ACCA DIPLOMA IN INTERNATIONAL FINANCIAL REPORTING BEP Learning Medias an ACCA Approved Content Provider. [nis means we work closaly with ACCA to ensure this Study Text contains the information you need to pass your exam, In this Study Text, which has been reviewed by the ACCA examining team, we. ‘Inoue reference othe eleva JFRS Azoourtng lancards ‘+ Diseus the best stralegis fo slung fo yur exars Highlight he most important elarant nthe slabs are Ky kls yo all iat ‘+ Signpost how each chanter links tothe silaous and the study quid Prowse fas pins artting ha ic psd yu othe cam ++ Enphasise kay points iy regular fast forward summaries 4+ Testyour ouedge ot wna! yoo shir i Dl Outre ‘+ Bramine your understanding in ur Practice Question Bank + Raderance ail the important ops ir olin FOR EXAMS IN DECEMBER 2023 AND JUNE 2024 “Loo4H4 Ss A >< moa BPP EARNING MEDIANinetaenth eton June 2028 SBN 9701 0365 0579.8 (Previous /S8% 9781 S097 4711 5) ‘/SEN 978) 0955 O66 1 Bitch Library Cataloguing in-Publiction Data A catalogue record forts book lava trom the Beh Library Published by BPP Learning Media Lt EPP lous, aline Place “42-144 Userioge Read London WI2 8A leamingmedatop.com Print inthe United Kingdom ‘Your earning mates, pubished by BEY Leeming ‘Macia Ld, ee printed on paper obtained fram teceable sustainable eaures. lights reserved. Mowat of (4 pabliation may oe rapreduesd, tered in etraval syste or transmit, ‘any form of by any meen, electonc, mechanical, batovopvina recording or otherwise, without to prior writ ptmision of SPP Loarning Mada Lid [HP Lert Mec ie grit th AS8 for permission to eproduce extracts trom IFRS Stender, AS Standard, SICard IFRIC. Ths publeation contains onytight © material are tadamacks ofthe IFAS. Foundation Al rights reserves, Used unr icense from. the IRS Foandstion®. Reprodueten and use rights ate strictly med. Fer more information zoout the IS Founsa end rghs io use ks rai pase is Wo IFRS or Dicelamer: To the extant permitted by appcabie law tne Board ana tn FS Fourtionaxpresh alscaims all laity howsoever afsing from this publication or any {ransition tnereof whether in contact, tortor otherwise (ineluding, but oot limited to, Hab fer any negigent actor ‘eission to any parson in cespat af ary cms or losses 1 any natura including dc. edict inciartalor consequential loe,punive eamanes, pares or corte Information contained in tis publication doesnot censtture ‘avg and should ot be substus for Ue Services ofa appropriately ualed profess onal Paring Mac te 2028 Aneto about copyright Dear Customer What does theta © mean and why does it mattr? You markeeading BFP bocks, courte materalé and &= Jeeming materials donot write and update herseves,Peoole write tha on thal own tena or 2 employes of an rsunisaion that inves nth ctv, Copyright law protcte ‘hei lvlneods dos so by creating rights ove the Use of ‘the conten, toe of wopytgh sw omar Wilts wel Ung criminal tence in some jection, tis potently a serious breach ol professional tics. Wah currant technology. things might seem it hazy but, basically. without the express permission of BPP Learing Medi + Photocopying our mete isa bree ot capyight Scanning ipcasingo: conversion of our digital rateale inte dren le ferme, uploading thee to ‘tapebook or malig hem to your Tends is @ breach 2 copyright "You zan, of course, sal yur boos, inthe fam in wich you have bought:hem — once you have nse with them, (this ‘airto your allow stucants? Wa update fora reason ) Passe nol the eproduct ae sold or single user cenes basis: we do notsuapy wrlack cos to pope whe have hough thar secondhand, ‘And wot obouteusid the UR® DP Leening Media aries to ‘aka our meets avalabie a prices students cn allra by loca printing arargemorts, pricing polis and partnersips which are lal sed a cur web. Ati minority lance ‘his and ince in cimlne acti a egal petacopying fur material er supgerting cgensations tha do. they 2 iegatly an uretlely in on area, can you relly rust tem? Copyright© IFRS Foundation Allegis reserved, Reproduction and use rights a siriety limites: No par of t's pubicaion may be vanslate. reprined 0 roproduced or used in any form ether in whole or npart By any electron, mechanical or ther means, ow kon or hate invented lating photocopying and recording, orn any information strage anc reteval syst, without prior garmiscion in wring fom the IFRS Foundation, Contact ‘the IFRS Foundation for turhar deta, The Foundation has rade marks registered around the world (Trade Yarks) including 1AS@, |ASBS”.FRICO, "FRSC ‘the IFRSCDlono, IFAS for SMES’ IFRS for SMEs‘ lo. the Hexagon Device, 'Istenaional Farcial Reporting Standards, NIFB and SIC®, Futter eas ol the Foundation's Trade Marks are walla from ae Licansor on request BEEIFRS MFRSQ BPP TARNIAG MEDIA Contents Introduction Helping you to pass Chapter features ‘Studying for the Diplam in International Financial Reparting Sytlabus and Study Guide Exam success skils Approaching a computer-based exam Part A International sources of authority 4 The regulatory tamework and ethies 2 The Conceptual Framework Part B Elements of financial statements Revenue ‘Accounting for tangible non-current assets Impairment of assets Aceounting for leases Intangible aesets and goodwill Provisions, contingent lables and contingent assets 9 Employee benefits 40 Financial instruments 11 Accounting for taxation 12 Foreign currency transactions 49. Other assets: Aariculture, mineral resources and inventories 44 Share-based payment Part C Presentation of financial statements and additional disclosures 15 Presentation of published financial statements 16 Reporting finanelal performance 47 Earnings per share 18 Related party disclosures and segment reporting 19° Reporting for small and medium-sized entities Part D Preparation of external financial reports for combined entities and joint arrangements 20 Constitution ofa group 21 Tho coneolidated statement of financial pesiton 22 The consolidated statement of profit or loss and other compreliensive income 23 Accounting for associates, 24 Accounting for joint arrangements: Practice Question Bank Practice Answer Bank Bibliography List of Key Terms and Index Review form Page vii xi xvi 39 59 69 103 125 139 153 i” 227 247 257 275 295 aig 935 351 365 379 380 433 459 479 485 509 581 555Helping you to pass A UTE Rea ae nace a ‘As an ACCA Approved Content Provider, BPP Learning Media gives you the opportunity to use study ‘materials reviewed by the ACCA exeminina team. By incornoratina the examinina team's comments and suggestions regarding the dapth and breacth of syllabus coverage, the BPP Learning Media Study Taxt provides excellent, ACCA-approved support for your studies. These materials are reviewed by the ACCA examining team. The objective of the review is to ensure that the ‘material properly covers the syllabus and study guide outcomes, used by the examining team in setting the ‘exams, Inthe appropriate breadth and depth. The review does not ensure that every eventuality, mination ‘or application of examinable topics is addressed by the ACCA Approved Content. Nor does the review comprise ¢ detailed technical check of the content as the Approved Content Provider has its ov quality assurance processes In pace In this respect. ‘Studying can be a daunting prospect, particularly when you have lots of other commitments. The differant features of the Stidy Text, the purposes of which are explained fully on the Chapter features page, wil hoip you whilst studying and improve your chances of exam success. Developing exam awareness Our Study Texts are completely focused on helping you pass your exam. Our advice on Studying for the Diploma in Intemational Financial Reporting (DiplIFR) cutlines the content of the exam, the necessary skills you are expected to be able to demonstrate and any brought forward knowledge you are expected to have, Exam focus points are included within the chapters to highlight when and how specific topics were examined, ‘or how tney might be examined in the tuture,. Lote Testing yourself helps you develop the skills you need to pass the exam and also confirms that you can recall what you have learnt We include Questions ~ lots of them ~ both within chapters and in the Practice Question Bank, as well as Quick Quizzes at the end of each chapter to test your knowledge of the chapter content, BEY ees oz ‘aebinChapter features Each chapter contains a number of helpful features to guide you thraugh each topie. Topic list Introduction Study Guide Exam Guide En) Examples Key terms Exam focus points EC Ut Hil rtm tlhe BPP eae 9 What you wil be studying inthis chapter and the relevant section numbers, Together with AGCA sylaous references, Puts the chapter content in the context of the syllabus as a whole Links the chapter content with ACCA guidance Highlights how examinable the chapter content is likely to be and the ways in which it could be examined. What you are assumed to know from previous studlesfexams. Summarisas the content of main chapter headings, allowing you to preview and review each section exsily Demonstrate how to apply key knowladge and techniques. Definitions of important concepts that can often eam you easy matks in exams. Wher and how specific topics were examined, or how they may be examined in the future Give you essential practice of techniques covered in the chapter. Aull list of the Fast Forwards includad in the chapter, providing an easy source of review. A quick test of your knowledge of the mi chaoter. topics in the Found at the back of the Study Text with more comprehensive chapter auestions. Cross referenced for easy navigation, Antraductso Studying for the Diploma in International Financial Reporting accountants or graduates, possessing relevant country specific qualifications or work ‘axperlence with an up to date and relevant conversion course, providing practical and detaled knowledge of Ure hey Ileiceationeal Financial Reputiny Standards (IFRSS Accounting Standards) and how Uney ave interpreted and applied Objectives ‘On completion ofthe DipIFR candidates should be able to ‘© Understand and explain the structura of the international professional and conceptuel framework of financial reporting. + Apply relevant International Financial Reporting Standards (IFRS Accounting Standards) to key elements