Summary of

„Accounting Principles of IAS“

Course held by Friedrich Spandl Winter Term 2003 / 2004

Summary written by Günther Füllerer 1 1.1

2 2.1

3

INTRODUCTION ..........................................................................................................4 List of Standards ................................................................................................................................................ 4

DEVELOPMENT OF STANDARDS .............................................................................5 Enforcement........................................................................................................................................................ 6

IAS FRAMEWORK.......................................................................................................6

3.1

Contents............................................................................................................................................................... 7

3.2

Addressees of Financial Reports ....................................................................................................................... 7

3.3

Target .................................................................................................................................................................. 7

3.4

Capital Maintenance and Real Capital Maintenance ..................................................................................... 7

1

3.5

balance sheet ....................................................................................................................................................... 7

3.6

Consolidation ...................................................................................................................................................... 7

4

ANNUAL REPORT 2002 – VIENNA AIRPORT ...........................................................8

4.1

Financial position ............................................................................................................................................... 8

4.2

Page 75................................................................................................................................................................. 8

4.3

Page 80................................................................................................................................................................. 8

4.4

Page 81................................................................................................................................................................. 8

4.5

Page 97................................................................................................................................................................. 8

5

PROPERTY, PLANT AND EQUIPMENT (IAS 16).......................................................8

5.1

Depreciation........................................................................................................................................................ 9

5.2

Derecognition.................................................................................................................................................... 10

5.3

Example............................................................................................................................................................. 10

6

LEASES (IAS 17) .......................................................................................................10

7

IMPAIRMENT (IAS 36)...............................................................................................11

8

INTANGIBLE ASSETS (IAS 38) ................................................................................14

8.1

separate Acquisition ......................................................................................................................................... 14

8.2

business combination, exchange transactions and internally generated assets........................................... 15

8.3

Goodwill ............................................................................................................................................................ 16

8.4 Website Costs (SIC 32)..................................................................................................................................... 16 8.4.1 Intangible assets............................................................................................................................................. 17 8.4.2 Accounting treatment of the different stages ................................................................................................. 17

9

INVESTMENT PROPERTY (IAS 40)..........................................................................18

10 CASH FLOW STATEMENT .......................................................................................18 10.1

CF from Operating Activities.......................................................................................................................... 18

10.2

CF from Investing Activities............................................................................................................................ 19

10.3

CF from Financing Activities .......................................................................................................................... 19

11 FIRST TIME ADOPTION (IFRS 1) .............................................................................19 12 INCOME STATEMENT / BALANCE SHEET (IAS 1).................................................20 12.1

Minimum format of balance sheet .................................................................................................................. 20

12.2

Minimum format of P & L .............................................................................................................................. 20

13 EARNINGS PER SHARE (IAS 33).............................................................................20 13.1

Minority Interests............................................................................................................................................. 20

14 DEFERRED TAXES ...................................................................................................21 15 STATEMENT OF COMPREHENSIVE INCOME ........................................................21 16 NOTES .......................................................................................................................22 17 STATEMENT REPORTING (IAS 14) .........................................................................22 18 PENSION (IAS 19) .....................................................................................................22 19 FINANCIAL INSTRUMENTS .....................................................................................22 19.1 Disclosure and Presentation (IAS 32) ............................................................................................................. 22 19.1.1 Objective................................................................................................................................................... 22 19.1.2 Definitions ................................................................................................................................................ 22

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19.1.3 19.1.4 19.1.5

Liabilities and equity ................................................................................................................................ 23 Offsetting .................................................................................................................................................. 23 The Disclosure .......................................................................................................................................... 23

19.2 Recognition and Measurment (IAS 39) .......................................................................................................... 24 19.2.1 Initial Measurement of Financial Assets and Financial Liabilities ........................................................... 24 19.2.2 Determination of the fair value ................................................................................................................. 24 19.2.3 Subsequent Measurement ......................................................................................................................... 25 19.2.4 Gains and Losses ...................................................................................................................................... 26 19.2.5 Impairment and Uncollectability of Financial Assets ............................................................................... 26 19.2.6 Financial Assets carried at cost................................................................................................................. 27 19.2.7 Available-for-Sale Financial Assets.......................................................................................................... 27 19.3 Hedging (IAS 39) .............................................................................................................................................. 28 19.3.1 Fair Value Hedging................................................................................................................................... 28 19.3.2 Macro Hedging ......................................................................................................................................... 29 19.3.3 Cash Flow Hedging .................................................................................................................................. 30

20 EXKURS: MEZZANIN-FINANZIERUNG....................................................................32 21 CHANGES IN IAS BY 17TH DECEMBER 2003..........................................................32 22 INSURANCE CONTRACTS .......................................................................................33 23 PROVISIONS (IAS 37) ...............................................................................................34 24 EVENTS AFTER THE BALANCE SHEET DATE (IAS 10)........................................34 25 EMISSION RIGHTS....................................................................................................36 26 SHARE BASED PAYMENT .......................................................................................37 26.1

TRANSFERS OF EQUITY INSTRUMENTS TO EMPLOYEES .............................................................. 37

26.2 RECOGNITION OF EXPENSES ARISING FROM EQUITY-SETTLED SHARE-BASED PAYMENT TRANSACTIONS .......................................................................................................................................................... 38 26.2.1 MEASUREMENT OF SHARE-BASED PAYMENT TRANSACTIONS .............................................. 38 26.3

MEASUREMENT DATE ................................................................................................................................ 40

