largely independent of the cash inflows from other assets or groups of assets.

Impairment Allocation Order within a CGU: (1) First allocate to goodwill, reducing it to nil; then (2) allocate the remainder pro rata to the other assets in the CGU. No individual asset may be written down below the highest of its own FVLCD, VIU, or zero. Goodwill is always impaired first.

Reversals of Impairment

• Permitted for individual assets (and non-goodwill assets in a CGU) when indicators suggest recoverable amount has increased
• Reversal is capped: carrying amount after reversal cannot exceed what it would have been (net of depreciation) had no impairment ever been recognized
• Goodwill impairment can NEVER be reversed

Standard Links: IAS 36 ↔ IAS 16 (PPE impairment) · IAS 36 ↔ IAS 38 (intangible impairment) · IAS 36 ↔ IFRS 3 (goodwill allocation to CGUs) · IAS 36 ↔ IFRS 9 (separate ECL model applies to financial assets — not IAS 36)

IAS 37

Provisions, Contingent Liabilities and Contingent Assets

Core Principle: A provision is a liability of uncertain timing or amount. Recognize a provision only when all three criteria are met simultaneously.

Recognition — Three Criteria (ALL must be met)

1. A present obligation (legal or constructive) exists as a result of a past event
2. It is probable (more likely than not — >50%) that an outflow of economic benefits will be required to settle the obligation
3. A reliable estimate of the amount can be made

Constructive Obligation: Arises from established patterns of past practice, published policies or a sufficiently specific current statement that creates a valid expectation in the minds of other parties that the entity will meet the obligation — even though no legal duty exists.

Measurement

• Best estimate of the expenditure required to settle the present obligation at the reporting date
• Large populations (e.g., warranties): use expected value (probability-weighted outcomes)
• Single obligation: use the most likely outcome, adjusted for material other possible outcomes
• Time value of money: Where the effect is material, discount using a pre-tax risk-free rate. The unwinding of discount each period is a finance cost in P&L
• Reimbursement rights (e.g., insurance recoveries): recognize as a separate asset only when virtually certain. Net presentation in P&L is permitted only when that threshold is met

Contingent Liabilities and Contingent Assets

Item	Probability	Treatment
Provision (liability)	Probable (>50%)	Recognize in the Statement of Financial Position
Contingent liability	Possible (not probable)	Disclose in notes only (do not recognize)
Contingent liability	Remote	No disclosure required
Contingent asset (inflow)	Probable	Disclose in notes only (do not recognize)
Asset (inflow)	Virtually certain	Recognize as an asset

Key Application Scenarios

• No provision for future operating losses — they do not meet the definition of a present obligation arising from a past event
• Onerous contracts: Recognize a provision for the lower of the cost of fulfilling the contract and the cost/penalty of terminating it
• Restructuring: A provision arises only when a detailed formal plan exists AND the entity has raised a valid expectation in those affected by having announced or started implementing the plan. A board decision alone, without external communication, is insufficient

Standard Links: IAS 37 ↔ IFRS 15 (onerous contracts in revenue recognition) · IAS 37 ↔ IAS 36 (impairment often triggered when onerous contracts are identified) · IAS 37 ↔ IAS 12 (deferred tax on provisions)

IAS 40

Investment Property

Definition: Property (land or a building — or part of a building — or both) held by the owner to earn rentals OR for capital appreciation OR both — and NOT for use in the production or supply of goods/services, for administrative purposes, or for sale in the ordinary course of business.

Initial Measurement

Recognized at cost, including transaction costs (same approach as IAS 16 initial measurement).

Subsequent Measurement — Policy Choice

Model	Depreciation?	Gains and Losses
Fair Value Model	None — no depreciation under the FV model	All FV changes recognized in P&L (not OCI)
Cost Model	Yes — per IAS 16 principles	Fair value disclosed in notes; gains/losses on disposal through P&L

Critical Distinction from IAS 16: Under IAS 40 Fair Value Model, ALL fair value gains and losses pass through P&L. Under IAS 16 Revaluation Model, gains pass through OCI. Confusing these two treatments is one of the most common errors in professional exams.

Transfers — Change in Use

Transfer Direction	Measurement at Transfer Date
Investment Property → Owner-occupied (PPE)	FV at transfer date becomes the deemed cost for IAS 16 purposes
Investment Property → Inventories	FV at transfer date becomes the cost for IAS 2 purposes
Owner-occupied (PPE) → Investment Property (FV model)	Revalue under IAS 16 first; carry FV into IAS 40; OCI surplus remains in equity
Inventories → Investment Property (FV model)	Difference between FV and carrying amount at transfer date recognized in P&L

IAS 41

Agriculture

Scope: Biological assets (living animals and plants), agricultural produce at the point of harvest, and government grants related to biological assets measured at fair value.

Measurement

• Biological assets: recognized and measured at fair value less costs to sell at each reporting date; all changes recognized in P&L
• If fair value cannot be reliably measured (rare exception): use cost less accumulated depreciation and accumulated impairment losses
• Agricultural produce at the point of harvest: recognized at FV less costs to sell at that date — this becomes the deemed cost under IAS 2 for all subsequent inventory accounting

Government Grants — IAS 41 vs. IAS 20

Grant Type (IAS 41)	Recognition Timing
Unconditional grant related to biological assets at FV less costs to sell	Recognized in P&L when the grant becomes receivable
Conditional grant related to biological assets at FV less costs to sell	Recognized in P&L only when all attached conditions have been met

Common Pitfall: Applying IAS 20 matching principles to grants relating to biological assets covered by IAS 41. IAS 41 specifically overrides IAS 20 for these assets. Once produce is harvested, IAS 41 no longer applies — IAS 2 governs all subsequent accounting.

IFRS 13

Fair Value Measurement

Definition: 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. This is an exit price — not an entry price (purchase cost).

Non-Financial Assets — Highest and Best Use

• FV of a non-financial asset assumes the highest and best use from the perspective of market participants — even if the entity's actual current use differs
• Rebuttable presumption: the entity's current use is the highest and best use, unless market or other factors indicate otherwise

Principal vs. Most Advantageous Market

• Principal Market: The market with the greatest volume and level of activity for the asset or liability — must be used if accessible
• Most Advantageous Market: Maximizes net proceeds after transport costs (but NOT transaction costs) — used only when no principal market exists
• FV is not adjusted for transaction costs — transaction costs affect profit, not fair value

Fair Value Hierarchy — Three Levels

Level	Input Type	Example	Audit Risk
Level 1	Quoted prices in active markets for identical assets/liabilities	Listed equity shares on a stock exchange	Lowest
Level 2	Observable inputs other than Level 1 (e.g., quoted prices for similar assets, or identical assets in inactive markets)	Interest rate swap valued using observable yield curves	Medium
Level 3	Unobservable inputs — entity's own assumptions about what market participants would use	Unlisted entity valued using discounted cash flow model	Highest

Audit Insight: Level 3 measurements carry the highest audit risk — they require significant management judgement and are most susceptible to bias. Auditors should challenge key assumptions, request sensitivity analyses, and evaluate whether alternative valuation techniques were considered.