of financial statements, ‘+ Identity and apply disclosure requirements for entities relating to the presentation of financial statements and notes. © Prepare group financlel statements (excluding statements of cash flows for groups) including subsidiaries, associates and joint arrangements. Position of the course within the overall portfolio of ACCA's qualification framework The DipIFR bulids on the technical and/or practical knowledge acquired from recognised country specific. accountancy qualifications or relevant work expetience. The syllabus introduces the candidate to the wider international framewerk of accounting and the eystom of standard setting, The DiplFR concentrates on the application of conceptual and technical financial knowledge that candidates have already obtained to the specific requirements of financial reporting under IFAS Accounting Standards, The DiplFR also provides essential international financial raprting knowledge and principles that will equip ‘candidates to operate in an increasingly global market place, The prer2quisite knowledge for DipIFR can either come from a country specific crofessional qualification, from possessing a relevant degree (giving exemptions from Accountant in Business (AB); Management ‘Accounting (MMA) and Finaneial Accounting (FA) and Corporate and Business Law (LW) of the ACCA ‘ualification) and two years’ accounting experience, or by having three years’ full-time relevant accounting experience, supported by an employer's covering letter.G BPP ARNG MEDIA Appreach to examining the syllabus From December 2020 onwards, the DipIFR exam is a computer-based exam (CBE). The examination lasts 3 hours and 15 minutes. Time should be teken to ensure that all the information and exem requirements are properly read and understood. Candidates are encouraged to plan their answer to each requirement before writing their final answer script. Careful reading and planning helps to ensure all requirements are correctly addressed, Most questions will contain a mix of computational and discursive elements. All questions are compulsory. ‘Al questions will attract 25 marks. Question one will involve the preparation of one or more of the consolidated financial statements that are exeminable within the syllabus. This question will often include issues that will need to be addressed prior to performing the consolidation procedures. Generally these {issues will relate to the financial statements of the parent prior to their consolidation. Question two will often be related to a scenario in which questions arise regarding the appropriate accounting treatment and/or disclosure of a range of issues. In this question, candidates may be asked to comment on ‘managements chosen eecounting treatment and determine 2 mote appropriate one, based on circumstances described in the question. This question wil also contain an ethical and professional component related to the accounting treatment that is being examined. This aspect of question two will have & mark ceiling of 5 marks. Question three will usually focus more specifically on the requirements of one specific IFRS Accounting ‘Standard, This question will typicelly contain 2 mixture of explanation of the principles underpinning the standard and practical application of those orincipes. Question four will usually consist of a scene in which the candidate is given @ series of queries from a superior relating to the financial statements. The requirement will usually be to answer each query. The ‘queries will normally be Independent of each other. It wil be rare for the queries In question four to require a ‘numerical answer, ‘Some IFAS Accounting Standards are very detailed and complex. in the DiplFR exam candidates need to be ‘wars of the principice and koy oloments of theca Standards, Candidatos will aco bo axpoctod to have an ‘appreciation of the background and need for international financial reporting standards and issues related to harmonisation of accounting in a global context. Finally, the syllabus contains outcomes relating to the demonstration of appropriate digital and employability skills in preparing for and taking the DiplFR examination. This includes being able to interact with different ‘question item types, manage information presentad in digital format and being able to use the relevant functionality and technology to prepare and present response options in a professional manner. These skils are specifically developed by practicing and preparing for the DiplFR exam, using the learning support Content for computer-based exarns available vis the ACCA Website and will need to be demonstrated during the live exam, The overall pass mark for DiplFR is 50%, Additional information Candidates need to be aware that the exam yaar will run from 1 September tothe following 31 August. Tha cut-off rating to eeaminable documents will ha sat 12 months hefore the start of tha yaar Knowledge of the new examinable regulations issued by 31 August will be required in examination sessions being held in the following calendar year. Documents may be examinable even ifthe effective date is in the future, The documents listed as being examinable are the latest that were issued prior to 31 August 2022 and will be ‘examinable in the December 2023 end June 2024 examination sessions This Study Text is for exams up to and including June 2024, AntraductSyllabus and Study Guide The complete syllabus and study guide can be found by visiting the exam resource finder on the ACCA ‘website: wr. accaglobal.com/uk/en/student/exam-support-resources.ntmt Examinable Documents IAS 4 Pracantation of Financial Satemants Tas 2 Inventories IAS E ‘Accounting Policies, Changes in Accounting Estimates and Errors IAS 10 Evenis After the Reporting Patiod IAS 12 Income Taxes TAS 18 Property, Plantand Equipment 1S 19 Employee Benefits 1aS 20 “Accounting for Governinent Granis and Disclosure of Government Assistance IAS 21 The Effects of Changes in Forelgn Exchange Rates iaS 23 Borrowing Costs IAS 24 Related Pariy Disclosures iS 7 Separate Financial Statements IAS 28 Investments in Associates and Joint Ventures IAS 82 Financial Instruments: Presentation 1AS 53 Earnings per Share 1AS 36 Impairment of Assets 1AS 37 Provisions, Gonlingent Liabilities ad Contingent ASSIS IAS 58 Intangible Assets IAS 40 Investment Property as 41 Agriculture IFRS 4 First-time Adoption of International Financial Raporting Standards IFRS 2 Share-based Payment IFRS Business Combinations (FASS Non-current Assets Held for Sale and Discontinued Operations IFRS 6 Exploration for and Evaluation of Mineral Resources IFRS? Financial instruments: Disclosures IFRS Operating Segments Ew Finanelal nstramonte IFRS 10 Consolidated Financial Statements IFRS 14 Joint Arrangements IFRS 12 Disclosure of interests in Other Entities iFRS 13 Fair Value Measurement TFRS 15 Revenue from Contracts with Customers IFRS 18 Leases IFRS for SMES | IFRS Tor Small and Meclum Sized Entities Accounting Standard =... 9 BPP ANI *aebinGey Cees The Conceptual Framework for Financial Reporting ‘Handbook ofthe International Code of Ethics for Professional Accountants (2020) — Part 4 (Sections 100, 110-115 and 120) BPP LPARNING MeviAAnalysis of past exams The analysis below shows the elements of the syllabus which have been examined under the current syllabus for the past five years, ea ee ec} Ce eee ee International sources of authority £—_| tainon as nenosiay nameoaie —) | TF 2 | Tw teneepial Frmawork enol lec lenis 3 Revenue ¥ |¥ e 4andS | Accounting tor tangible non-current assets, v viele ly ie ahd ghar eanp eam te Impairment of assets: Tecniig fas r= Tange sts and goad Provisions, contingent lizbilities and Fie le conten ats 9 Employes benefits ae v v 7 10 Financial instruments: v wl le [4 lv fy [7 11 | Accounting for taxation v Ww ‘Foreign currency iranskation € ¥ Pm ¥ 73. | Other assets: agriculture, mineral resources. | ~ vive iy 14 ‘Shar2-based payment ¥ vi¢ v Presentation of financial statements and onal dsclosues 15 Prasantation of published financial statements ¢ ¥ v 16 _ | Reporting financial performance ¥ v |v v v 7 Eamings per share v ud * 18 ‘Related party disclosures and segment v ¥ v gain 19 | Revorting for small and medium-sized entities ¥ | Pripénitonsteotesattinntalipotste | | | | | || 1 1 combined entitles and joint arrangements a ‘The consolidated statement of financial v[ele le - v pat 22 ‘The consolidated statement of profit or loss v viele 23 | Accounting for associates v v v 24 | Ascounling for joint arrangamants v * Exam was held in September 2020 rather than June 2020 due to Covid-19. BPP ZARNING ‘neinExam success skills Passing the DiplFR exam requires more than applying sylabus knowledge; it also requires the development of excellant exam technique through question practic. We considar the following six skills to be vital for exam success. Exam success ski Ouestians in tha exam will present yo with a lat af information The skill is how you hana this information to make the best use of your time. The key is determining how you will approach the exam, and then actively reading the questions. Managing information Advice on developing this skill Approach To avoid being overwhelmed by the quantity of information provided, you must take an active approach to reading each question. Active reading means focussing on the question's requirement frst, highlighting key verbs such as ‘prepare’, comment , ‘explain’ ‘discuss’, to ensure you answer the question properly. Then read the rest of the question, and as you now have an understanding of what the quastion requires you lo do, you cat highlight important and relevant information, and use the scratchpad within the exam software to make ‘notes of any relevant technical information you think you will need. The highlighter too! provided jn the toolbar at the top of the exam screen ofters 2 range of colours: ¥ Highlight F strikethrough Remove Highlight This allows you to choose different colours to highlight different aspects to a question. For example, if a ‘question asked you to discuss the pros and cons ot an issue then you could choose a diferent colour for highlighting pros and cons within the relevant section of a question, The strikethrough function allows you to delete arcas of @ question that