26.4

CASH-SETTLED SHARE-BASED PAYMENT TRANSACTIONS .......................................................... 40

26.5

SHARE-BASED PAYMENT TRANSACTIONS WITH CASH ALTERNATIVES ................................. 41

26.6 SHARE-BASED PAYMENT TRANSACTIONS IN WHICH THE ENTITY HAS THE CHOICE OF SETTLEMENT............................................................................................................................................................... 41 26.7

DISCLOSURES................................................................................................................................................ 41

26.8

Example............................................................................................................................................................. 42

27 WORDS AND PHRASES...........................................................................................44 27.1

English – German............................................................................................................................................. 44

27.2

German - English.............................................................................................................................................. 47

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1 Introduction There are two terms that are used in connection with IAS: ƒ IFRS (new term): International Financial Reporting Standards: These standards were developed by the IASC (International Accounting Standards Committee), which changed to the IASB (International Accounting Standards Board) on 1st of January 2002. The IASB is independent and is employing 14 people (12 full-time and 2 part-time) ƒ IAS (old term): International Accounting Standards The most obvious reason for the development of these standards is the idea of a harmonization of the various different European national standards. The structure of the balance sheets across Europe is similar but presentation and measurement are very different from country to country. Therefore due to regulation 1606/2002 7000 (listed) companies have to set up consolidated balance sheet according to this regulation from 01-01-2005. Listed companies are companies having bonds. However the Austrian HGB is still important for non-listed companies. Furthermore it will be possible for non-listed companies with international relationships to choose IFRS standards voluntarily. Apart from that the 4th and 7th directive have been changed and due to that group accounts have been established (→ amendment has been made). A directive has to be confirmed by each local government. 1.1

List of Standards • • • • • • • • • • • • • • • • • • • • • • • • • • • •

IAS 1: Presentation of Financial Statements IAS 2: Inventories IAS 7: Cash Flow Statements IAS 8: Net Profit or Loss for the Period, Fundamental Errors and Changes in Acco... IAS 10: Events After the Balance Sheet Date IAS 11: Construction Contracts IAS 12: Income Taxes IAS 14: Segment Reporting IAS 15: Information Reflecting the Effects of Changing Prices IAS 16: Property, Plant and Equipment IAS 17: Leases IAS 18: Revenue IAS 19: Employee Benefits IAS 20: Accounting for Government Grants and Disclosure of Government Assistance IAS 21: The Effects of Changes in Foreign Exchange Rates IAS 22: Business Combinations IAS 23: Borrowing Costs IAS 24: Related Party Disclosures IAS 26: Accounting and Reporting by Retirement Benefit Plans IAS 27: Consolidated Financial Statements IAS 28: Investments in Associates IAS 29: Financial Reporting in Hyperinflationary Economies IAS 30: Disclosures in the Financial Statements of Banks and Similar Financial I... IAS 31: Financial Reporting of Interests in Joint Ventures IAS 32: Financial Instruments: Disclosure and Presentation IAS 33: Earnings per Share IAS 34: Interim Financial Reporting IAS 35: Discontinuing Operations

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• • • • • •

IAS 36: Impairment of Assets IAS 37: Provisions, Contingent Liabilities and Contingent Assets IAS 38: Intangible Assets IAS 39: Financial Instruments: Recognition and Measurement IAS 40: Investment Property IAS 41: Agriculture

2 Development of Standards The IASB takes a topic matter (e.g.: share based payments) and tries to answer the question: How have to be these stock options accounted? IASB 14 members, who meet on a regular basis to decide on accounting issues and form opinions

exposure draft (ED) comment period ISAB discusses received comments and publishes standads EU Has to transform these standards in European legislation and the way of implementing is discussed in

EFRAG

ARC

(European Financial Reporting Advisory Group)

(Accounting Regulation Committee)

technical level – no national agency task: discussion of proposals (Is this an appropriate standard in Europe?) and creation of a draft comment letter for the ARC

political level similar to: ƒ FMA (Finanzmarktaufsicht) ƒ Institut der Wirtschaftsprüfer

EFRAG issues endorsement or not

The European Parliament is only needed, when the ARC does not come to a conclusion. All IFRS are translated in all languages, but only the standard itself is translated – implementation, guidance, conclusions, etc. are only available in English. The standards are supranational law and therefore supersede local laws. On 29-09-2003 all IAS standards except IAS 32 and 39 were endorsed and became part of the European law. After 01-01-2007 no European company is allowed to use US-GAAP, Australia, New Zealand, Hong Kong and Singapore will also use IAS: US-GAAP IAS/ IFRS rule based principle based If conditions are met → do that and that If that and that is material → then do 5

companies near to USA use it

companies near to Europe use it

process of converging is taking place Apart from the standards there are interpretations that support understanding and interpretation of the different standards: SIC (old term – Standing Interpretations Committee) and IFRIC (new term – International Financial Reporting Interpretations Committee) are issued by IASB. The IFRS does not regulate how to present the P&L statement. 2.1 Enforcement The CESR (Committee of European Security Regulators) guarantees that the European law is met by the companies. It has 25 members, everything kept in English

3 IAS Framework The IAS Framework stands above the different standards and interpretations: ƒ Recognition: What is an asset? Is it recognized? ƒ Matching e. g: Austrian law revenue 100 € today by selling 10 items production cost 30 € today R & D cost 500 € in the past not capitalized in Austria → profit of 70 € today and losses in the past

profit prudence: never know for sure, if it is possible to sell the estimated 100 items loss