IFRS 5

Non-current Assets Held for Sale and Discontinued Operations

Core Principle: When an asset's carrying amount will be recovered principally through a sale transaction (rather than continuing use), it is classified as held-for-sale and measured at the lower of carrying amount and fair value less costs to sell (FVLCTS).

Classification Criteria — Held for Sale (ALL must be met)

• The asset is available for immediate sale in its present condition (subject only to terms that are usual and customary)
• The sale is highly probable: management is committed, an active programme to locate a buyer is initiated, the asset is marketed at a reasonable price relative to its current FV
• The sale is expected to be completed within 12 months of classification (limited extensions permitted for specified circumstances)

IAS 10 Interaction: If held-for-sale criteria are met after the reporting date but before the authorization date → this is a non-adjusting event under IAS 10. Do NOT reclassify the asset in the current year's financial statements. Disclose the event if material.

Measurement

• Remeasure under the relevant standard (IAS 16 or IAS 38) immediately before reclassification
• Then remeasure at lower of carrying amount and FVLCTS
• Subsequent increases in FVLCTS may be recognized as a gain, but only up to the cumulative impairment previously recognized under IFRS 5
• No depreciation or amortization while the asset is classified as held-for-sale

Discontinued Operations

• A component of an entity that represents a separate major line of business or geographical area of operations that has been disposed of or classified as held-for-sale
• Post-tax profit or loss from discontinued operations is presented as a single line item on the face of P&L, separately below profit from continuing operations
• Comparative P&L statements are restated to show the discontinued operation separately in the prior period
• Assets and liabilities of disposal groups are presented separately on the face of the SOFP — assets and liabilities must NOT be offset

IAS 38

Intangible Assets

Definition: An identifiable non-monetary asset without physical substance. Three elements required: (1) identifiability — separable or arising from contractual/legal rights; (2) control — through legal rights or ability to restrict others' access to benefits; and (3) future economic benefits.

Recognition Criteria

• It is probable that future economic benefits will flow to the entity
• The cost of the asset can be measured reliably
• The asset is identifiable: either (a) separable — can be sold, licensed, transferred, rented or exchanged separately; or (b) arises from contractual or legal rights

Initial Measurement

Acquisition Route	Initial Measurement
Separately purchased	Cost = purchase price + directly attributable costs of preparation
Acquired in a business combination (IFRS 3)	Fair value at the acquisition date — can be recognized separately from goodwill even if not previously recognized by the acquiree
Internally generated	Generally NOT recognized — subject to Research vs. Development rules below
Government grant	Either at fair value OR at nominal amount plus directly attributable expenditure (IAS 20 applies)

Research vs. Development — Internal Generation

Important Clarification: IAS 38 does not prohibit recognition of all internally generated intangibles as a blanket rule. The standard draws a clear distinction: research costs must always be expensed, while development costs may be capitalized if all six specified criteria are satisfied. The blanket prohibition applies only to specific categories — internally generated goodwill, brands, mastheads, publishing titles, and customer lists.

Phase	Characteristic	Accounting Treatment
Research	Original planned investigation to gain new knowledge; no certainty of commercial outcome	Always expense as incurred
Development	Application of research findings to a plan/design for a new product or process prior to commercial production	Capitalize if ALL 6 criteria are met

Development Capitalization — 6 Criteria (Mnemonic: PIRATE)

1. Probable future economic benefits will flow to the entity
2. Intention to complete the asset and use or sell it
3. Resources (technical, financial and other) are available to complete the development
4. Ability to use or sell the intangible asset once complete
5. Technical feasibility of completing the development
6. Expenditure attributable to development can be measured reliably

Never capitalize internally generated: goodwill, brands, mastheads, publishing titles, customer lists — these do not meet the identifiability criterion reliably and are specifically excluded by IAS 38.

Subsequent Measurement

Useful Life	Model	Treatment
Finite	Cost model	Amortize over useful life; test for impairment when indicators arise
Finite	Revaluation model	Only if an active market exists for the intangible (extremely rare in practice)
Indefinite	Cost model (no amortization)	Mandatory annual impairment test + whenever indicators exist; review classification annually

Indefinite ≠ Infinite: "Indefinite" means there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows. It must be reviewed annually. If circumstances change and useful life becomes determinable, reclassify to finite useful life — this is a change in accounting estimate, applied prospectively.

Never capitalize research costsNever capitalize development costs until all 6 criteria are metIf indefinite life → annual impairment test, no amortization

IFRS 6

Exploration for and Evaluation of Mineral Resources

Scope: Expenditures incurred after the entity has obtained legal rights to explore in a specific area, but before technical feasibility and commercial viability of extracting the mineral resources have been established.

Recognition and Measurement

• The entity determines its own accounting policy for which expenditures qualify as exploration and evaluation (E&E) assets (per IAS 8 — must be consistent and either more relevant or no less relevant than alternatives)
• E&E assets are classified as either tangible (e.g., drilling rigs, vehicles) or intangible (e.g., drilling rights, licences) — subsequent measurement follows IAS 16 or IAS 38 accordingly
• Test for impairment when facts and circumstances suggest the carrying amount may exceed recoverable amount (IFRS 6 specifies its own indicators rather than IAS 36's full requirements)

Audit Insight: IFRS 6 is a temporary standard — entities must reclassify E&E assets once technical feasibility and commercial viability are established. At that point, normal IAS 16/IAS 38 recognition and measurement rules apply. Auditors should challenge whether entities are deferring reclassification to avoid full IAS 36 impairment testing.

IAS 8

Accounting Policies, Changes in Accounting Estimates and Errors

Core Principle: Accounting policies must be applied consistently and must faithfully represent transactions. Changes are treated differently depending on whether they involve a change in policy, a revision to an estimate, or a correction of an error.