you have dealt with ~ this can be useful in managing information if you are dealing with numerical questions because it can allaw you to ensure that all numerical areas have been accounted for in your answer You can resize windows within the exam by clicking and dragging on the bottom right-hand corner of the window. This functionality allows you to display a number of windows at the same time, so this could allow you review: ‘© The question requirements and the exhibit relating to that requirement, at the same time; or ‘+ The Window containing your answer (whether a word processing or spreadsheet document) and the exhibit relating to that requirement, et the same time. om vet waaExam success skill 2: Correct interpretation of the requirements The active verb used often dictates the approach that written ansivers should take (eq ‘explain’, “discuss, ‘evaluate’, Its important you identify and use the verb to define your approach, The correct interpretation of the requirements skill means correctly producing only what is being asked for by @ ‘equlrement. Anything not required will not earn marks. ‘Advice on developing thus skill This skil can be developed by analysing question requirements and applying this process: Read the requirement Firstly, read the requirement 2 couple of times slowly and carefully and hiahliaht the active verbs. Use the active verbs to define what you plan to do. Make sure you identity any sub-requirements, ‘You nay lind it useul to begin by copying the requirements Into your chasen ‘response option (eg word processor, in order to form the basis of your answer plan, See Exam success skil 8: Ansiver planning below. Read the rest of the question By reading the requirement first, you will have an idea of what you arc looking out for as you read through the scenario and exhibits. This is a great time saver and means you don't end up having to read the whole question in full twice. You should do this in an active way — see Exam success skill 1: Managing information, Road the requirement again Read the requirements again to remind yourself of the exact wording betore suartiig your answer. This will caplure any rnisinlerpretalion of Ue requitenens ‘or any requirements missed entirely. [tis particularly important to pay attention to any dates you are given in requirements. This is especially the case when, for example, discussing an accounting treatment up toa particular date, No marks will be awarded for discussing the treatment a a different date then that asked for in the requirement Exam success skill 3: Answer planning: Priorities, structure and logic This still requires the plenning of tha key aspects of an answer which accurately and completely responds to the requirement. ‘Advice on developing this skill Everyore will have & preferred siyle for an answer plan. For example, IL anay be lo use Ute Scratet ad IO raw up a mind map or bullet-pointed lists, However, a time-saving approach in a CBE is to plan your answer diteclly in your chosen response option (2g word processor) and then fill out the detail of the plan with your answer. This will save you time spent on creating a separate plan in the scratchpad and then typing up your answer separately - though you could copy and paste between the seratchpad and roopence option if you wantod to do co. The easiest way to start your answer plan is to copy the question requirements to your chosen response aption (eg ward procassor) Tris will allow you to ensure that yaur answer plan addresses all parts af the uestion requirements. Then, as you read through the exhibits, you can copy and paste any relevant information into your chosen response option under the relevant requirement. This approach also has the advantage of making sure your answer is applied to the scenario given, MEDIAg BPP TARNIAG MEDIA Copying and pasting simply involves selecting the relevant information end elther right clicking to access the copy and paste functions, or alternatively using Clil-C to copy and CitFY to paste Exam success skill 4: Efficient numerical analysis This skill aims to maximise the marks awarded by making clear to the marker the process of arriving at Your answer. This ls achieved by laying out an answer such that, even if you make & few ertors, you can. stll score subsequent marks for fllow-on calculations. Its vital that you do not lose marks curely because the marker cannot follow what you have done. Advice on developing this skill This skill can be developed by applying the fallowing pracess: Use a standard proforma working where relevant If answers can be laid out in a standard proforma then always pian to do so, This, will nelp the marker to understand your working and allocate the marks easily. It will alse help you to work through the figures ina methodical and time-effcient way. ‘Show your workings Keep your workings as clear and simple as possible and ensure they are cross- referenced to the main part of your answer. Where it helps, provide brief narrative cexolanations to help the marker understand the steps in the calculation. This means that it mistake is made you do not lose any subsequent marks for follow-on calculations. Keep moving! [tis Important to remember that, in an exam situation, itis dificult to get every ‘number 100% correct. The kay is therefore ensuring you do not spend too long ‘on any single calculation. if you are struggling with a selution then make a sensible assumption, state it and move on. Inthe CBE, you can use the spreadsheet to prepare calculations, If you wish. Ifyou do so, you can make use of fotmulas to help with calculations, instead of using a calculator. For example the ‘su function: =SUM(A1:10) would add 2il the numbers in spreadsheet cells At to A10. You can use the symbol * to calculate a number ‘to the power of.., eg =1.10°2 calculates 1.10 squared — tis is very useful if you need to perform a discounting calculation, It you use the spreadsheet for calculations, make sure the spreadsheet cell includes your formula and not just the final answer, so thet the marker can sae what you have done and can award follow-on marks even iMyou have mad a mistake eariler inthe calculation. Ifyou do decide to use a caloulator instezd, don't just put the final answer into a cell without including your workings ~ make sure you type up your workings as well and cross refer to them in your tinal answer. Exam success skill ‘fective writing and presentation ‘Narrative answets should be presented so that the marker can clearly see the points you are making, presented in the format specified in the question. The skills to provide efficient narrative answers with sufficient breadth of points that answer the question, in the right depth, in the time available on‘Advice on developing this skill Use headings Using the headings and sub-headings from your answer plan wil give your answer structure, order and logic. This will ensure your answer links back to the requirement and is clearly signposted, making it easier for the marker to understand te diferent polnts you wre making. Uniceslining oF making your headings bold will also help the marker. Type your answer in short, but full, sentences Use short, punchy sentenoee with the aim that every sentence should say ‘soneting uilferent and geverate ks. Type in full sentences, suring yout styl is professional Do your calculations first and explanation second Questions sometimas ask for an explanation with supporting calculations. The best approach is to prepare the calculation first but present it on the bottom half of the page of your answer. Then add the explanation before the calculation. Performing the calculation first should enable you to explain what you have done Inthe CBE, this is easy to do — prepare your calculation, then type up your answer above It f you wish, You can use the word processor to type up narrative discussion and the spreadsheet to prepare any calculations. Ifyou de se, make sure you clearly cross reference to your calculation so the marker can follow what you have done. See exam success skill 4 ~ Efficient numerical analysis Exam success skill 6: Good time management This skill means planning your time across all the requirements so that all tasks have been attempted at the end of the 3 houre 15 minutee available and actively chacking on time during yeur exam. Thie ie ee that you can flex yout approach and prioritise requirements which, in your judgement, will generate the ‘maximum marks in the available time remaining, ‘Advice on developing this skill The exam is 3 hours 15 minutes long, which translates to 1.95 minutas per mark. Therefore a 10-mark requirement should be allocated a maximum of 20 minutes to complete your answer before you move on to the next task. At he beginning of a question, work out the amount of time you should be spending on. each requirement and type the time allocation next to the requirements in your answer plan, Keep an eye on the clock ‘Aim to attempt all requirements, but be ready to be ruthless and move on if your answer Is not going as planned. The challenge for many Is sticking to planned timings. Be aware this is difficult to achieve in the early staces of your studies and be ready to let this skill develop over time, If you find yourself running short on time and knovr that a full answer is not possible in the time you have, ‘consider recreating your plan in overview form and then add key terms and details as time allows. If you have done your planning directy in your chosen rasponse option, this should be straightforward to do if you are short of time. Remember, some marks may be available, for example, simply stating a conclusion whieh you dent hava tims tn justify in full, BPP LEARNING NEDIA‘Anote from the examining team The examining team have commented that many students seem to spent too long on question 1 and therefore don’t have enough time to present a good answer to question 4. This is not good exam technique. You are mort likely to gain marks by dadicating an appropriate amount of time to question 4 rather than spending additional time on question 1 and running out of time on question 4. You should aim to follow the advice here for good time management to avoid this issue BPP om. oo MEDIAApproaching a computer-based exam DIpIFR Is examined using a computer -ased exam (CBE). You need to make sure that you know how to use tha ORF software so that you are fully preqared for your exam. tis very Important for you to become familiar with the CBE software. On the ACCA website, there are various CBE resources which you should ensure you access before attempting your real DipIFR exam. {In particular, you should attempt the DipIFR Specimen exam in the CBE practice software, available here: hitps://www.accaglobal.com/uk/en/studentiexam-support-tesources/dipitr-study-resources/cbe- sspecimen-exam. html You should also access the past exams available in the praclice software here: hitps:/)www.accaglobal.com/gb/en/student/exam-support-resources/dipitr-study-resources/past- oxaminatione. html In this section, we will explore how to use the CBE software using syllabus section E: Employability and technology skills as 2 framework, We will also refer to the exam success skills covered in the previous section, Syllabus | information ant ning outcome E1. Use computer technology to effi tly acces ind manipulate rel (CBE tools can be used to support the exam success skill of managing information (exam success skill 1). imtrctiome (1 4) PXele?