IAS: estimated to sell 100 items → 5 € per item R & D cost → revenue 100 € - production cost 30 € - R& D cost (5 times 10) 50 € profit by IAS 20 € → R & D cost from the past are capitalized Example: 100 CU consolidation IAS balance sheet machines 20 equity 30 • building 20 liabilities 40 • receivables 30 • 70 70 • balance sheet machines 25 equity building 30 liabilities receivables 25

building bought 40 years ago, there was no infrastructure → today there is perfect infrastructure → measurement → worth 30 machinery can be used by 10 years → worth more receivables: doubt on costumer → value reduced liabilities are worth 38

42 goodwill is calculated by subtracting the equity of 42 from 38 100 → 58 6

80 US-GAAP: balance sheet machines 25 equity building 30 liabilities receivables 25 R 25 CL 10 115

80

67 R … Research Results 48 CL … Customer List → goodwill of 33 115

3.1 Contents ¾ Aim of financial reports ¾ Benefits of financial reports ¾ Definitions, ability of recognition and measurement 3.2 Addressees of Financial Reports ¾ Investors ¾ Employers ¾ Creditors ¾ Suppliers ¾ Customers ¾ Government ¾ Public 3.3 Target ¾ Information about financial situation, profitability and changes in equity ¾ Ability of company to generate cash and cash equivalence and determing when whey are going to arise ¾ Financial status of entity is dependent on … 3.4 Capital Maintenance and Real Capital Maintenance Real Capital Maintenance: includes inflation → representation o fair market prices IFRS are in between those two concepts 3.5 balance sheet P & L (ordinary P & L account and changes in equity) cash flow statement 3.6 Consolidation In the past US-GAAP used the pooling interest method, but since the fatal crash of EMRON USGAAP switched to the purchase accounting (same in IAS) → There is nearly no difference between Austrian HGB and IAS: • Everything has to be valued at fair value. • Self-generated patents and R&D can be capitalized.

7

4 Annual Report 2002 – Vienna Airport 4.1 Financial position An asset is a resource which is controlled by an entity resulting from the past and which is expected to gain benefit for the enterprise. It needs control, not property. That’s the reason the reason why a lessee will capitalize a rented building. A liability is an obligation that exists now and is resulting from events in the past and is expected to cause an outflow of resources. Assets and liabilities have to be reliably measurable – otherwise no recognition. 4.2 Page 75 The Consolidated Statement of Capital and Reserves has to be included due to IFRS. 2005: CESAR: present 2003/2004 due to local GAAP → 2004 new GAAP (IAS) additionally → 2005 only new GAAP (IAS) Page 80 4.3 IAS 18 does not rule revenue recognition very detailed, therefore the 4th and 7th directive have to be considered which means: If you find a regulation in IAS 18 for your problem, you have to apply it, if there is no regulation for your problem in IAS 18 you have to take your local GAAP in consideration. 4.4

Page 81

permanent differences permanent tax savings e.g.: former IFB

Taxes on income timing differences subsidy e.g.: accelerated depreciation

quasi tangent differences does not exist in Austria Germany: Sonderposten mit Rücklagenanteil

4.5 Page 97 Audit opinion: Apart from IAS the International Audit Standards (ISA) and International Valuation Standards.

5 Property, Plant and Equipment (IAS 16) Tangible fixed assets other than biological assets (IAS 41 Agriculture), mineral Rights. The term PPE includes property in construction or development for future use as Investment property. • •

Tangible fixed assets are held by an entity for use in the production or supply of goods or services, for rental to others, or for administrative purposes and are expected to be used during more than one period. Cost is the amount of cash or cash equivalents paid or the fair value other consideration give to acquire an asset at the time of its acquisition or construction (if payment is deferred cash price equivalent except alternative treatment IAS 23 –capitalisation of directly attributable) and includes: o Purchase price, including import duties and non-refundable purchase taxes, after deducting any trade discounts and rebates (in case of exchange: fair value of asset given up, only if more clearly than fair value of asset received; if non reliably than of asset given up) and o directly attributable cost to bring the asset to the location and working condition necessary for it to be capable of operating in the manner intended by management, including testing (after deducting the net proceeds from selling any items produced –like eg. samples) o cost of employee benefits, site preparation, delivery and handling costs, installation and assembly costs, professional fees and costs to dismantle and remove an asset and restore its 8

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site (with corresponding provision under IAS 37), see also IFRIC 2 (capitalisedat inception or later, in this case also depreciation of land!)) o Capitalisation ceases when PPE is in the location and working condition necessary; costs incurred in using or redeploying assets are excluded (distinct from improving the assets’ standard of performance. o Costs not a component of PPE are costs of opening a new facility, introducing a new product, conducting business in a new location, SGA o Government grants may either be deferred income are deducted from the carrying amount of the asset (IAS 20) o income and expenses of incidental operations are part of P&L (use of car park until construction) o in case of finance leases fair value of if lower PV of future lease payments (finance leases – IAS 17) o Recognition when it is probable that future economic benefits associated with the asset will flow to the entity and cost or fair value can be measured reliably Replacing and renewing of a component–capitalised, replaced item written off (including air craft maintenance) Subsequent expenditure shall be added to the carrying amount when, and only when, it is probable that the expenditure increases the future economic benefits, embodied in the asset in excess of its performance assessed immediately before expenditure is incurred (e.g. extension of remaining useful lifetime, increase capacity, upgrade in quality or reduction of cost) –if asset was written down for impairment expenditure is capitalised to the extent impairment can be reversed. Immaterial expenditure in P&L Subsequent measurement at cost (benchmark treatment) or fair value (alternative treatment), in both cases less accumulated depreciation –market value according to appraisals, in absence of market replacement cost; revaluations annually in volatile markets, otherwise all 3 to 5 years; all assets of a class shall be revalued simultaneously; Result shall be credited to equity as revaluation surplus (except it reverses a revaluation expense of the same asset recognised as expense, than it is income); when carrying amount is decreased as result of revaluation deduction from revaluation surplus, if it exceeds the credit balance –rest expense. When revalued asset is disposed of, balance of revaluation surplus directly into retained earnings (not via P&L)