1. Accounting Policy Changes

• Changes are permitted only if: (a) required by a new or revised IFRS, or (b) the change results in information that is more relevant and faithfully representative
• Treatment: Retrospective application — restate comparative information; adjust opening retained earnings of the earliest period presented
• If impracticable to restate all prior periods, restate from the earliest practicable date

2. Changes in Accounting Estimates

• Arise from new information or developments — e.g., revision of useful life, changes in ECL estimates, revision of warranty provisions
• Treatment: Prospective — applied from the current period and future periods only; no restatement of comparatives
• Disclosure: nature and amount of the change in current period, and expected impact on future periods where practicable

3. Prior Period Errors

• Omissions or misstatements arising from a failure to use, or misuse of, reliable information that was available when the financial statements were authorized
• Treatment: Retrospective restatement — comparatives restated as if the error had never occurred; cumulative effect in the opening balance of retained earnings of the earliest period presented

Distinguishing Estimate from Policy: If uncertainty was always present and you are refining the measurement → change in estimate (prospective). If you are changing the accounting treatment or basis → change in policy (retrospective). When the distinction is unclear, IAS 8 presumes it is a change in estimate.

New IFRS requires change → Retrospective (policy)New information refines measurement → Prospective (estimate)Error discovered → Retrospective restatementNever change a policy merely for convenience

IAS 10

Events After the Reporting Period

Scope: Events (both favourable and unfavourable) that occur between the reporting date and the date the financial statements are authorized for issue.

Classification — Adjusting vs. Non-Adjusting

Type	Definition	Treatment
Adjusting	Provides evidence of conditions that existed at the reporting date	Adjust carrying amounts in the financial statements
Non-Adjusting	Evidence of conditions that arose after the reporting date	Disclose if material (no adjustment); exception: going concern

Illustrative Examples

Event	Classification	Rationale
Settlement of a lawsuit that existed at year-end	Adjusting	Confirms conditions at reporting date
Customer bankruptcy (balance outstanding at year-end)	Adjusting	Confirms recoverability of receivable at reporting date
Post-year-end sale of inventory provides NRV evidence	Adjusting	Confirms NRV at reporting date
Major restructuring announced after year-end	Non-Adjusting	Condition arose after the reporting date
Factory destroyed by fire after year-end	Non-Adjusting	Condition arose after the reporting date
Post-period dividends declared	Non-Adjusting	No present obligation at reporting date

⚑ Key Test

The determinative question: did the condition exist at the reporting date? Yes → Adjusting. Arose after → Non-Adjusting. Going concern is the one exception where a non-adjusting event (e.g., intention to liquidate after year-end) triggers full restatement of the financial statements on a going concern basis, or disclosures if preparation on that basis is no longer appropriate.

IAS 24

Related Party Disclosures

Objective: Ensure financial statements contain sufficient disclosures so that users can draw attention to the possibility that the entity's financial position and performance may have been affected by the existence of related parties and by related party transactions.

Who Is a Related Party?

• All members of a group (parent, subsidiaries, fellow subsidiaries, associates, joint ventures)
• Key Management Personnel (KMP) and their close family members — KMP are those persons having authority and responsibility for planning, directing and controlling the activities of the entity (includes both executive and non-executive directors)
• Entities controlled, jointly controlled or significantly influenced by KMP or their close family members
• Post-employment benefit plans for employees of the entity or of a related entity

Disclosure Requirements

• Name of the parent entity and, if different, the ultimate controlling party
• KMP compensation in total and by each of five categories: short-term, post-employment, other long-term, termination, and share-based payments
• For each type of related party transaction: nature, amounts involved, outstanding balances, terms and conditions, provisions for irrecoverable balances
• Disclose related party relationships even when no transactions have occurred during the period

Key Rule: Related party disclosures are required even if no monetary consideration is exchanged. Statements that transactions were conducted at arm's length terms must NOT be made unless that assertion can be substantiated. Transactions that are financially immaterial still require disclosure if they involve KMP or key relationships.

IFRS 15

Revenue from Contracts with Customers

Core Principle: Recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The Five-Step Model

Step	Description	Key Judgements
Step 1	Identify the contract with a customer	Has the contract been approved? Are rights and payment terms identifiable? Is collection probable?
Step 2	Identify the performance obligations (POs)	Is each promised good/service distinct on its own AND in the context of the contract?
Step 3	Determine the transaction price	Variable consideration constraint; significant financing component; non-cash consideration; amounts payable to customer
Step 4	Allocate transaction price to POs	Allocation based on relative standalone selling prices (SSP); allocation exceptions
Step 5	Recognize revenue when (or as) each PO is satisfied	Point-in-time vs. over-time recognition criteria

Step 3 — Variable Consideration: The Constraint

Correct Treatment: Variable consideration is estimated using either the expected value method (probability-weighted sum) or the most likely amount method. It is included in the transaction price only to the extent that it is highly probable that a significant reversal of cumulative revenue recognized will NOT occur when the uncertainty is resolved. This is the variable consideration constraint — it applies specifically to prevent premature revenue recognition, not as a general reliability threshold.

Step 5 — Over-Time vs. Point-in-Time Recognition

Revenue is recognized over time if ANY ONE of the following criteria is met:

1. The customer simultaneously receives and consumes the benefits as the entity performs (e.g., routine cleaning services)
2. The entity's performance creates or enhances an asset that the customer controls as it is created (e.g., construction on customer's land)
3. The entity's performance does not create an asset with alternative use to the entity AND the entity has an enforceable right to payment for performance completed to date

If none of the over-time criteria are met → revenue is recognized at a single point in time when control transfers to the customer.

Contract Assets vs. Contract Liabilities

Item	Arises When
Contract Asset	Revenue recognized exceeds amounts billed to the customer (performance has outpaced billing)
Contract Liability	Cash received from customer exceeds revenue recognized (deferred revenue / advances)
Receivable	Unconditional right to payment exists (only time passage required)

IFRS 16

Leases

Definition of a Lease: A contract that conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control requires: (1) the right to obtain substantially all the economic benefits from use, AND (2) the right to direct the use of the identified asset.