\ Think Ahead The frst thing you will see when you open 2 CBE is an introduction followed by a series of instructions on how to use the CBE software. On the ACCA website, there is « document which explains the differences in functionality between the CBE specimen and the lve exam: htpsiswww- accaglobal.com/uk/en/student/exam-support-resources/cipitr-study-resources/cbe- specimen-axam htm Tatton $ Spb lege bene BY Dons mene Tein 3 Banemntnne “te hd el = Orr. MEDIA‘Once you have started the CBE and are in 2 question, you should note the various elements of the workspace: + Introductory information (on the right side of the screen) — this usually contains background Information about the company and a lst of tho exhibits that are provided. * Exhibits ~to open an exhibit, cick on the button cn the left side of the soreen, When you click on an suhibit button % naw windnw i apensd containing the evhihit information The avis contain the question scenario, broken dawn into small sections and are necessary for answering the question. Each requirement will only ralate to one exhibit, so to avoid too much clutter on your sorwerl, you stiould oly frye ore exbibit open ata te ‘© Requirement(s)~ the question requirements are opened via the clickable button on the let side of the ceraen. Whan you aliok ths requirement button a new window is opaned aontaining the requirements. ‘+ Raspansa optian(s) —tha raspnsa options ara where you presant yew anwar Far Chisction 4 {you will usually be provided with a spreadsheet only. For the remaining questions, you will usually be provided with both a word processor and a spredsheet, The response options are opened by clicking on the button on the left side ofthe screen. (Once you have opened the requirements, the relevant exhibit and the response option, the screen wil start to got vary cluttered. To help you manage allthis information you can re-artangs how éach of these ‘windows looks on soreen. The windows can all be moved around on the soraan and can be ré-sizad (by clicking on the bottom right of an exhibit): you need to attempt some questions in the CBE specimen to get used to how the windows move and how you can arrange them. AS each requirement wil only relate to ‘one exhibit, you should only have one exhibit open ata time. 2 eta tad te ¥ eaten a 4 fm mm P oamaces Daneman ean saan Eatin “ : a Syllabus learning outcome E2. Work on r technology, as required by the workspace inl response options, using available functions and CBE tools can be used to support the exam success skills of answer planning (exam success skill 3) and eticlent numerical analysis (exam success SKI 4). Response options ‘Questions may present you with both a word processor response option and a spreadsheet response ‘option, or they may just include a spreadsheet (eg in question 4) or just @ word processor, if the answer required is mainiy discursive BPP Om. oe MEDIATY ee Where you have both options avallable, remember you can answer using both response options fora single requirement. For exarnple, if the requirement asked for calculations and then ai explanation of these calculations, we recommend you perform the calculations In the spreadsheet and type your explanation in the word processer, To make it clear for the matker, you should clearly label your ealoulations and then ‘reference them in your explanation in the word processor. Within the workspace and response options, there ate several functions that will help you plan and type up your answer, suchas highlighting and forilting lexl, undo aud redo, atid Copy aud paste, There are many functions and formulae that can be used in the spreadsheet, so you are advised to aresee the CRF sparimen as saan ac paccihle to make eure yeu ate abla tn usa them You can copy and paste text and numbers from an exhibit into the work processor and spreadsheet however you may need to reformat if copying from a table so be careful Other workspace functions There is a soratch pad function available it you want to make rough notes. The contents of the soratch pad will be saved on screen for you for the duration of your exam however, they will net be marked. Therefore, \we recommend you do all yur planning and note taking within the response option itset. That way your planning willbe visisleto you as you type up your answer and wil be visible to the examiner once your ‘exam is submitted, If you run out of time to complete your answer, you may score a small number of ‘marks for the contents of your plan The workspace also contains a calculator function (you can use your own calculator, but it must not have the ability to enter and store data). Syllabus learning outcome E3, Navigate windows and computer screens to create and amend responses fo exam requirements, using the appropriate tools This supports the exam success skils of managing information (exam success skil 1}, correct interpretation of requirements (exam success skill 2), answer planning (exam success skill 3) and time ‘management (exam success sKIll 6) Requirements By now, you should be starting to feel more comfortable toggling between the various elements ofthe CBE ~ the exhibits, the requirement(s) and the response option(s). We recommend that you copy the ramlrements and paste them inthe word peasant raepanea apfinn Yau can then ica the requirements as the basis of your answer plan and you can close the requirements window, which will make the workspace less cluttered. ox‘Another benefit fo copying the requirements like this is that the requirements will be visible as you type up your answer, helping you (o slay focussed on wit you have actually been ase! to do. Navigation tools What about switching between questions? This can be done by accessing the navigator tunction on the bottom right-hand comer of the workspace: © Previous HE Navigator Next > |t you teal you need to move an but haven t finished what you wanted ta say (perhaps yau'ra stuck, or you are concerned about time), the navigator gives you the option to flag the question for review at a ater stage ta make sure that you aven't forgotten about t. There is also a help function which provides an ‘overview ot the instructions Tor both the workspace and the exam rsa eter a Fagpea ‘ecto A F ueston + Nearest F ‘ection 8 F Oueaton nen F Une F loss Ore Syllabus learning outcome E4. Present data and Information effectively, using the appropriate tools This supports the exam suozess skil of effective writing and presenta yn (exam success skill 5) The formatting functionality in the word processor response option will help you to produce @ more professional-looking answer. However, keep it simple. Tables, headings, bold text and underlining may all be useful whete appropriate but no marks ate evallabe for lferent font sizes or styles for headings. ‘Summary ‘Maks use of questions available in the CBE specimen and In the thras past exams avaliable in the CBE practice software, This will help to familiarise you with the various elements of the CBE and how you can make use of them when answering questions. ‘Although there are syllabus outcomes on employability and technology skills, demonstration of these skills won't specifically attract marks in the same way that you are rewarded for technical skills. However, familiarity with the technology that you are qiven in the CBE will help you perform effectively in the exam. BPP om en MEDIASuggested approach to exam questions We recommend the following approach to answering an exam question in @ CBE: Step 1 Step 2 Step 3 Step 4 Step 5 Work out what time you should finish the question. All questions are 25 marks, so you should spend approximately 48 minutes on 2zch. Allocate this time betwrezn each requirement in the question. Copy the question requirements into your chosen response option. Then read the requirements and analyse them. Underline each sub-raguirement separately and identity the varb(s) used in the requirement. Ask yourself what ezch sub-requlrement means. Read and analyse the scenario, Use active reading as discussed in exam success shill 1. You may want to note relevant IFRS Accounting Standards, or issues you have identified, in your chosen response option under the relevant requirement, as you read each exhibit. ach requirement will relate to one exhibit only, 20 to avold toa much clutter on your ‘screen, we recommend you only have open the exhibit that is relevant to the requirement you are addressing, Prepare an answer plan, We recommend you do this in your chosen response option, Under the relevant requirement, Use key Words from the requirement as headings. in Question 1 (the consolidation question), you do not need to make @ plan, but you should make notes on the group structure and craw up a proforma for the consolidated statement you are required to prepare. Complete your answer. We recommend that you present discursive answers in the word processor response ontion. If you need to prepare a longer calculation or working. we recommend that you use the spreadsheet response option and then cross reference from the word processor to the spreadsheet, so