IFRS 1 FTA–carrying amount of asset of PPE before FTA (carrying amount according to local GAAP including revaluation is regarded as deemed cost provided that close to fair value or according to price index); same is true for event driven revaluations like IPO or privatisation 5.1 •

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•

Depreciation allocation of the depreciable amount (cost / fair value less residual value) on a systematic basis, method used shall reflect the pattern entity expects future economic benefits to be consumed(factors to be considered include usage, wear and tear, technical or commercial obsolescence, legal or similar limits Residual value is amount currently expected from disposal less related cost at end of useful life –to be determined if material –amendments of residual value are accounted prospectively as an adjustment to future depreciation depreciation is recognised even if the fair value exceeds the carrying amount –depreciation charge is an expense (except when it constitutes part of the cost of another asset –e.g. depreciation of manufacturing plant and equipment is included in cost of conversion of inventories (IAS 2, depreciation does not stop when asset becomes temporarily idle. useful life should be reconsidered annually –change leads to adjustments of current and future periods only, the same is true if depreciation method has to changed (reviewed annually) – 9

change of an accounting estimate. If recoverable amount is below carrying amount – impairment (IAS 36) 5.2 on • • •

Derecognition disposal or when NO future economic benefits expected from its use or disposal (included in P&L); if payment of consideration is deferred, consideration received (less carrying amount = gain or loss on disposal) is recognised at cash price equivalent. Difference between nominal amount and cash price equivalent is recognised as interest income

According to ED 4 an entity shall classify a non-current asset (like PPE) as available for sale • if its carrying amount will be recovered principally through a sale transaction rather than trough continuing use. • Measurement at the lower of its carrying amount and fair value less costs to sell –difference: impairment loss. • Asset can be part of a group of assets to be disposed of (disposal group). No depreciation while asset is classified as held for sale; interest and other expenses continue to be recognised • if asset is reclassified than expense in all periods presented) • sale must be highly probable, expected to qualify for recognition within 1 year (at the latest at balance sheet date!), except a delay is caused by reasons beyond management's control • other criteria see B1 (management must have authority to approve the action, has to commit itself to a plan to sell, asset is available for immediate sale its present condition, active programme to locate a buyer has been launched, asset is being actively marketed unlikely that there will be significant changes • assets held for sale are shown in a separate line item–related liabilities of a disposal group too(details of assets classified as available for sale Several items of disclosure Example 5.3 An entity bought a machine at 100. Now the fair value of this machine is 200. The first measurement is at cost → 100. Subsequent measurement is also at cost minus depreciation (usual way). Apart from that, IAS 16 gives the possibility (just an option) to measure at FV. The difference between cost and fair value is presented on the liability (might be part of equity).

6 Leases (IAS 17) operating lease financing lease leased asset is capitalized with the lessor and the needs capitalization of leased asset with the lessee has an periodically expense lessee: → lessor has a receivable → lessee capitalizes an asset and depreciates it The value that is recognised is the PV of the future lease payments calculated at the interest rate in the lease = “internal rate of return” direct financing lease sales type lease New IFRIC 3 contains additional forms of contracts that would then qualify for leasing such as outsourcing, etc. difference: never rent a building, always lease it accounting for “Miete”: 2 models (distinction comes from tax law) 10

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operating leases financing leases (property is transferred to lessee where the asset is capitalized; the lessor only shows a receivable)

distinguish between land (= operating lease) and building (might be a financing lease) rent: you don’t rent an apartment if it’s your major apartment – you rent land! apartments are shown as shares not as tangible asset ⇒ IAS 32 + 39 (not lease) entry: building at cost (=Minimum Lease Payments) / liability at inception they have the same value a car of 30.000€; 15.000 km /year; ND 5y how does the leasing company calculate the lease? a car of 5y and 75.000km has a residual value of 12.000€ (sell) down payment 10.000€ 20.000 principal interest first lease instalment 100 -2 98 -2,5 97,5 interest rate PV of the total of minimum lease payments + residual value: you calculate it by using the implicit interest rate in the lease ( 0 = PV ) the first lease payment of 100 includes interest + principal: 98, 5 interest expense 1.5 liability bank 100 the leasing company has the PV of accounts receivable other entries: bank unearned income (accrual matching principle) Finanzierungseffekt: UST erhalte ich, aber VST erst später

7 Impairment (IAS 36) •

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• •

An impairment loss is the amount by which the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount. Therefore an asset is impaired when the carrying amount of the asset exceeds its recoverable amount. Recoverable amount is the higher of its net selling price and value in use. Value in use is the PV of the future CFs expected to be derived from an asset or a cash-generating unit.Net selling price is amount obtainable from the sale of an asset or cash-generating unit in an arm‘s length transaction between knowledgeable willing parties less cost of disposal. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent from other assets or groups of assets. At each balance sheet date an entity shall assess whether there is any indication that an asset my be impaired. Irrespective of indications an entity shall annually:-estimate the recoverable amount of an intangible asset with an indefinite useful life or not yet available for use and-test goodwill acquired in a business combination for impairment 11

•

Indications shall be considered from external and internal sources of information.