Lease Term — Determination and Reassessment

• Lease term = Non-cancellable period plus optional extension periods if reasonably certain to exercise plus optional termination periods if reasonably certain not to terminate
• "Reasonably certain" is a high threshold — consider all economic factors: leasehold improvements, significance of location to operations, cost of relocation, business plan
• Reassess lease term if a significant event or change in circumstance within the lessee's control occurs (e.g., decision to make major leasehold improvements)

Lessee — Initial Recognition

• Recognize a Right-of-Use (ROU) asset and a lease liability at the commencement date
• Exemptions (straight-line expense instead): Short-term leases (lease term ≤ 12 months) and leases of low-value assets

Lease Liability = PV of future lease payments (discounted at the rate implicit in the lease; or the lessee's incremental borrowing rate if implicit rate not determinable) ROU Asset = Lease liability at commencement date + Initial direct costs incurred by the lessee + Prepayments made at or before commencement − Lease incentives received + Estimated dismantling / restoration costs (IAS 37)

Lessee — Subsequent Measurement

• Lease liability: Accrue interest using the effective interest method; reduce by cash payments made
• ROU asset: Depreciated on a straight-line basis over the shorter of the lease term and the asset's useful life — unless ownership transfer or purchase option exercise is reasonably certain, in which case depreciate over the full useful life
• ROU asset is subject to impairment testing under IAS 36

Current Portion of Lease Liability: The current portion represents the principal repayment expected within the next 12 months (i.e., the reduction in the liability's carrying amount over the coming year). It is not related to a formula involving finance costs. Finance costs are a separate P&L charge and do not determine the current/non-current split.

Variable Lease Payments

Type	Included in Lease Liability?	Recognition
Variable payments linked to an index or rate (e.g., CPI, LIBOR)	Yes — at commencement date using the index/rate at that date	Reassess when index/rate changes at a reassessment trigger event
Variable payments NOT linked to an index or rate (e.g., % of sales)	No	Recognized as an expense in the period incurred

Sale and Leaseback

• If the sale satisfies the IFRS 15 performance obligation (control genuinely transfers to buyer) → derecognize the original asset; recognize ROU asset and lease liability; recognize gain only in relation to rights transferred to the buyer (not the retained ROU portion)
• If the sale does NOT satisfy IFRS 15 (e.g., repurchase option means control is retained) → treat as a financing arrangement: asset remains on SOFP; cash received recognized as a financial liability

Lessor — Finance vs. Operating Lease

	Finance Lease	Operating Lease
Substance test	Substantially all risks and rewards of ownership transferred to lessee	Lessor retains substantially all risks and rewards
Lessor's SOFP	Derecognize asset; recognize lease receivable (= net investment in the lease)	Keep asset on SOFP; depreciate per IAS 16
Income recognition	Finance income on effective interest basis over the lease term	Lease income on straight-line basis (or another systematic basis)

Standard Links: IFRS 16 ↔ IFRS 15 (sale and leaseback) · IFRS 16 ↔ IAS 36 (ROU asset impairment) · IFRS 16 ↔ IAS 16 (depreciation methodology for ROU assets) · IFRS 16 ↔ IAS 12 (temporary differences on ROU asset and lease liability)

IFRS 2

Share-based Payment

Core Principle: Recognize the goods or services received in a share-based payment transaction at the fair value of those goods or services. If FV of goods/services cannot be reliably estimated, measure by reference to the fair value of the equity instruments granted.

Equity-Settled Share-based Payments

• Measured at FV of equity instruments at the grant date — never remeasured subsequently
• Total charge spread over the vesting period on a cumulative basis
• At each reporting date: revise the estimate for the number of instruments expected to vest (non-market conditions); adjust the cumulative charge accordingly
• Credit entry: equity (share-based payment reserve within equity — not a liability)

Cumulative charge at period end = (Estimated total options expected to vest × Grant-date FV per option) × (Elapsed vesting period ÷ Total vesting period)

Vesting Conditions — Treatment Summary

Condition Type	Effect on Measurement	Adjust for Non-Achievement?
Service condition (e.g., remain employed for 3 years)	Not reflected in grant-date FV	Yes — adjust number expected to vest at each reporting date
Non-market performance condition (e.g., EPS target)	Not reflected in grant-date FV	Yes — adjust number expected to vest at each reporting date
Market condition (e.g., share price target)	Reflected in the grant-date FV (via option pricing model)	No — recognize full charge regardless of whether market condition is achieved

Cash-Settled Share-based Payments (SARs)

• Recognize a liability (not equity)
• Remeasure at FV at each reporting date and at settlement date — changes recognized in P&L
• Spreading logic: same cumulative cost approach as equity-settled
• On settlement: derecognize liability, recognize cash paid; difference recognized in P&L

Modifications

• Beneficial modification (e.g., reduction in exercise price): recognize the incremental FV at modification date in addition to the original charge; spread over remaining vesting period
• Detrimental modification (e.g., increase in exercise price): continue recognizing the original grant-date FV — never reduce the total charge
• Cancellation: Accelerate the remaining unrecognized charge; recognize immediately in P&L

IAS 33

Earnings Per Share

Scope: Applies to entities whose ordinary shares or potential ordinary shares are publicly traded, or which are in the process of issuing such instruments to public markets.

Basic EPS

Basic EPS = Profit or loss attributable to ordinary equity holders of the parent ÷ Weighted average number of ordinary shares outstanding during the period

Weighted Average Shares — Adjustments

Capital Event	Treatment
Bonus issue (scrip/stock dividend)	Treated as if always in issue — adjust current period AND restate prior period comparative EPS retroactively
Rights issue (contains a bonus element)	Adjust for the bonus fraction (TERP ÷ actual cum-rights price); restate comparative EPS
Issue at full market price	Time-apportion from the date of issue; no retrospective adjustment required
Share buyback / repurchase	Remove from weighted average from the date of buyback

Diluted EPS

• Assumes all dilutive potential ordinary shares (options, convertible instruments, warrants) are converted at the start of the period (or date of issue if later)
• Adjust numerator: add back interest/dividends saved on convertibles (net of tax)
• Adjust denominator: add notional shares issued on conversion/exercise
• Treasury stock method for options: notional proceeds assumed to be used to purchase shares at the period's average market price; only the excess (dilutive increment) is added to the denominator
• Diluted EPS is only disclosed if it is lower than basic EPS — antidilutive instruments are always excluded

Presentation: Both basic and diluted EPS must be shown on the face of the Statement of Profit or Loss for both continuing operations and total profit or loss. EPS figures based on OCI items must NOT be presented on the face of financial statements. OCI items do not affect EPS. Restatement of comparative EPS is required when bonus issues or share splits occur.

IAS 12

Income Taxes

Core Principle: Account for the current and future tax consequences of transactions and events recognized in the financial statements — giving rise to current tax payable/receivable and deferred tax liabilities/assets.