that the marker can see what you have done. Question practice Question practice is a core part of learning new topic arges. When you practice questions, you should focus on improving the exam success skils ~ personal to your neads - by oblaining feedback or through a process of self-assessment. Practising as many exam-siyle questions as possible will be the key to ‘passing this exam, You should use word and excel to type up your answers as tis will help you get used totyping, rather than writing, your answers, which Is good preparation for your CBE. You should attemot ‘questions under timed conditions and ensure you produce full answers to the discussion parts as well as doing the calculations. Also ensure that you atternpt ll mock exams under exam conditions. EY eee onInternational sources of authority BPP TARNING MEDIA anv YS vuonWTEC] framework and ethics 1 The need for a regulatory framework At 2__The International Accounting Standards Board (IASB) AL 2 Boope and applation of FRE Aseourting mi Standards 4 Managing the change to IFRS Accounting Standards a 5 Ethical and protessional principles Az Introduction In this chapter, we introduce the regulatory system run by the International ‘Accounting Standards Board (IASB). We consider the structure of te IASB and how IFRS Accounting Standards are pracuced. ‘We the move cn te consider hew a company manages the change to IFRS ‘Accounting Standards fr the first time, Finally. we consider the ethical and professional pincigles given in the ‘Hanabook of the International Code of thls for Professional Accountants, The ‘application of ethical principles wil be tested for up to § marks in question 2 of every exam.Study guide ‘A __| INTERNATIONAL SOURCES OF AUTHORITY ‘A1__| The International Accounting Standards Board (IASB) and the regulatory framework Discuss the need for IFAS Accounting Standards and possible barriers to their development Explain the structure and constitution of the IASB and the standard setting process ‘Account forthe first-time adoption of IFRS Accounting Standards ‘Az _| Fundamental etnical and protessional principles ‘Appraise and discuss the ethical and professional issues in complying with accounting standards 1 The need for IFRS Accounting Standards 1.1 Impact of globalisation FESR) The need for a single set of international financlal reporting standards arises as a result of the alobalisation of business activities and operetions. The current realty is that the world’s capital markets operate more and more freely across borders. ‘As the modarn business imperative moves towards the globalisation of operations and activities, there is aan underlying commercial logic that also requires a truly global capital market. A single set of international reporting standards is intended to provide: = Aplattorm for wider investment choice = Amore efficient capital market Lower cost of canital Enhanced business development Globally, users of financial statements need transparent and comparative information to help them make economic decisions 1.2 IFRS Accounting Standards — advantages and disadvantages The advantages and disadvantages of adopting IFRS Accounting Standards have tobe considered by each adopting country and have been debated for several years. particularly in the US. which currently uses a rules-based (as opposed to a principles-based) system, The main advantages are seen to be = Abusiness can present its financial statements on the same basis as its foreign competitors, ‘making comparison easier. * Cross-border listing will be facilitated, making it easier to raise capital abroad © Companies with foreign subsidiaries will have a common, company-wide accounting language. ‘= Foreign companies which are targets for takeovers or mergers can be mare easlly appraised The disadvantages are peroaived to be: ‘* The cost of implementing IFRS Accounting Standards The beliat by some that there is lower level of datail in IFAS Accounting Standards (compared with US GAAP) BE sn nent ts | Pret aia Om. MenaCountries that have national standards that are very prescriptive are worried about the rinciples-based approach in IFRS Accounting Standards that require the application of judgement. This is particularly so in the US. US accountants are subject to a high degree of tigation and thelr defence in court is usually that they ‘complied with the relevant sub-saction of one of the hundreds of detalled standards which meke up US GAAP. They fear that adoption of IFRS Accounting Standards will remove this defence, 2 The International Accounting Standards Board (IASB) FES) The 1ASB develons IFRS Accounting Standards. The main objectives of the IFRS Foundation ara ta raise the standard of financial reporting and eventually bring about global harmonisation of accounting standards. 2.1 Introduction The IASB is an independent, privately funded body that develops and approves IFAS Accounting Standards. Prior to 2003, standards were issued as International Accounting Standards (IASs). In 2003, IFAS 1 was issued and all new standards are now designated as IFRS Accounting Standards. important Throughout this Study Text, we will use IFRS Accounting Standards to include both IFRS and IAS Standards, The members of the IASB come from several countries and have a variety of backgrounds, with 2 mix of auditors, preparers of financial statements, users of financial statements and academics. The IASB operates under the oversight of the IFRS Foundation. 2.2 The IFRS Foundation The IFRS Foundation is a not-for-profit, private sector body that oversees the IAGB and the International Sustainability Standards Board (ISSB). The ISSB was formed in 2021 with the intention of delivaring a colobal baseline of sustainability-related disclosure standards. The ISSB and sustainability disclosure standards are beyond te scove of the LIDIFH syllabus, The objectives of the IFRS Foundation are to (2) Through the IASB and the ISSB, to develop high-qualty, understandable, enforaeable and globally accepted standards. The \ASB is responsible for daveloping IFRS Accounting Standards and the SSB is responsible for |FAS Sustainability Disclosure Standards (together known as IFRS Standards). Thase complementary sats of IFAS Standards are intended to result in the provision of high-quality transparent and comparable information in financial statements and in sustainability disclosures that is useful to Investors and other participants in the world's capital markets In making economic decisions. (0) Promote the use and vigorous application of IFRS Stanifards (c)_Teke account of, as appropriate, the neads ofa range of sizes and types of enttes in dlversa economic settings (a) Promote and taciltate adoption of IYHS Standards through the convergence of national accounting standards and IFRS Standards (IFRS Foundation, 2004) TARNING Mevia @ BPP Fatt Alntemaional soureas of authorty | 4: The2.3 Structure of the IFRS Foundation The structure is 2s follows: Public acoountalty [ise ce Independent Een eS Cy slandard-seting pen rere) Rislaad azivy g IFRS Susanailty IFRS Accounting Standards Deen Sena FAS Interpretations Committee Source: IFRS Foundation, irs org/about-us/our-structure {IFRS Foundation Monitoring Board. The Monitoring Board consists of a group capital markets authorties and provides a formal link between the Trustzes and the public authorities in order to entnce the publ accountability of the IFRS Foundation {IFRS Foundation Trustees. The Trustees comprise @ group of individuals with diverse geographic and functional backarounds. The Trustees appoint the Members ofthe Board, the IFAS Interpretations Committee and the IFRS Advisory Counc. in addition to monitoring the Foundation's effectiveness 2nd raising its funds, the Trustees will approve the budget and have responsibility for constitutional changes. IFRS Advisory Council. The IFRS Advisury Couric provides a formal vehicle for futher groups ad Individuels with dlverse geographic and functional backgrounds to give advice to the IASB, the ISSB and, at times, to advise the Trustees, Its consulted by the IASB and ISSB on all malor projects and its meetings are ‘open to the publi. It advises the IAS# and ISSB on prioritisation ot thelr Work and on the implications ot proposed standards for users and preparers of financial statements IFRS Interpretations Committee. The Interpretation Committes provides timely guidance on the application and interpretation of IFRS Accounting Standards. It deals with newly identified financial reporting Issues not specticaly addressed in IFRS Accounting Standards or Issues where unsatisfactory or conflicting interpretations have developed, or seem likely to develop, 3 Developing IFRS Accounting Standards 3.1 Duc process ESE) Fs Accounting Standards are developed through a formal system of due process and broad international consultation involving accountants, financial analysts and other users and regulatory hodies from around the world. The overall agenda of the IASB will intially be set by discussion with the IFRS Advisory Council. The process for developing an individual standard would invalve the following steps, Step 1 uring me cary stages of a project, ie |ASB may establish an Advisory Committee to gIve advice on Issues arising in the projact. Consultation withthe Advisory Committee and the IFRS Advisory Council oceurs throughout the projectStep 2 —_ 1AS8 may develop and publish Discussion Papers for public comment. Step 3 Following the receipt and review of comments, the |ASB would develop and publish an Exposure Draft for public comment. Step 4 Following the receipt and review of comments, the IASB would issue a final IFRS ‘Accounting Standard Tha stops ars underpinned by the following principlas: (3) Tranepat 1ey — the IASB conducte ite etandard-eatting prooase in a traneparant manner: (b) Full nd fair consultation ~ consideting the perspectives of those affected by IFRS Accounting Standards globally; and (c) Accountability —the IASB analyses the potential effects ofits proposals on affected parties and ‘explains the retionale for why it made the decisions it reached in developing or changing @ Standard, The period of exposure for public comment is normally 120 days. However, in exceptional circumstances, ntonosale may he issued with 2 camment prrind of 20 rays. Rratt IFAS Interpuatations ara normally exposed for a 90-day comment period. (Due Process Handbook, 2016: para. 6.7) 3.2 Consultation The development of an IFRS Accounting Standard involves @ full and fair consultation which includes an ‘open, public process of debating technical Issues and evaluating input sought through several ‘mechanisms. Opportunities for interested parties to participate in the develooment of an IFRS Accounting ‘Standard would include, depending on the nature ofthe project: (2) Participation in the development of views 2s a member of the IFRS Advisory Council (b) Participation in advisory groups. (c} Submission of a comment letter in response to a discussion document (a) Submission ofa 60 respunise Lo at Exposure Dra (c) Participation in public hearings (f) Participation infield visits and field tests The IASB publishes an annual report on its activities during the past year and priorities tor next year. This report provides a basis and opportunity for comment by interested partes. In addition, itis required to undertake a public consultation cn its future technical agenda every five years The IASB reports on its technical projects on its website: www its org. It also publishes a report on its ecisions immediately after each meeting in Its newsletter (ASB Undat. 