Measurement of the Recoverable Amount: How to determine the net selling price and the value in use? • From an individual asset, if individual asset does not generate independent CFs, then from cash generating unit • Best basis for net selling price is binding sale agreement, in absence net selling price is based on the best information available to reflect the amount that an entity could obtain at the balance sheet date for the disposal of an asset. Value in use • Estimate of the future CFs the entity expects to derive from the asset (management forecast – best estimate taking into account both past actual CFs and management’s ability to forecast CFs reliably, based on the most recent budgets and forecasts fora maximum of five years, beyond that period extrapolating the projections using steady or declining growth rates) –shall include CFs from the continuing use of the asset at its current condition (no future restructuring as long as company does notbecome committed to such a restructuring or CAPEX to improve condition),cash outflows necessary to generate such CFs and net CF to be received for the disposal) • Expectations about possible variations and timing of CFs • Time value of money –represented by risk free rate of respective currency (pre-tax) • The price for bearing the uncertainty (risk premium in discount rate) • Other factors such as illiquidity, but CFs shall not include financing and taxes Recognition of an impairment loss: In the P&L, unless asset is carried at revalued amounts, then treated as revaluation decrease (reduction of revaluation reserve) • After recognition of impairment loss, depreciation/amortisation charged adjusted in future periods to allocate the asset’s revised carry amount less residual value on a systematic basis Cash-Generating Units: • If market exists, than output that is used entirely internally is sufficient for creation of cashgenerating unit • The carrying amount of a CGU includes the carrying amount of only those assets that can be attributed directly or allocated on a reasonable an consistent basis and does not include any liabilities, unless the recoverable amount of the CGU unit cannot be determined without • Goodwill acquired in a business combination is allocated to one or more CGUs. (always the smallest CGU to which portion of the carrying amount of goodwill can be allocated on a reasonable and consistent basis = lowest level of monitoring by management but shall not be larger than a segment in IAS 14);such CGU might include several smaller CGU • Goodwill tested on lowest level management is monitoring –allocation to CGU at the latest before the end of the first annual reporting period beginning after business combination Goodwill so allocated is also part of carrying amount when determining the gain or loss on disposal If CGU is impaired than determine whether goodwill is impaired (implied value = excess of recoverable amount of CGU over net fair value of the identifiable assets, liabilities, contingent liabilities the entity would recognise if it acquired that CGU) Impairment Test can be performed at any time provided that test is performed at the same time every year. Corporate assets to be allocated to CGU, if impossible test for impairment on a higher level necessary too 12

Allocation of impairment: • First to goodwill (until carrying amount = implied value) • Then on a pro-rata basis to all assets in a CGU • Carrying amount shall not be reduced below zero. Disclosures! Reversal of impairment • shall be recognised in P&L except for revalued amounts (including CGU except goodwill) with depreciation adjusted for future periods. • Reversal of impairment of goodwill is prohibited. Balance Sheet Equity IAS 1

Fixed assets - tangible IAS 16 + IAS 40 Participation Investment in Subsidiaries Consolidation IAS 27 At equity IAS 28 Joint Ventures IAS 31 Business Combinations IAS 22 (ED 3) - intangible IAS 38 (valuation, presentation + measurement) - impairment IAS 36 Current assets - inventories IAS 2 IAS 23 (borrowing costs, POC) IAS 11 (long term contracts) - receivables + available for sale IAS 32, 39 ED 6 (hedging)

Leasing IAS 17 Provisions IAS 37 Liabilities IAS 32, 39

fixed assets: tangible – what should be capitalized? depreciation intangible – only amortized if useful life is definite if indefinite: no amortization, no amortization in good will net selling price is lower than book value ⇒ problem: Wertberichtigungsbedart = impairment!! IAS 36: find out, if there is impairment or not we are a purchaser of a company we get: house 200 equity (carrying amount) liabilities receivables 300

200 300

we pay 1000 –why?? because we don’t buy assets of company, we buy future CF! 13

first we only offer the current value prospect: rental income will increase ⇒ we are ready to pay more than just the present value of current surplus! 1000 = present value of future CF perhaps we are not able to increase income, but a third party finds possibilities; the third party will only buy it if he can generate value: it is ready to pay 1300 the valuation is done on a daily basis difference between current value and actual price = good will we find out that the house is worth 300 (=FV); the price is 1000 good will real estate receivables

700 equity 300 payable 300

1000 300

you don’t make an impairment test, but an allowance bei UV (Ford.); but you still say: receivable is impaired when we talk about impairment test, we talk about assets! allowance depends on: held for trading, available for sale, held to maturity, loan or receivable originated each balance sheet date there is a CF test: recoverable amount: - net selling price - value in use real estate appraisal (=Liegenschaftsbewertung) ⇒ problem in calculating value in use: take the original cash generated unit but 2 years later the company now has a new financial plan; the results are influenced by current management ⇒it isn’t the original company anymore IAS 36 is not accepted by IASB for good will: good w. isn’t amortized anymore; it is only subject for impairment test (because sometimes good w. is 50% of balance sheet!)

8 Intangible Assets (IAS 38) 8.1 •

•

separate Acquisition An intangible asset is an identifiable non-monetary asset without physical substance. •An asset is a resource controlled by an entity as a result of past events from which future economic benefits are expected to flow to the entity Identifiability –to distinguish from goodwill (if acquired represents a payment made by the acquirer in anticipation of future economic benefits from assets that are not capable of being individually identified and separately recognised.

