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Transcript of © 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All...
CAIB - 1© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
Role of IFRS in Financial Statement PreparationRole of IFRS in Financial Statement Preparation
AUDITAUDIT
Presentation to the 2006 CAIB ConferencePresentation to the 2006 CAIB Conference
CAIB - 2© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
Role of IFRSs Role of IFRSs
Provides specific guidance on:
Definition
Recognition
Measurement
Disclosure
CAIB - 3© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
IAS(30)
SIC(11)
Framework
IFRIC(7)
Summary of IFRSSummary of IFRS
IFRS(7)
IFRSs are for general purpose financial reporting by profit-oriented entities
CAIB - 4© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
AgendaAgenda
IFRS Framework
IAS 1
Financial Instruments Standards
Future Developments
IFRS Framework
IAS 1
Financial Instruments Standards
Future Developments
CAIB - 5© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
FrameworkFramework
Consistency of IFRSs
Assist in development of future IFRSs and review of existing IASs
Assist national standard setting bodies in developing national standards
Assist preparers and users in preparing and interpreting IFRS financial statements and with the issues not covered by standards
Strict guidance in IAS 8 applies
CAIB - 6© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
Objective of financial statementsObjective of financial statements
The objective is to
Provide information about financial position, performance, and changes in financial position of an entity:
…that is useful to a wide range of users in making economic decisions
CAIB - 7© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
Financial statements
Users of financial statementsUsers of financial statements
Investors,Present & potential
Employees
Suppliers and other trade creditors
Lenders
Customers
PublicGovernments and
their agencies
CAIB - 8© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
Underlying assumptionsUnderlying assumptions
Accrual basis
Going concern
CAIB - 9© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
Qualitative characteristics of financial statementsQualitative characteristics of financial statements
Materiality
Faithful representation
Substance over form
Neutrality
Prudence
Completeness
Relevance
Understandability
Reliability
Comparability
True and
fair view / fair
presentation
CAIB - 10© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
Qualitative characteristics of financial statements (continued)Qualitative characteristics of financial statements (continued)
Constraints on relevant and reliable information
Timeliness
Balance between benefit and cost
Balance between qualitative characteristics
CAIB - 11© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
Assets & Liabilities: Definition and recognitionAssets & Liabilities: Definition and recognition
Asset
Liability
Income
Income
Expenses
Expenses
The matching concept less important
CAIB - 12© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
Assets, liabilities and equity: definitionsAssets, liabilities and equity: definitions
Asset Liability
Equity
Residual interest in the assets of the entity
CAIB - 13© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
AgendaAgenda
IFRS Framework
IAS 1
Financial Instruments Standards
Future Developments
IFRS Framework
IAS 1
Financial Instruments Standards
Future Developments
CAIB - 14© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
Objective and scopeObjective and scope
Objective: ensure comparability between years and entities
Scope: all financial statements (FS) prepared in accordance with IFRSs:
All financial statements, including interims (IAS 34)
All types of entities
Separate FS
Consolidated FS
Individual FS
CAIB - 15© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
Required components of financial statementsRequired components of financial statements
Balance sheet
Income statement
Either:
Statement showing all changes in equity; or
Statement of recognised income and expense (SoRIE)
Cash flow statement
Notes
CAIB - 16© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
Other components of financial reportsOther components of financial reports
Not within scope of IFRSs, but often presented outside financial statements:
Financial review by managementperformance
financial position
uncertainties
Environmental reports, value added statements etc
The financial statements must be clearly identified and distinguished from other information in annual report
CAIB - 17© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
Overall considerationsOverall considerations
Accrual basis of accounting
Going concern
Materiality andaggregation
Offsetting
Consistency of presentation
Comparative information
Compliance with IFRS
Fair presentation
Financial Statements
CAIB - 18© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
OffsettingOffsetting
Assets and liabilities should not be offset unless:
Required or permitted by a standard or interpretation
Items of income and expense should not be offset unless:
Required or permitted by a standard or interpretation, or
Gains, losses and related expenses arising from the same or similar items not material
CAIB - 19© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
Compliance with IFRSsCompliance with IFRSs
“Explicit and unreserved statement of compliance” in notes
Disclose application of standards or interpretations before effective date
Compliance with all standards and interpretations.
Inappropriate accounting treatments not rectified by disclosure
CAIB - 20© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
Fair presentationFair presentation
Achieved by appropriate application of IFRSs
Requires faithful representation of effects of transactions, events and conditions in accordance with recognition criteria set out in the Framework
If compliance with a standard or interpretation misleading, departure from that standard required (extremely rare)
Comprehensive disclosure requirements
CAIB - 21© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
Assets – Suggested PresentationAssets – Suggested Presentation
Cash and cash equivalents
Trading assets
Pledged assets
Derivative assets held for risk management
Loans and advances to banks
Loans and advances to customers
Investment securities
Property and equipment
Intangible assets
Deferred tax assets
Other assets
CAIB - 22© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
Liabilities – Suggested PresentationLiabilities – Suggested Presentation
Trading liabilities
Derivative liabilities held for risk management
Deposits from banks
Deposit from customers
Debt securities issued
Subordinated liabilities
Provisions
Current tax liabilities
Deferred tax liabilities
Other liabilities
CAIB - 23© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
Other Elements of the Financial StatementsOther Elements of the Financial Statements
Total assets
Total liabilities
Equity
Share capital and share premium
Retained earnings
Other reserves
Total equity attributable to equity holders of the Bank
Minority interest
Total equity
Total liabilities and equity
CAIB - 24© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
AgendaAgenda
IFRS Framework
IAS 1
Financial Instruments Standards
Future Developments
IFRS Framework
IAS 1
Financial Instruments Standards
Future Developments
CAIB - 25© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
Overview of currently effective financial instruments standards Overview of currently effective financial instruments standards
CAIB - 26© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
IFRS 7 Financial Instruments: DisclosuresIFRS 7 Financial Instruments: Disclosures
The disclosure requirements for financial instruments have been amended by IFRS 7, which was issued in August 2005 and supersedes IAS 30 and the disclosure requirements in IAS 32.
In particular, the IASB removed unnecessarily onerous or duplicate disclosures from IAS 30 and IAS 32 and located in one IFRS all disclosure requirements relating to financial instruments.
CAIB - 27© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
AgendaAgenda
IFRS Framework
IAS 1
Financial Instruments Standards
Future Developments
IFRS Framework
IAS 1
Financial Instruments Standards
Future Developments
CAIB - 28© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
Future developmentsFuture developments
Discussion paper Management Commentary
Guidance on management commentary in financial report
Prerequisite for compliance with IFRSs?
Exposure Draft of Proposed Amendments to IAS 1 Presentation of Financial Statements – A Revised Presentation
Focus on performance (total recognised income and expense) rather than on profit or loss
Statement of financial position (balance sheet) for three periods
CAIB - 29© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved. The KPMG logo and name are trade marks of KPMG International.
increasedcomplexity
increaseddisclosure
limitedoptions
increased useof fair values
Trends in recent IFRSTrends in recent IFRS
strict application: no“IFRS lite”
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2006 KPMG, the Trinidad and Tobago member firm of KPMG International, a Swiss cooperative. All rights reserved.
Presenter’s contact details
Robert Alleyne
1 868 623 1081-3
www.kpmg.co.tt
Presenter’s contact details
Robert Alleyne
1 868 623 1081-3
www.kpmg.co.tt