3.3 Scope of IFRS Accounting Standards ‘Any limitation ofthe applicability of a specific IFAS Accounting Standerd is made clear within that standard. (FAS Accounting Standatds are not intended lo be applied to immaterial items, nor are they retrospective. Each individual IFRS Accounting Standard lays out its scope at the beginning of the standard, 3.4 Interpretation of IFRS Accounting Standards Tho IFAS Intorp lations Committee assiste the IASB by improving existing IFRS Accounting Standards, The IFRS Interpretations Committee has two main responsibilities: = Meview, on a timely basis, newly identified financial reporting issues not specifically addressed in IFRS Accounting Standards. Part Alnteraoral sourcas of authorty | 1: Tha ee:© Glatify issues where unsatisfactory or conflicting interpretations have daveloped or seem likely to develop in the absence of authoritative guidance, with a view to reaching a consensus on the apptoptiata traatmant 3.4.1 Authority and application of IFRS Interpretations Committee Interpretations The IFRS Interpretations Committee issues ‘Interpretations’ which carry the same authority as IFRS Accounting Standards, in the sense that thay set out consensus views that entities must adhere to if they decoribe their financial statements ae being prapared in aacordanea with IFRS Accounting Standarde. Interpretations are applicable from the date of issue or if they specity one, from thair effective date, Some Interpretations may contain ‘trensitional provisions’ that apoly to their first application {An Interpretation then ceases to apply when itis overridden by a new IFRS Accounting Standard (or other authoritative IASB document), When this happens, this would be mentioned in the Exposure Draft of the new, overriding IFAS Accounting Standard (or other document). The IASB Would then inform the IFRS Interpretations Committee when this happens. 3.5 IFRS Interpretations Committee due process The IFRS Interpretations Committee discusses technical matters in meetings thal are open fo public observation. The due process for each project normally. but not necessarily, involves the following steps (the steps that are required under the terms of the Constitution are indicated by an asterisk*): (2) Staff work to identity and review all the issues associated with the topic and to consider the application of the \ASB's Conceptual Framework to the issues (t) Study of nationel accounting requirements and practice and an exchange of views about the issues ‘with national standard setters, including national committees that have responsibility for Interpretations of national standards (c) Publication of a draft Interpretation for public comment if no more than four of the IFRS Interpretations Commitee s members nave voted against the proposal (a) Consideration of all comments received on a draft Interpretation within a reasonable period of time (2) Approval by the IFRS Interpretations Committee of an Interpretation if no more than four of the IFAS Interpretations Committee's members have voted against the Interpretation after consider public comments on the draft Interpretation qf) Approval of the Interpretation by at least nine votes of the Board 4 Managing the change to IFRS Accounting Standards 4.1 IFRS 1 First-time Adoption of International Financial Reporting Standards * IFRS 1 gives guidance to entities anplying IFRS Accounting Standards for the first time. ‘+ The change to IFRS Accounting Standards must be carefully managed. Tho adoption of a new body of aecounting standards will inevitably have a significant effect on the accounting treatments used by an entity and on the elated systems and procedures, IFRS 1 First-time Adoption of International Financial Reporting Standards was issued to ensure that an entity's frst IFRS financial statements contain high-quality information that (2) Is transparent for users end comparable over all periods presented (0) Provides a suitable starting point for accounting Under IFFIS Accounting Standards (c) Can be genetated at a cost that dozs not exceed the banefits to users (IFRS 1: para. 1) MEDIAQ BPP TARNIAG mela 1.1 General principles ‘An entity applies IFRS 1 ints first IFRS financial statements. ‘An entity's first IFRS financial statements are the first annual financial statements in which the entity adopts |FRS Accounting Standards by an explicit and unreserved statement of compliance with IFRS. Any other financial statements (including fully compliant financial staternents that did not stata so) are not the first set of financial statements under IFRS Accounting Standards. (IERS 1: para. 3) 4.1.2 Opening IFRS statement of financial position |An entity prepares and presents an opening IFHS statement of nancial position at the date of transition to IFRS Accounting Standards as a starting point for IFRS accounting (IFRS 1: para. 6) Generally, this will be the boginning of the earliest comparative period shewn (ic full rctrospoctive application). Given that the entity is applying a change in accounting policy on adoption of IFRS, IAS 1 Presentation of Financial Statements requites the presentation of at least three stalements of financial position (SUFP) (and two of each of the other statements). IMustration: Opening IFRS SOFP Comparative year ‘st year of adoption 4.1.20%8 31.12.2068 31.412.20x8 Date of transition First IFRS to IFRS financial statements Preparation of an opening IFAS statement of financial position typically involves adjusting the amounts reported at the same date under previous GAAP. All agiustments are recognised directly in retained earnings (or. if appropriate, another category of equity) notin profit or loss. 4.1.3 Estimates Estimates in the opening IFRS statement of financial position must be consistent with estimates mado at the same date under previous GAAP even If further information is now available (in order to comply with IAS 10 Events After the Reporting Period). 4.1.4 Transition process (2) Accounting policies The entity should select accounting policze thet comply sith IE Accounting Standards effective al the end of the first IFRS reporting period ‘Thase accounting policies are used in the opening IFRS statement of financial position and ‘throughout all periods presented, The entity does not apply different versions of IFRS Accounting Standards effective at earlier dates (Lb) Derecugnition of assets and liabilities Previous GAAP statement of financial position may contain items that do not qualify for recognition Under IFAS Accounting Standards, For example, [AS 38 intangible Assets explicitly does not permit the capitalisation of research, statt ‘raining and relocation costs, Part Alnteratlora sourcas of authorty | 1: Tha(c) Recognition of new ai New assets and liabilities may need to be recognised, for example deferred tax balances and certain provisions such as environmental and decommissfaning costs, (a) Reclassification of assets and liabilities, For example, compound tinancial instruments need to be spilt into ther liability and equity ‘components. (ce) Measurement \Value at which asset or liability is measured may differ under IFRS Accounting Standards, For example, discounting of deferted lax asselssiebilles ol allowed unuer IFRS Accounting Standards. 1.5 Main exemptions from applying IFRS Accounting Standards in the opening IFRS statement of financial position (2) Properly, plant and equipment, investment properties and intangible assets (i) Fair value/previous GAAP revaluation may be used as a substitute for costat date of transition to IFAS Accounting Standards, (b) Business combinations, For business combinations prior to the date of transition to IFRS Accounting Standards: (i) The same classitication (acquisition or uniting of interests) Is retained as under previous GAAP. (ll) Foritems requiring a cost measure for IFRS Accounting Standards, the carrying amount at tho dato of tho bucinoce combination ic troated ac doomed cot and IFRS rulae aro appliod ‘rom thereon (ii) items requiting z fair value meesure for IFRS Accounting Standards are revalued at the date of transition to IFRS Accounting Standards, (iv) The carrying amount of goodwill a the date of transitian to IFS Accounting Standards is the amount as reported under previous GAAP. (c) Cumulative translation differences on foreign operations {) Translation differences (which must be disclosed in a seperate translation reserve under IFRS) may be deemed zero at the date of transition to IFAS, IAS 21 The Effects of Changes in Foreign Exchange Rates is anplied from then on. (ii) fa subsidiary (or associate or joint venture) applies the exemption in (di) below, then the subsidiary can instead choose to measure cumulative translation differences at the carrying amount that would be included in the parent's consolidated financial statements atthe parent's date of transition, (2) Adoption of IFNS by subsidiaries, associates and joint ventures if a subsidiary, associate or joint venture adopts IFAS Accounting Standards later than its parent then it measures its assats and liabilities Either: (I) Atthe amount that would be included in the patent's consolidated financial statements, based on the parent s date of transition Or {il)__ At the amount based on the subsidiany’s (associate or joint venture) date of transition4.1.6 Disclosure (2) Areconcillation of previous GAAP equily to IFRS Accounting Standards Is required at the date of ‘tansition to IFRS Accounting Standards and for the most recent financial statements presented Under previous GAAP. (t) A reconciliation of profit for the most recent financial statements presented under previous GAAP. Exam focus | The transition to IFRS was most recently tested in December 2020 for 8 marks. In the examiner's report, yolet the examining team stated that ‘only a minority of candidates correctly stated the relevant provisions of |FRS 1 First-time Adoption of International Financial Reporting Standards. A question on this aspect of the syllabus seemed to come 2s 2 surprise tothe majority of candidates’ (Fxaminer’s Report Dacember 2070: p. 10). 