Temporary Differences

Temporary Difference = Carrying amount of an asset or liability in the SOFP − Its tax base

Type	Condition	Deferred Tax Created
Taxable Temporary Difference	CA of asset > Tax base (will generate taxable income in future periods)	Deferred Tax Liability (DTL)
Deductible Temporary Difference	CA of asset < Tax base (will generate a tax deduction in future periods)	Deferred Tax Asset (DTA)

Tax Base

• Asset tax base: The amount that will be deductible for tax purposes against taxable economic benefits that flow from the asset in future periods
• Liability tax base: Carrying amount less any amount that will be deductible for tax purposes in future periods when the liability is settled

Recognition Rules

Item	Recognition Rule	Exceptions
Deferred Tax Liability (DTL)	Recognize for ALL taxable temporary differences	Initial recognition exception (asset/liability not arising from business combination and affecting neither accounting nor taxable profit); goodwill
Deferred Tax Asset (DTA)	Recognize only to the extent probable that sufficient taxable profit will be available to utilize the deductible temporary difference	Assess recoverability at every reporting date

• Both DTAs and DTLs are presented as non-current in all circumstances
• DTAs and DTLs may be netted only when there is a legally enforceable right to set off AND they relate to the same tax authority

Presentation — "Follow the Underlying Item"

• Tax relating to items in P&L → recognized in P&L
• Tax relating to items in OCI (e.g., revaluation gain, actuarial gains) → recognized in OCI
• Tax relating to equity transactions → recognized directly in equity

Revaluation gain in OCI → deferred tax in OCIGoodwill → no DTL (initial recognition exception)Always reassess DTA recoverability at year-end

IFRS 8

Operating Segments

Management Approach: Segments are identified and reported based on how management (specifically the CODM) internally reviews and manages the business — even if that basis differs from full IFRS measurement principles. External reporting mirrors internal information.

Key Definitions

• Operating Segment: A component that: (i) engages in business activities earning revenues and incurring expenses; (ii) whose operating results are regularly reviewed by the CODM; and (iii) for which discrete financial information is available
• CODM (Chief Operating Decision Maker): The function — not necessarily a single person — that allocates resources and assesses performance. Often the CEO, Board, or Executive Committee

Reportable Segments — Quantitative Thresholds (10% Tests)

An operating segment is reportable if it meets any one of the following:

• Revenue (internal + external) ≥ 10% of combined revenue of all operating segments
• Reported profit or absolute reported loss ≥ 10% of combined profit/loss of all profitable/loss-making segments
• Assets ≥ 10% of combined assets of all operating segments

75% Floor Test: Reportable segments must in aggregate account for at least 75% of total external revenue. If this threshold is not met, additional segments must be designated as reportable even if they fail the 10% tests.

Required Disclosures

• Revenue (internal and external), interest income/expense, depreciation and amortization, material income/expense items, share of equity-method income, income tax, capital expenditure
• Segment assets and segment liabilities — if regularly provided to the CODM
• Reconciliation of each segment total to the corresponding financial statement total
• Entity-wide disclosures: Revenue by product/service line; revenue by geography; major customer information (if ≥ 10% of total external revenue from a single external customer)

IAS 19

Employee Benefits

Scope: All forms of consideration given by an entity in exchange for services rendered by employees or for the termination of employment — covering short-term, post-employment, other long-term and termination benefits.

Defined Contribution Plans

• The entity's obligation is limited to fixed contributions to a separate fund; all investment and actuarial risk lies with the employee
• Contributions payable for the period → expense in P&L; unpaid → accrual; overpaid → prepayment
• No actuarial assumptions or complex calculations required

Defined Benefit Plans

Defined Benefit: Entity promises a specified retirement benefit. Both actuarial risk and investment risk rest with the entity. Requires actuarial valuations using the Projected Unit Credit Method.

Net Defined Benefit Liability (Asset) = Present Value of Defined Benefit Obligation (DBO) − Fair Value of Plan Assets

Three Components of Defined Benefit Cost

Component	Recognized in	Notes
Current service cost (benefits earned in the current period)	P&L — operating cost	Increases DBO
Past service cost (arising from plan amendment or curtailment)	P&L — immediately (no spreading)	Can be positive (benefit improvement) or negative (curtailment)
Net interest cost (= net DB liability × discount rate)	P&L — finance cost	Reflects time value of money
Actuarial remeasurements (experience adjustments + assumption changes)	OCI — never recycled to P&L	Demographic and financial assumption changes

Projected Unit Credit Method: Key actuarial assumptions include: discount rate (based on high-quality corporate bond yields in an active market, or government bond yields where no deep market exists), salary growth rate, employee turnover, mortality rates, and expected retirement age. Changes in assumptions give rise to actuarial gains and losses — recognized in OCI, never recycled.

Past Service Cost — Frequently Tested: Under IAS 19 (post-2011 amendment), past service costs are recognized immediately in P&L on the date of the plan amendment or curtailment. There is no longer any corridor approach or spreading over vesting periods.

Always use high-quality corporate bond rate as discount rateNever recycle actuarial remeasurements from OCI to P&LAlways recognize past service cost immediately in P&L

IAS 21

The Effects of Changes in Foreign Exchange Rates

Key Distinction: Monetary items (cash, receivables, payables, loans) are retranslated at the closing rate. Non-monetary items measured at historical cost are translated at the historical rate — no retranslation, no exchange difference.

Transaction Date Recognition and Year-End Retranslation

Item Type	Initial Recognition	Year-End	Exchange Difference
Monetary items	Spot rate at transaction date	Closing rate	P&L
Non-monetary (cost model)	Historical rate	No retranslation	None
Non-monetary (FV/revaluation model)	Spot rate at transaction date	Rate when FV was determined	OCI (for IAS 16 items); P&L (for IAS 40/41 items)

Revaluation Model & IAS 21 Interaction: Where an entity holds a revalued non-monetary asset denominated in a foreign currency, the exchange difference is embedded within the revaluation movement. It must NOT be separated and recognized as a standalone exchange gain or loss in P&L — the entire movement (including the currency element) is recognized in OCI as part of the revaluation surplus. This is a frequently examined and commonly misapplied interaction.

Translation of Foreign Operations

• Assets and liabilities: Translated at the closing rate
• Income and expenses: Translated at the rate at the transaction date (or average rate as a practical approximation)
• Exchange differences: Recognized in OCI within the translation reserve (foreign currency translation reserve — FCTR)
• The cumulative translation reserve is recycled to P&L on disposal of the foreign operation

Monetary item → closing rate → P&L differenceNon-monetary (cost) → historical rate → no differenceNon-monetary (FV/IAS 16) → FV date rate → OCIForeign operation → closing rate (B/S), transaction rate (P&L) → OCI (FCTR)

IFRS 9

Financial Instruments

Core Principle: Financial assets are classified based on the entity's business model for managing them AND the contractual cash flow characteristics of the instrument (SPPI test — Solely Payments of Principal and Interest).