14

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Identifiable –means separable, capable of being separated or divided from the entity and sold, transferred, licensed, rented, exchanged individually or together with a related contract OR – arises from contractual or other legal rights, regardless of transferability and separability Recognition: it is probable that the future economic benefits attributable to the asset will flow to the company (always satisfied for separately acquired intangible assets) and the cost of the asset can be measured reliably Measurement: initially at cost (purchase price and directly attributable expenses); capitalisation ceases when an intangible asset is in the working condition necessary for it to be capable of operating in the manner intended by management

8.2 business combination, exchange transactions and internally generated assets • Cost is its fair value at acquisition date (recognition criterion always satisfied, value reflects probability that CF will flow into the company • Identifiable –separable or legal/contractual right • In a business combination all acquiree’s intangible assets, excluding assembled workforce irrespective of whether those assets had been recognised in the acquiree`s financial statements before the business combination!!! • Therefore all of the acquiree`s in-process research and development projects that meet the definition of an intangible asset (if meets the asset definition, is identifiable)!!! • Measurement: quoted market prices, otherwise what would I have to pay? In exchange transactions: Cost of the intangible asset given up! Internally generated assets • Internally generated goodwill shall no be recognised. • Internally generated brands, mastheads, publishing titles, customer lists etc. shall not be recognised • Research -no recognition as asset, cost expensed in P&L development cost -shall be recognised • if technical feasible –available for use or sale AND • it is intended to complete the intangible asset AND • ability to use or sell can be demonstrated AND • generation of probable future CF can be demonstrated AND • technical, financial resources are available for completion AND • demonstration of ability to measure the expenditure attributable to the intangible asset during development Total R&D cost expensed to be disclosed in the notes! Cost –no reinstatement of expenditure recognised as expenses in prior years Directly attributed and necessary to creating, producing and preparing the asset for it to be capable of operating in the manner intended by management Subsequent expenditure on an intangible asset • To be expensed unless probable increase of future economic benefits in excess of original assessed standard of performance and expenditure can be measured and attributed reliably • In process R&D acquired separately or in a business combination shall be treated like R&D Subsequent measurement • •Benchmark treatment: at cost less accumulated amortisation and accumulated impairment losses 15

•

Alternative treatment: fair value determined by reference to an active market; revaluation shall be made with sufficient regularity –if fair value than whole class of assets at fair value (revaluation reserve in equity, decrease in value to be expensed unless cannot be charged to revaluation surplus; if expensed than reversal shall be recognised as income to the same extent

Useful life • Finite (consequence: amortisation from date when asset is available for use, residual value = 0 except active market or commitment by third party to acquire) or • indefinite (not infinite!) (consequence: no amortisation, impairment only) indefinite when based on an analysis of all of the relevant factors there is no foreseeable limit on the period over which the asset is expected to generate net CF for the entity Contractual or legal rights: maximal period of this rights or shorter; if renewal option than useful life shall include the renewal period only if there is evidence to support renewal without significant cost 8.3 Goodwill Goodwill is part of this standard and including the results of the current ED goodwill is recognised. The value that is recognised is calculated by subtracting the purchase price from the fair value of net asset. It is measured at inception and as under Austrian HGB it is only allowed to recognise a derivative goodwill. There is no amortization possible due to the fact that the lifetime is indefinite but the entity has to perform an annually impairment test according to IAS 36. This impairment test is based on so-called cash generating units (CGU) and there are two different methods, namely the bottom-up or bottom-down test. 8.4 Website Costs (SIC 32) SIC-32 concludes that an internally developed Web site is subject to the requirements of IAS 38, Intangibles, and prescribes the accounting treatment for various stages of Web site development and operation. An enterprise may develop and operate its own web site for either internal or external use. for external access eg. to promote/advertise an enterprise’s own products and services, provide electronic services, and sell products and services for internal access eg store company policies / customer details, and search relevant information The stages of a web site’s development can be described as follows: Planning – includes undertaking feasibility studies, defining specifications, evaluating alternative products and suppliers, and selecting preferences. Application and Infrastructure Development - includes obtaining a domain name, purchasing and developing hardware and operating software, installing applications on the web site and stress testing. Graphical Design Development - includes designing the appearance of web pages Content Development – all information on the web site, either textual or graphical in nature, uploaded before the completion of the web site’s development. eg. Information about an enterprise, products; Once development of a web site has been completed, the Operating stage begins. During this stage, an enterprise maintains and enhances the applications, infrastructure, graphical design and 16