4.2 Practical issues The implementation of the ctvanae to IFAS Accountina Standards is lkely to entail careful manadement in most companies. Here are some of the change management considerations that should be addressed. (2) Accurate assessment ofthe task involved. Underestimation or wishful thinking may hamper the cffactiveness of the conversion and may ultimately prove inefficient. (t) Proper planning. This should take place atthe overall project level, but detailed task analysis ‘could be drawn up to control work performed. (c) Human resource management, The project must be propery structured and statfad (2) Training. Where there are skills gaps, remedial training should be provided, (c) Monitoring and accountability. An overly relaxed attitude could spall danger. implementation progress should be monitored and regular meetings set up so that participants can personally ‘account for What they are doing 2s well 2s flag up any problems as carly 2s possible. Project drift should be avolded. (1) Achieving milestones. Successful completion of key steps and tasks should be appropriately acknowledged. ie what managers call celebrating success’, 50 as to sustain motivation and performance. (a) Physical resourcing, The need for IT equipment and office space should he properly assessed (h) Process review. Care should be taken not to perceive the change as @ one-off quick fix. Any change in future systems and processes should be assessed and properly implemented. () Follow-up procedures. As with general good management practice the follow up procedures ‘should be planned in to make sure that the changee stick and that any furthar changes are identified and addressed. 2.1 Financial reporting infrastructure [As Well 2s Sound management judgement, Implementation of HHS Accounting Stancaras requires @ ‘sound financial reperting infrastructure. Key aspects ofthis include the folowing: (2) A robuot rogulatery framework. For IFRS Accounting Standarde to be cuccecetul, thoy muct bo rigorously enforced. (b) Trained and qualified statf. Many preparers of financial statements will have been trained in local GAAP and not be familiar withthe principles underlying IFRS, lt alone the detall. Soma professional hodles provide conversion qualifications —for examole, the ACCA’s Diploma in international Financial Reperting ~ but tha availabilty of euch qualifestione and courtee may vary ‘rom country to county. BPP fa a wthon Oh. Heth nentuntsicartomiey |e mrnenereacae nce EI maoin(c) Availability and transparency of market information. This is particularly important in the determination of fair values, which are such e key component of many IFRS Accounting Standards (a) High standards of corporate governance and audit. {his is all the more Important in the transition period, especially where there is resistance to change Overall, thote are significant advantages to the widespread adoption of IFRS Accounting Standards, but if the transition is to go well, there must be a realistic assessment of potential challenges. 5 Ethical and professional principles Professional accountants should comply with the tive tundamental ethical princiolas given in te ESHA Code: integrity, objectivity, professional competence and due care, confidentiality and professional behaviour, Exam focus point Ethics wil feature in question 2 of every exam, for a maximum of § marks. The ethical scenarios in the exam are straightforward and thetetore you should be able to score highly in this question 1n your ‘exam. In order to gain an understanding of the type of question you could be asked, we recommend you refer to the most recent exams December 2021, June 2022 and December 2022, avaliable on the ACCA website: httos/www.eccaglobal.con/e/en/studentiexam-support-resources/aiptt-study-resources/past- examinations html 5.1 Handbook of the International Code of Ethics for Professional Accountants The DIpIFR syllabus requires you to be able to appraise and discuss the ethical and professional issues in ‘complying with accounting standards, The exariinable decane tesquire you to Understand and be able apply Part 1 Sections 100, 110-115 and 120 of the Handbook af the International Code of Ethics for Professional Accountants (‘the Code’). The Code Is Issued! by the Intemational Ethics Standards Board for ‘Accountants (/ESHA), a committee of the International Federation of Accounts (IFAC). Important You can access the IESBA Handbook of the International Code of Ethics tor Professional Accountants (2020 Edition) from the IESBA wobsite: www ethicsboard.org You should read Patt 1 Sections 100, 110-115 and 120. 5.1.1 Section 100: Complying with the Code The content of Section 100 can be summarised as follows, ‘= Professional accountants must actin the public interest (para. 100.1 At). ‘* Professional accountants must comply with the Code. If laws or regulations prevent an accountant ‘rom complying with same parts of tne Code, then the laws and regulations prevail but the accountant should comply with all other nats of the Gode (para. 1400.9), ‘* Aprotessional accountant who identifies a breach of the Code should evaluate the significance of ‘the breach and impact on the arcountant's ability ta comply with the fundamental ethical principles (see next section). They should also take actions to address the consequences of the breach and determine whether to report the breach to relevant parties (para. 100.4).Q BPP TARNIAG MELIA 5.1.2 Section 110-115: The fundamental principles There are five fundamental ethical principles which a professional accountant should comply with (para. 1101 Ai): inte Definiti Integrity ‘To be straightforward and honest in all proessional and business relationships Objectivity ‘Not to compromise professional or business judgments becailse of bias, conflct of interest or undue influence of ethers! Professional To competence and due | tain ard maintain professionel knowicdgo and slat the level requiod to ensure that a client or employing organization receives competent professional service, based on currant technical and professional standards and relevant legisation; and (ii) Actdiligently and in accordance with applicable technical and professional standards" Confidentiality “To respect the confidentiaity of information aoquired as a result of professional and business relationships” Professional ‘To comply with relevant laws and regulations and avoid any conduct that the behaviour professional accountant knows or should know might discredit the profession’ 5.1.3 Section 120: The conceptual framework The standard of behaviour for a professional accountant is set by the fundamental ethical principles (vara. 110.2 At), The conceptual framework establishes the approach a professional accountant should take in order to comply with those principles and to mest their responsibility to actin the publi: interest (para. 120.1). The approach a professional accountant should take isto (para 120.2): (1) dentity threats to compliance with the fundamental ethical principle; (2) Evaluate the threats identified; and (8) Address the thneats by eliminating ur reducing tem to an acceptable level ‘The Gade identities the following categories of threats to compliance with the fundamental ethical principles (para. 120.6 A3): Selt-interest ‘The threat that a financial or other interest wil inappropriately influence a professional accountant's judgement or behaviour’ Saltreview "The threat that a professional accountant will not appropriately evaluate the racults of a previous judgment made; or an activity performed by the accountant, or by anther individual within the zecountant's firm or employing organization, on which the caovuuinlait will ely wie Foti a fugue a> part Uf performing a Gun nt activity’ Advocacy "The threat that protessional accountant wil promote a client's or employing ‘organization's position to the point that the accountants objectivity is compromised’ Familiarity "The threat that due to.a long or close relationship with a client or employing ‘organization, a professional accauntant will be too sympathetic to ther interests or too aocepting of thelr work’ Intimidation "The threat that a protessional accountant wil be deterred trom acting objectively because of actusl or perceived pressures. Including attempts to exercise undue Influence over the accountant eeThreats can be addressed by elther eliminating them or by reducing them to an acceptable level. This can bbe done by (para. R120.10): (2) Eliminating the umstances, including Interests or relationships, that are creating the threats; (b) Applying safeguards, where available and cepable of being epplied, to reduce the threats to an aoceptable level oF (c) Declining or ending the specific professional activity. 