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Unit 10: IFRS and its Relevance

10.2 Types of IFRS and their Relevance Notes

The following are the key IFRS issued by International Accounting Standard Board (IASB):
IFRS 1: First-time Adoption: IFRS 1 requires an entity to do the following in the opening
IFRS statement of financial position that it prepares as a starting point for its accounting
under IFRSs: (a) Recognize all assets and liabilities whose recognition is required by
IFRSs; (b) Not recognize items as assets or liabilities if IFRSs do not permit such recognition;
(c) Reclassify items that it recognized under previous GAAP as one type of asset, liability
or component of equity, but are a different type of asset, liability or component of equity
under IFRSs; and (d) Apply IFRSs in measuring all recognized assets and liabilities.

IFRS 2: Share-based Payment: The objective of this IFRS is to specify the financial reporting
by an entity when it undertakes a share-based payment transaction. In particular, it requires
an entity to reflect in its profit or loss and financial position the effects of share-based
payment transactions, including expenses associated with transactions in which share
options are granted to employees.

IFRS 3: Business Combinations: The objective of the IFRS is to enhance the relevance,
reliability and comparability of the information that an entity provides in its financial
statements about a business combination and its effects. It does that by establishing
principles and requirements for how an acquirer (a) recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed and any non-controlling
interest in the acquiree; (b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and (c) determines what information to
disclose to enable users of the financial statements to evaluate the nature and financial
effects of the business combination.
IFRS 4: Insurance Contracts: The objective of this IFRS is to specify the financial reporting
for insurance contracts by any entity that issues such contracts (described in this IFRS as an
insurer) until the Board completes the second phase of its project on insurance contracts. In
particular, this IFRS requires (a) limited improvements to accounting by insurers for
insurance contracts; (b) disclosure that identifies and explains the amounts in an insurer’s
financial statements arising from insurance contracts and helps users of those financial
statements understand the amount, timing and uncertainty of future cash flows from
insurance contracts.
IFRS 5: Non-current Assets Held for Sale and Discontinued Operations: The objective of
this IFRS is to specify the accounting for assets held for sale, and the presentation and
disclosure of discontinued operations. In particular, the IFRS requires (a) assets that meet
the criteria to be classified as held for sale to be measured at the lower of carrying amount
and fair value less costs to sell, and depreciation on such assets to cease; and (b) assets that
meet the criteria to be classified as held for sale to be presented separately in the statement
of financial position and the results of discontinued.
IFRS 6: Exploration for and evaluation of Mineral Resources: The IFRS (a) permits an
entity to develop an accounting policy for exploration and evaluation assets without
specifically considering the requirements of paragraphs 11 and 12 of IAS 8. Thus, an entity
adopting IFRS 6 may continue to use the accounting policies applied immediately before
adopting the IFRS. This includes continuing to use recognition and measurement practices
that are part of those accounting policies; (b) requires entities recognising exploration and
evaluation assets to perform an impairment test on those assets, when facts and
circumstances suggest that the carrying amount of the assets may exceed their recoverable
amount; and (c) varies the recognition of impairment from that in IAS 36 but measures the
impairment in accordance with that Standard once the impairment is identified.

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