Financial Assets — Classification (Debt Instruments)

Category	Business Model	SPPI Test	Measurement & Gains/Losses
Amortised Cost	Hold to collect contractual cash flows	Passes	Interest income in P&L via effective interest method; FV changes not recognized
FVTOCI (Debt)	Both hold to collect AND sell	Passes	Interest in P&L; FV changes in OCI; cumulative OCI recycled to P&L on disposal
FVTPL	Other / hold to sell / trading	Fails or not applicable	All FV changes (including interest) in P&L

Financial Assets — Equity Investments

• Default: FVTPL — all gains/losses in P&L; transaction costs expensed immediately
• Irrevocable election (on initial recognition, for non-trading instruments only): FVTOCI — gains/losses in OCI; NEVER recycled to P&L; dividends still recognized in P&L; no impairment assessment required

Critical Distinction — Debt vs. Equity OCI: For debt instruments at FVTOCI, gains/losses in OCI ARE recycled to P&L on derecognition. For equity instruments designated at FVTOCI, gains/losses in OCI are NEVER recycled to P&L. This distinction is frequently tested.

Financial Liabilities — Classification

• Default: Amortised Cost using the effective interest method
• Fair Value Option: Designate at FVTPL if it eliminates or significantly reduces an accounting mismatch, or the group of liabilities is managed on a fair value basis. Changes in own credit risk recognized in OCI (not recycled)
• Derivatives: Always FVTPL

Derecognition

• Financial assets: Derecognize when contractual rights to cash flows expire, OR when the asset is transferred AND substantially all risks and rewards have been transferred to the transferee. If neither transferred nor retained → assess control
• Financial liabilities: Derecognize when the obligation is discharged, cancelled or expires
• Substantial modification test (liabilities): If the PV of new cash flows under new terms differs by ≥ 10% from the PV under original terms (using the original EIR) → substantial modification → derecognize old; recognize new at FV

Expected Credit Loss (ECL) — Impairment Model

Stage	Condition	ECL Allowance	Interest Revenue
Stage 1	No significant increase in credit risk since initial recognition	12-month ECL	On gross carrying amount
Stage 2	Significant increase in credit risk (SICR), but not credit-impaired	Lifetime ECL	On gross carrying amount
Stage 3	Credit-impaired (objective evidence of default)	Lifetime ECL	On net carrying amount (gross minus ECL)

• ECL = PV of (Probability of Default × Loss Given Default × Exposure at Default)
• Forward-looking information must be incorporated (not solely historical loss rates)
• Trade receivables and contract assets: Simplified approach — always recognize lifetime ECL without stage assessment. Provision matrix approach is permitted
• ECL is recognized as an allowance account (contra to the asset) — not a direct write-off unless the asset is actually written off

Hedge Accounting

Qualifying Criteria

• Formal documentation at inception: risk management objective, hedging instrument, hedged item, and how effectiveness will be assessed
• An economic relationship exists between the hedging instrument and the hedged item
• The effect of credit risk does not dominate the hedge relationship
• The hedge ratio is consistent with the actual quantities used for risk management

Types of Hedges

Type	Hedged Item	Effective Portion	Ineffective Portion
Fair Value Hedge	Exposure to changes in FV of a recognized asset/liability or firm commitment	Both instrument and hedged item adjusted to FV — gains/losses in P&L (offsetting)	P&L immediately
Cash Flow Hedge	Exposure to variability in future cash flows (including forecast transactions)	Effective gain/loss in OCI (cash flow hedge reserve)	P&L immediately
Net Investment Hedge	Currency risk in a net investment in a foreign operation	OCI — recycled to P&L on disposal of the investment	P&L immediately

Standard Links: IFRS 9 ↔ IFRS 7 (financial instrument disclosures) · IFRS 9 ↔ IAS 32 (presentation — compound instruments, offsetting) · IFRS 9 ↔ IFRS 13 (fair value measurement inputs) · IFRS 9 ↔ IAS 21 (foreign currency monetary items)

IAS 28

Investments in Associates and Joint Ventures

Significant Influence: The power to participate in the financial and operating policy decisions of the investee — but not control or joint control. Presumed at 20–50% ownership (rebuttable). Indicators include board representation, material intercompany transactions, interchange of managerial personnel, and provision of essential technical information.

The Equity Method

• Investment initially recognized at cost
• Subsequently adjusted for: investor's share of post-acquisition profits/losses (P&L), share of OCI, and dividends received (which reduce the carrying amount of the investment)
• Investor's P&L: includes its share of the associate's profit or loss
• Investor's OCI: includes its share of the associate's OCI items
• Goodwill embedded in the investment is not separately tested — the entire investment carrying amount is tested as a single asset under IAS 36

Upstream and Downstream Transactions

Direction	Description	Treatment
Upstream	Associate sells goods to the investor (parent)	Eliminate unrealized profit to the extent of the investor's interest (% held)
Downstream	Investor sells goods to the associate	Eliminate unrealized profit to the extent of the investor's interest (% held)

Losses in Excess of Investment

• Recognize losses until the investment (and any long-term interests that form part of the net investment) is reduced to nil
• Further losses are recognized as a liability only when the investor has a legal or constructive obligation to fund the associate beyond the equity investment

IFRS 11

Joint Arrangements

Definition: An arrangement over which two or more parties have joint control — where decisions about relevant activities require the unanimous consent of all parties sharing control.

Classification — Two Types

	Joint Operation	Joint Venture
Typical structure	Usually no separate legal entity; parties have direct rights to assets and obligations for liabilities	Structured through a separate legal entity with its own assets and liabilities
Rights/obligations	Rights to assets and obligations for liabilities directly	Rights to the net assets of the entity only
Accounting method	Each party recognizes its own share of assets, liabilities, revenues and expenses line by line	Equity method per IAS 28

No Proportionate Consolidation: A joint venture structured through a separate entity must be accounted for using the equity method — proportionate consolidation is not permitted under IFRS 11. The legal structure and the substance of the contractual arrangements together determine classification; a separate legal entity does not automatically make the arrangement a joint venture.

IFRS 3

Business Combinations

Core Principle: All business combinations are accounted for using the acquisition method. The acquirer recognizes the identifiable assets, liabilities and contingent liabilities of the acquiree at their fair values at the acquisition date.