content of the web site. eg. updating graphics, revising content, registering with search engines, backing up data; SIC 32 does not apply to expenditure on purchasing, developing, and operating hardware of a web site. Such expenditure is accounted for under IAS 16, Property, Plant and Equipment. Expenditure on an Internet service provider hosting the web site, the expenditure is recognised as an expense when incurred (under IAS 8.7) and the Framework when the services are received. Expenditure on the development or operation of a web site for sale to another enterprise. Leases (IAS 17) - when a web site is leased under an operating lease, the lessor applies this Interpretation. When a web site is leased under a finance lease, the lessee applies this Interpretation after initial recognition of the leased asset. Expenditures incurred for development of a web-site primarily for promoting and advertising its own products and services should be recognised as an expense when incurred. 8.4.1 Intangible assets IAS 38.7: intangible asset is an identifiable non-monetary asset without physical substance held for use in the production or supply of goods and services, for rental to others, or for administrative purposes (eg. Software -> web site). Expenditure on an intangible item have to be recognized as an expense when incurred (IAS 38.56), unless it forms part of the cost of an intangible asset that meets the recognition criteria in IAS 38.18: “The recognition of an item as an intangible asset requires an enterprise to demonstrate that the item meets the: a) definition of an intangible asset (paragraph 7-17) b) recognition criteria set out in this standard (paragraph 19-55). Web site cost recognized as an internally generated intangible asset comprises all expenditure that can be directly attributed, or allocated on a reasonable and consistent basis, to creating, producing and preparing the asset for its intended use. An intangible asset always has a finite useful life (IAS 38.84), so a web site that is recognised as an asset is amortised over the best estimate of its useful life (IAS 38.79). The useful life of web sites will be short (IAS 38.81). 8.4.2 Accounting treatment of the different stages Planning Expenditure on research has to be recognized as an expense when incurred. This implements that expenditure incurred in the Planning stage of a web site’s development are recognised as an expense when incurred.(IAS 38.42 and IAS 38.44) Application and Infrastructure Development stage, the Graphical Design stage and the Content Development are treated in the same way. They are similar in nature to the development phase in IAS 38.45 - .52: Intangible asset arising from the development phase can only be recognised if they fulfil certain criteria (6 criteria). One is to demonstrate how a web site (intangible asset) will generate probable future economic benefits (IAS 38.45(d)). These benefits may include revenue from the sale of products or services, cost savings, or other benefits resulting from the use of the asset by the enterprise. (IAS 38.17) Therefore, future economic benefits from a web site may be assessed when the web site is capable of generating revenues. Expenditure incurred in these stages should be included in the cost of a website. They should be recognised as an intangible asset in accordance with SIC 32 when the expenditure can be directly attributed to preparing the website for its intended use. 17

Content Development A web site that is only developed for advertising and promoting an enterprise’s own products and services is not an intangible asset because the enterprise cannot demonstrate their future economic benefits. This expenditure is recognised as an expense when incurred (IAS 38.57(c)) Operating In the operating stage expenditure to enhance or maintain an enterprise’s own web site is recognised as an expense when incurred (unless it meets the recognition criteria in IAS 38.60:” …unless a) it is probable that this expenditure will enable the asset to generate future economic benefits in excess of its originally assessed standard of performance, and b) this expenditure can be measured and attributed to the asset reliably. If these conditions are met, the subsequent expenditure should be added to the cost of the intangible asset (web site) Other expenses incurred such as training of employees to operate the web site and other general overhead expenditure that can not be directly attributed to preparing the website should be recognised as an expense when incurred under IAS 38.53 - .58

9 Investment property (IAS 40) • • • • •

Is property (land or a building or part of) held to earn rentals or for capital appreciation or both (insignificant own use allowed) Creates cash-flow largely independently of the other assets held by an entity–this distinguishes it from owner-occupied property (IAS 16 applies) ownership or finance lease (both always) or operating lease (if fair value model is used) not held for sale If property houses subsidiaries it can be investment property on the individual company level and an owner-occupied property in the consolidated statement

For some situations there are no standards → take a look into US-GAAP

10 Cash flow Statement The CF-Statement has to be presented by all companies. FASB95 operating CF IAS 7 financing CF HFA1/95 investing CF 10.1 CF from Operating Activities Jahresüberschuss/ Jahresfehlbetrag + Abschreibung + Dotierung / Auflösung langfristiger Rückstellungen Cash Earnings + / - Veränderungen im Working Capital building inventory A/R receivables cash 1

31.12.2001 350 equity 120 provisions 200 bank loan 50 A/P 30

200 50 350 150

1

building inventory A/R receivables cash

31.12.2002 380 equity 100 provisions 280 bank loan 50 A/P 20

250 60 320 200

new windows → capitalization of 50 and 20 depreciation → + 30

18

750 100 + 20 + 10 130 - 80 + 20 + 50 120

750

830

830

profit ( but A/R went up → 80 in cash) depreciation long-term provision cash earnings A/R Inventory (reduced from 120 to 20) A/P CF from operating activities

10.2 CF from Investing Activities building – 50 (no investment in A/P) → CF from investing activities = - 50 10.3

CF from Financing Activities - 30 instalments - 50 dividend -80 CF from financing Activities

The total CF is – 10 → cash has been reduced by 10. The term cash equivalent includes investments with an expiration of less than 90 days. Exchange: hingegebener Wert, not asset received like in Austrian HGB or EStG Incidental income: income from testing machines, etc. is not relevant for the P & L but is reducing the cost of the machines Another example:buying real estate and build up car park. The construction of the planned skyscraper will last about 5 years → if the construction of the skyscraper has started the car park generates incidental income and reduces the construction cost of the skyscraper, if the construction has not yet started the profit of the car park is presented in the P & L Error correction: A company builds a nuclear power plant in a third world country on the technological level of 2003.The environmental legislation in this country is very liberal and therefore no further technological improvement is considered to be implemented. However after 5 years the government of this country introduces a very strict legislation concerning use and disposal of nuclear power plants.