5.2 Ethical considerations in financial reporting In preparing financial statements or advising on corporate reporting, a varity of ethical problems may arise (1) Professional competence is clearly a key issue when decisions are made about accounting tines ain disclosures, Gompariy uitecturs anid their advisers Lae: duly lo kee up Lo dale with developments in IFRS Accounting Standards and other relevant regulations. CClreumstaneae that may thraaten the abllty of accountante In thoee alee to pertorm tholr dutior with the appropriate degree of professional competence and due care include: Insufficient time Incomplets,rastricted or Inadequate information Insufficient exparioncs, training or education Inadequate resources (2) Objectivity and integrity may be threatened in a number of ways: = Financial interests, such as profit-related bonuses or share options = Inducements te encourage unethical behaviour (3) Accountants may be pressurised, either externally or by the possibilty of personal gain, to become assoviated with misleading information. The Code (pare. A111.2) clearly states that members should not be associated with reports, returns, communications or other information where they believe that the information: . Contains a materially misleading statement: + Contains statements or intormation turnished racklessty; . Has been prepared with bias; or . Omits or obscures information required to be included where such omission or obscurity would 5.2.1 Example Ths Finance Director of Kershaw Co has asked an employee, Tanya, to join a teat that is planning @ takeover of one of Kershaw Co's suppliers. An old school fiend of Tanya's works as an accountant for the supplier. The Finance Ditector knaws this and has asked Tenya to try and find out ‘anything that might help the takeover succeed, but it must remain secret’ Required What ethical issues could arise? Solution There are tree issuas nee. First, Tanya hes a conflict of interest as the Finance Director wants Tanya to keep the tekeover a secret, but ‘she may fael that che chould tell her friand what is happening as it may affect thelr jab ‘Second, the Finance Diractor is asking Tanya to deceive har friend, Deception is unprofessional behaviour and s in breach of ethical princigles. The situation is presenting Tanya with two conflicting demands. NeDIAQ BPP TARNIAG mela Finally, the request to breach ethical principles constitutes unprofessional behaviour by the Finance Director. Tanya should weigh up whether blowing the whistle internally would prove effective: if not, she should sonsidar reporting them to their relevant prafessional hady 5.2.2 Example Kelshall Is a public limited company. The current year end is 31 December 20X5. The Finance Director, 2 professional accountant, is remunerated with a profit-related bonus and share options. Kelshall owns a signiticant number ot owner-occupied propertias wnicn historically have been held under the revaluation model. Recently, due to an economic downturn, property prices have been falling. The Finance Director is proposing to switch from the revaluation model to the cost model, ‘Shortly before the year end, the CEO of Kelshall, whe is also a professional accountant, and who holds a large number of share options, mentioned to the Finance Director that he was hoging to retire within the next year and was hoping to maximise Kelshall’'s share price by his retirement date. Required {2} Discuss whether the Finznce Director of Kelshall would ba acting sthicaly i he ravi accounting policy for its properties rom the revalueton rmodel to the cost model (b) Discuss whether the CEO's comment to the Finance Director Is ethical and what action, if any, the Finance Director should take. id the Solution (2) IAS 8 Accoumting Policies, Changes in Accounting Estimates and Errors only allows a change in ‘accounting policy where required by another standard ori it results in financial statements providing reliable and more relevant information. IESBA's Code of Ethics requires professional ‘aocountants to act with integrity and professional competence, Professional competence includes ‘complying with aocounting standards and the Conceptual Framework ‘Thare Is a self-interest threat arising forthe Finance Director as thelr bonus is linked to profits ithe Finance Director is revising the accounting policy to maximise pratits, then they would be acting unsthically due to non-compliance with IAS &. In fact, though, the cost model would not necessarily lead to Improved profits (and improved remuneration) because under the revaluation model, losses are first writen off to the revaluation surplus (and reported in other comprehensive Income} then to profit or loss, and so might nat impact profits at all. Also, even under the cost model, assets need to ba written down where there is evidence of an impairment. {tthe motivation of the Finance Director is that the economic downturn is causing volatlty in market value of properties and the more stable cost model would provide a truer and fairer view, ‘then they could possibly be considered to have acted ethically, (b) The CEO and the Finance Director are both professional accountants and are therefore bound by the principles of the IESBA's Code of Ethics. As directors, they should be acting inthe best Intarests of te shareholders, However, It appears as though the CEO is more concerned with self-interest and maximising the ‘gains on his share options by manipulating the share price. This pressure from the CEO Is a thraat to the integrity and objectivity of the Finance Director. The Finance Director Is in a difficult position ethically as he reports directly to the GEO and the GEO has, dirartinfluonce avar his jah coruirty and remuneration ‘The Finance Director could speak directly to the CEO and seek clarification ofthe intent of his comments, explaining that he is unable to change Kelshall’s accounting policies just to maximise Kelshall’s share price in the short term and that he is bound by the IESBA’s Code of Ethics to zct with professional competence. However, if he felt under too much pressure from the CEO to speak ‘chim directly, he could raise his concerns with the non-executive directors and/or the audit, committee. ee‘The problem here is that the threats to both the CEO's and the Finance Director's objectivity and integrity are similar so there is a danger that the Finance Director reacts to the CEO's comments by changing ancaunting policies to maximise profits and share price rather than acting in the ‘company's and stakeholders’ best long-term interests. This would definitely constitute unethical behaviour. Exam focus wae ACCA's website contains many useful articles, including the following relating to ethics: © Ethics in DipIFR exam questions This is available in the DipIFR study support resources section of the ACCA website, Brennen | Petre arity Om. WeebiACa) = Theneed for a single set of international Financial Reporting Standards arises as a result of the lobalisation of business activities and operations. ‘+ Tha IASB develops IFAS Accounting Standards. The main objectives of the IFRS Foundation are to raise the standard of financlal reporting and eventually bring about global harmonisation of accounting standards. ‘+ _ IFRS Accounting Standards are developed through a formal system of due process and broad international consultation involving accountants, financial analysts and other users and regulatory bodias from around, the world. ‘+ |FRS-1 gives guidance to entities applying IFRS Accounting Standards forthe first time + The change to IFRS Accounting Standards must be carefully managed ‘* Professional accountants should comply with the five fundamental ethical principles given in the IESBA Code of Ethics: integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. 1 Brletly describe why a single set of global accounting standards is needed. 2 Which of the follow is not an objective of the IFRS Foundation? A Toenforce IFRS Accounting Standards in most countries 3 —Todevelop IFRS Aecounting Standards through the [ASS © Tobring about convergence of accounting standards and IFRS Accounting Standards D —Totake account ofthe financial reporting needs of SMEs 3 Fillinthe blanks. Tho IFRS Issues, which aid users interpretation of IFRS ‘Accounting Standards. 4 The IASB is responsible for the standard-setting process. True or false? Which ofthe following might (or might be thought to) affect the objectivity of providers of professional accounting services? A Failure to keap up to date with continuing professional development (CPO) 8 Apersonal financial interest in the client's aairs © Being negligent or rackless with the accuracy of the information provided to the client MeAnswers to Quick Quiz 1 The need fora single set of Intetnationel Financial Reporting Standards arises as a result of the Globalisation of business activities and operations. A single set af international financial reporting standards will enable financial statements across the lobe to be more easily compared. This will ld intemational business by providing + Aplatform for wider investment choice = Amore efficient capital market = Lower cost of capital * Enhanced business development 2 A The IFRS Foundation has no powers of enforcement. 3 The IFRS Interpretations Committee issues Interpretations which aid users’ interpretation of IFRS Accounting Standards, 4 Tue 5B __Apersonal financial interest in the clients affairs ‘A personal financial interest in the client's affairs will affect objectivity. Failure to Keep up to date on continuing professional development is an issue of professional competence, while providing Inaccurate information reflects upon professional integrity a Introductory na Wa 2 Introductory na na BED: terest ranevork ae ates | Fat neat sours tatty @ BPP NeDiaThe Conceptual Framework 1 Conceptual Frameworkané GAAP a 2h IASB's Conewual Framework or Financia? a Reporting ‘Chapier { — The objecive of general purpose financial A reporting “4 Chapter 2 — Qualtative characteristics of useful Mt financial information ‘5 Chapter 3 — Financial statements and the reporting A entity @hepter # Eerents of fancialsaements ui ‘7 Chapter 8 — Recognition and derecognition AL @.Chepter 6 Meseurement x 3 Chapter? Presentaton and decosure Mi 10 Chapter & ~ Concepts of capital and capital AD maintenance 77 Currant IFRS Accounting Standards and tha revised a Conceptual Famenrk Introduction ‘Aconceptual framewerk for financial reporting can te dened as an attempt to touily existing yenerally wepled avcouiing practice (GAAP) in ord: to reappraise current accounting standards and to produce new standards Uncor IFRS we have the IASB Conceptual Framowork for Financial Reporting,