Goodwill Calculation

Goodwill = Purchase Consideration (at FV) + Fair Value of NCI at acquisition date − Fair Value of Net Identifiable Assets acquired (FVNA)

NCI Measurement — Two Methods (choice per acquisition)

Method	NCI Measured At	Effect on Goodwill
Full Goodwill Method	Fair value of NCI (includes NCI's share of goodwill)	Goodwill includes both parent's and NCI's share → higher goodwill and higher NCI equity
Partial Goodwill Method	NCI's proportionate share of the acquiree's net identifiable assets	Goodwill reflects only the parent's share → lower goodwill and lower NCI equity

Bargain Purchase

• If the goodwill formula produces a negative result → this is a bargain purchase (negative goodwill)
• Before recognizing a gain: reassess and verify all identifiable assets, liabilities, consideration and NCI have been correctly identified and measured
• If still negative after reassessment → recognize the excess as a gain in P&L immediately

Consideration Transferred

• Measured at fair value at the acquisition date — includes cash, shares issued (at FV on acquisition date), and contingent consideration
• Contingent consideration: Recognized at FV at acquisition date. Subsequent changes: if classified as equity → not remeasured; if classified as a financial liability → remeasured at FV through P&L at each reporting date

Acquisition-Related Costs

• Direct acquisition costs (professional fees, due diligence, legal fees) → expensed in P&L
• Costs of issuing debt instruments → deducted from the carrying amount of the liability (effective interest method)
• Costs of issuing equity instruments → deducted from equity (share premium)

Measurement Period: Provisional fair values may be adjusted retrospectively within 12 months of the acquisition date if new information comes to light about facts and circumstances existing at the acquisition date. Adjustments restate goodwill. After 12 months → all adjustments recognized through P&L.

IFRS 10

Consolidated Financial Statements

Core Principle: An investor controls an investee — and must consolidate — when it is exposed, or has rights, to variable returns from its involvement with the investee AND has the ability to affect those returns through its power over the investee.

Definition of Control — Three Elements (ALL required simultaneously)

Element	Description
Power	Existing rights that give the investor the current ability to direct the relevant activities of the investee (those that significantly affect the investee's returns)
Exposure to variable returns	The investor's returns from involvement with the investee can vary — positively or negatively (dividends, residual interests, economies of scale, credit risk)
Linkage	The investor uses its power to affect the amount of its returns from the investee

Consolidation Procedures

• Combine assets, liabilities, equity, income, expenses, and cash flows of parent and subsidiaries line by line
• Eliminate all intragroup balances, transactions, income and expenses in full
• Eliminate unrealized profits and losses arising from intragroup transactions
• Uniform accounting policies: Adjust subsidiary accounts to parent's accounting policies before consolidation
• Reporting date alignment: All entities use the same reporting date; if unavoidable, maximum gap of three months, adjusting for significant intervening events

Non-Controlling Interests (NCI)

• Presented within equity in the consolidated SOFP, separately from the parent shareholders' equity
• NCI's share of profit or loss and OCI presented separately on the face of the consolidated P&L and OCI statements
• Losses continue to be allocated to NCI even when this results in a negative (deficit) NCI balance

Common Pitfall — Majority Shareholding ≠ Control: An investor can control another entity with less than 50% of voting rights if it has practical control (e.g., widely dispersed remaining shareholding). Conversely, holding >50% does not automatically constitute control if rights are purely protective or subject to contractual restrictions that limit ability to direct relevant activities.

Foundation

Conceptual Framework for Financial Reporting

Status: The Conceptual Framework is NOT an IFRS Standard. Where a conflict exists between the Conceptual Framework and a specific IFRS Standard, the Standard always prevails.

Definitions of the Elements

Element	Framework Definition
Asset	A present economic resource controlled by the entity as a result of past events
Liability	A present obligation of the entity to transfer an economic resource as a result of past events
Equity	The residual interest in the assets of the entity after deducting all its liabilities
Income	Increases in assets or decreases in liabilities that result in increases in equity, other than those relating to contributions from equity holders
Expenses	Decreases in assets or increases in liabilities that result in decreases in equity, other than those relating to distributions to equity holders

Framework vs. Individual Standards — Critical Distinction: "Control" appears in the Framework as part of the definition of an asset. It is NOT carried forward as a recognition criterion within individual standards such as IAS 16 or IAS 38. Recognition criteria within standards are typically: (1) probable future economic benefits, and (2) reliable measurement. These two must not be conflated with the Framework-level element definition.

Qualitative Characteristics of Useful Financial Information

Fundamental Characteristics	Enhancing Characteristics
Relevance — including materiality (information is material if omitting, misstating or obscuring it could influence decisions)	Comparability — consistent across periods and entities
Faithful Representation — complete, neutral and free from error	Verifiability — different knowledgeable observers could reach consensus
	Timeliness — available to decision-makers in time to influence their decisions
	Understandability — classified, characterised and presented clearly and concisely

Measurement Bases

• Historical cost — entry price; reflects what was paid
• Current value bases: Fair value (exit price, IFRS 13); Value in Use / Fulfilment value (entity-specific PV of cash flows); Current cost (current entry price for equivalent asset)
• Choice of measurement basis is guided by which provides the most useful information to users given the nature of the asset/liability

Fundamental Ethical Principles (IESBA Code)

• Integrity: Honest and straightforward in all professional and business relationships
• Objectivity: Do not allow bias, conflict of interest or undue influence of others to override professional judgement
• Professional Competence and Due Care: Maintain professional knowledge and skill; act diligently in accordance with applicable technical and professional standards
• Confidentiality: Respect the confidentiality of information acquired; do not disclose without proper authority or legal duty
• Professional Behaviour: Comply with relevant laws and regulations; avoid any action that discredits the profession

⚑ Exam Trap

Always apply in sequence: (1) Does the item meet the Framework definition of an asset or liability? (2) Does it meet the standard-specific recognition criteria? Many marks are lost in professional exams by conflating these two separate hurdles. An item may meet the definition but fail recognition — and vice versa cannot arise (you cannot recognize something that fails the definition).

IFRS 18

Presentation and Disclosure in Financial Statements

Status: IFRS 18 is effective from 1 January 2027, replacing IAS 1. It improves comparability of financial statements by requiring standardized income statement categories, mandatory subtotals, and regulated disclosure of Management Performance Measures (MPMs).

