THE INTERNATIONAL Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants issued amendments to IAS 1 and 2. A summary of some of the requirements is as follows.
IAS 1, Presentation of Financial Statements:
Requires the use of a classified balance sheet. A non-classified presentation should only be used where such presentation provides information that is reliable and is more relevant than a current/non-current presentation.
Prohibits disclosure of items as "extraordinary items" in the income statement and notes.
Separate disclosure on the face of the income statement of:
'Profit or loss for the period,
'Profit or loss attributable to minority interest, and
'Profit or loss attributable to equity holders of the parent'
Requires disclosure, on the face of the statement of changes in equity, of total income and expenses for the period (including amounts recognised directly in equity) attributable to 'minority interest' and 'equity holders of the parent'.
Minority interest should be disclosed as a separate component in equity.
Post balance sheet refinancing, amendments, waivers, etc. cannot be used in determining classification of debt at the year-end.
Disclosure required of judgements made by management in applying the accounting policies that have the most significant effect on the measurement of items in the financial statements.
Disclosure of key assumptions about the future, and other sources of estimation uncertainty, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
Disclosure is no longer required of:
the results of operating activities
the number of the entity's employees
IAS 2 INVENTORIES
No longer permits the use of last-in, first-out (LIFO) formula to measure the cost of inventories.
Foreign exchange differences on recent acquisition of inventories can no longer be included in the costs of inventories.
Requires separate accounting for finance cost of inventories purchased with deferred settlement terms. The difference between the purchase price for normal credit terms and the amount paid is recognised as interest expense over the period of financing.
These new requirements are effective for accounting periods beginning on or after January 1, 2005. Earlier adoption is allowed.
Mr. Raphael E. Gordon is the managing partner of KPMG Peat Marwick, chairman of KPMG CARICOM and past president of the Institute of Chartered Accountants of Jamaica. The views and opinions are those of the author and do not necessarily represent the views and opinions of KPMG Peat Marwick. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.
Taken from the Financial Gleaner, Friday, September 30, 2005