Three Mandatory Income Statement Categories

Category	Content
Operating	Revenue and expenses from the entity's main business activities — all items not classified as investing or financing
Investing	Returns on investments in associates, JVs and unconsolidated structured entities; income on cash and investments not integral to operations (e.g., interest on surplus cash)
Financing	Finance costs on liabilities (e.g., interest expense on borrowings, lease interest); changes in FV of financial liabilities measured at FVTPL due to own credit risk

Mandatory Subtotals on the Face of the Income Statement

• Operating profit or loss
• Profit or loss before financing and income tax
• Profit or loss before income tax
• Profit or loss from continuing operations
• Profit or loss (total)

Management Performance Measures (MPMs)

MPMs — Permitted but Regulated: IFRS 18 does not prohibit MPMs. Entities may continue to use entity-specific performance measures (such as Adjusted EBITDA, Adjusted Operating Profit) to communicate performance. However, MPMs must be disclosed in a single dedicated note — not on the face of the financial statements — and must be accompanied by: (i) a description and reason for use; (ii) a reconciliation to the most directly comparable IFRS-defined subtotal; and (iii) the tax and NCI effects of each MPM.

Expense Classification

• Entities choose: nature of expense (materials, staff costs, depreciation) OR function (cost of sales, distribution, administration) OR a mixed presentation
• If function is chosen → nature information (staff costs and depreciation at minimum) required in the notes
• P&L is the default location for all income/expenses unless a specific IFRS requires OCI recognition (e.g., IAS 16 revaluation gains, IAS 19 actuarial remeasurements)

⚑ Exam Tip

EPS (IAS 33) is calculated on profit or loss — OCI items do NOT affect EPS. Restatement of comparative financial statements is required when an entity changes its classification of income or expenses between operating, investing and financing categories.

IFRS S1

General Requirements for Sustainability-related Financial Disclosures

Objective: Require entities to disclose information about sustainability-related risks and opportunities that could reasonably be expected to affect the entity's cash flows, access to finance, or cost of capital over the short, medium or long term.

Four Disclosure Pillars

Pillar	What is Disclosed
Governance	How the entity's governing body oversees, and management manages, sustainability-related risks and opportunities; roles, responsibilities and accountability
Strategy	How identified sustainability risks and opportunities affect the entity's business model, value chain, strategy, and financial position; scenario analysis; resilience of strategy
Risk Management	Processes used to identify, assess, prioritize, and monitor sustainability-related risks and opportunities; how these integrate with the entity's overall risk management
Metrics and Targets	Performance metrics and quantitative targets used to measure, monitor and manage material sustainability-related risks and opportunities; progress against targets

Connected Information: IFRS S1 requires sustainability disclosures to be made in the same report as the related financial statements, enabling users to understand the connections between sustainability information and financial information.

IFRS S2

Climate-related Disclosures

Scope: Requires disclosure of climate-related risks and opportunities that could reasonably be expected to affect the entity's cash flows, access to finance, or cost of capital. Built on the four pillars of IFRS S1 with climate-specific requirements.

Physical vs. Transition Risks

Risk Category	Sub-type	Examples
Physical Risks	Acute	Extreme weather events: hurricanes, floods, wildfires
	Chronic	Sea level rise, rising average temperatures, shifting precipitation patterns
Transition Risks	Policy and legal	Carbon pricing, emission trading schemes, litigation
	Technology	Shifts to lower-emission technologies; stranded asset risk
	Market and reputational	Changing customer/investor preferences; impact on brand value

GHG Emissions Disclosure — Scope 1, 2 and 3

• Scope 1: Direct GHG emissions from sources owned or controlled by the entity
• Scope 2: Indirect GHG emissions from the generation of purchased/acquired electricity, heat or steam
• Scope 3: All other indirect GHG emissions occurring in the entity's upstream and downstream value chain (supply chain and product use by customers). Required if material — disclosure of Scope 3 may involve significant estimation uncertainty

IFRS 19

Subsidiaries without Public Accountability: Disclosures

Purpose: Allows eligible subsidiaries to apply reduced disclosure requirements while retaining full IFRS recognition, measurement and presentation requirements. This reduces the disclosure burden for non-public group entities without compromising the quality of information at the consolidated group level.

Eligibility Criteria

• The entity is a subsidiary (not a parent, associate or joint venture)
• No public accountability: equity or debt instruments are NOT traded in a public market AND the entity is NOT a bank, insurer or other financial institution regulated for the purpose of holding assets for a broad group of outsiders
• An ultimate or intermediate parent produces IFRS-compliant consolidated financial statements that are available for public use and include the subsidiary

Key Rules and Limitations

• IFRS 19 is a disclosure-only standard: it does not modify recognition, measurement or presentation requirements — full IFRS Recognition and Measurement applies
• IFRS 19 does NOT reduce disclosure requirements for: IAS 33 (Earnings Per Share), IFRS 8 (Operating Segments), or IFRS 17 (Insurance Contracts)
• The election to apply IFRS 19 must be explicitly disclosed in the entity's financial statements

SMEs

IFRS for Small and Medium-Sized Entities

Scope: For entities that do not have public accountability AND publish general purpose financial statements for external users. Eligibility is determined by a test of public accountability — NOT by quantitative size thresholds. Individual jurisdictions decide whether to permit or require IFRS for SMEs for eligible entities.

Key Simplifications vs. Full IFRS

Area	Full IFRS	IFRS for SMEs
R&D costs	Research expensed; development capitalized if all 6 PIRATE criteria met	All R&D expensed as incurred (no capitalization of development costs)
Goodwill & indefinite-life intangibles	Annual impairment test; no amortization	Amortized over useful life (max 10 years if not determinable); no indefinite-life category
PPE and intangible assets	Cost model or revaluation model	Cost model only — revaluation model not permitted
Investment property	Fair value model or cost model	FV model if reliably measurable without undue cost/effort; otherwise cost model
Financial instruments	Full IFRS 9 classification, SPPI test, ECL model	Simplified — amortised cost or FV; incurred loss model (not ECL forward-looking model)
Borrowing costs	Capitalize on qualifying assets (mandatory)	All borrowing costs expensed as incurred

Topics Omitted from IFRS for SMEs

• Interim financial reporting
• Segment reporting (IFRS 8 equivalent)
• Earnings per share (IAS 33 equivalent)
• Insurance contracts (IFRS 17 equivalent)
• Assets classified as held-for-sale (IFRS 5 equivalent omitted)

Update Cycle

The IFRS for SMEs Standard is reviewed approximately once every three years, significantly reducing the reporting burden relative to full IFRS which is subject to more frequent amendments and new standards.

⚑ Exam Trap

A listed (publicly traded) entity can NEVER use IFRS for SMEs — regardless of its actual size or operations. Public accountability (listing status, or being a financial institution regulated to hold public assets) is the sole disqualifier. Size thresholds do not feature in the IFRS for SMEs eligibility criteria whatsoever.