11 First Time Adoption (IFRS 1) Austria and Germany will adopt this standard in 2004, whereas other countries that are now under US-GAAP have two years longer for adoption. IFRS 1 FTA replaced SIC 8 (very restrictive) and is much more liberal and therefore makes adoption easier: Measurements can be continued under local GAAP which means that comparability between the European Countries will only be reached over time. Due to the date of transition regulation in IFRS 1 listed companies that are obligated to use IAS at 1st January 2005, they have to set up IAS-conform comparability values from 1st January 2004 on. In principle estimations such as useful lifetime, … that were made under local GAAP can also be used under IAS, if this estimations do not suffer from drastic errors. The book values of the last balance sheet are regarded as deemed cost which is regarded to be equal to the measurement under IFRS. The use of IAS basically means that these standards have to be applied retrospectively and there is no time limit for this “look back period”. However there are some exemptions of this retrospective 19

regulation and therefore prospective: (consolidation IAS 22, defined benefit plans IAS 19, hedge accounting…) Furthermore it is worth mentioning, that IFRS does not want to replace the local GAAPs so far, because this step now is nearly possible because killing the local GAAPs by replacing them by IAS automatically kills the tax regime in most European countries.

12 Income Statement / Balance Sheet (IAS 1) 12.1 Minimum format of balance sheet Intangible assets PPE Equity method investments Financial assets Inventories Trade receivables Cash & cash equivalents Deferred tax asset

Issued capital Reserves Minority Interest Provisions Trade Payables Noncurrent liabilities Deferred lax liability

12.2 Minimum format of P & L IAS one does not contain any strict scheme how the P & L has to look like, it only gives some basic requirements: The P & L has to be set up either in • Total cost format, or • Cost of goods sold (COGS) format: Sales - COGS Margin SGA Profit

13 Earnings per Share (IAS 33) EPS (earnings per share) no calculation of earnings 13.1

fully diluted EPS potential shares included (e. g.: convertible bonds)

Minority Interests Parent company

3rd party

10 %

90 %

Subsidiary participation fixed assets current assets

Parent 50 equity 10 40 100

100 100

fixed assets current assets

Subsidiary 30 equity 50 liabilities 80

20 60 80

20

Business combination (IAS 22), which will be replaced by IFRS 3: • Goodwill of 30 (due to 50 – 20) • Revaluation of all assets and liabilities of Subsidiary with fair value Subsidiary fixed assets 40 equity current assets 50 liabilities in process R&D 10 100

40 60 100

In a business combination it is possible to capitalize some additional intangible assets (patents or own R&D projects. Consolidation goodwill 10 equity 100 fixed assets 50 liabilities 60 This would mean that the Subsidiary is owned by Parent by 100%, which is current assets 90 not true → minority interest has to be included in process R&D 10 160 160

goodwill fixed assets current assets in process R&D

Consolidation 10 equity 50 minority interest 90 liabilities 10 160

96 4 10 % of the equity of the Subsidiary belong to the minority → 10% 60 times 40 = 4 160

What is minority? – Only participation is presented at equity. If the distribution of shares is equal 50% to 50% → pro rata consolidation Due to the concept of substance over form it is possible to do not own 1 share but have a minority interest of 90% due to control of the company (e.g. being responsible for procurement, …)

14 Deferred Taxes An entity has bought 100 shares of company A at 10€ each. → investment of 1000€. Shares are financial instruments according to IAS 39 and if they are held for trading they are measured at fair value and therefore fair value changes are shown in the P&L. At the end of the year the entity’s shares are worth 16€ each → whole package is 1600 € worth. investment 1600 equity 1000 profit 600 Assuming of having a tax rate of 20% and a profit tax base of 500, there is a tax liability of 100€. However the profit due to IFRS is 1100 € and therefore we have a fictious tax liability of 220. The difference between 220 and 100 are a deferred tax liability of 120.

15 Statement of Comprehensive Income Includes change in equity CF-Hedge → equity Fair value Hedge → P&L Securities → P&L Securities held to maturity → equity The revaluation can be up (revaluation reserve → equity) or down (P&L) Banks: 21

• •

deposits (Spareinlage): measured at cost → only CF hedges → fluctuation in equity investments: measured at FV → FV hedges → stable equity → fluctuation of profit

16 Notes There is no IFRS standard for the notes, there exists only the 4th and 7th directive. The MD&A (Management discussion and analysis) will probably become part of the financial statement.

17 Statement Reporting (IAS 14) There are primary (geographical or business) and secondary (geographical or business) segments. Apart from that the total annual of assets (IAS 34 obligatory from 01-01-2006) has to be disclosed. The following points need not to be disclosed: • Segment liabilities • Capital expenditure • Segment revenue/ expenses

18 Pension (IAS 19) A pension is a future obligation for the company and it is calculated until the employee retires: defined benefit plan defined contribution plan Contains the pension and severance payment the certain percentage employee has to pay in employee receives. pension fund and the company is in charge of allocation of the fund’s money is not considered in the balance sheet

19 Financial Instruments 19.1

Disclosure and Presentation (IAS 32)

19.1.1 Objective This Standard prescribes requirements for presentation of financial instruments and identifies the information that should be disclosed about them. IAS 32 addresses the objective in essentially three ways: 1) Clarifying the classification of a financial instrument, from the perspective of the issuer, into liabilities and equity. 2) Prescribing conditions under which financial assets and liabilities should be offset in the balance sheet. 3) Requiring a broad range of disclosures about factors that affect the amount, timing and certainty of an entity’s future cash flows relating to financial instruments and the accounting policies applied to the instruments. 19.1.2 Definitions A financial instrument is a contract that results in a financial asset of one entity and a financial liability or equity instrument of another entity. A financial asset is 8 cash, 8 a contractual right to receive cash or another financial asset from another entity, 8 a contractual right to exchange financial instruments with another entity under conditions that are potentially favourable, or 8 an equity instrument of another entity. 22

e.g.: cash, accounts receivable, all securities, part B of balance sheet A financial liability is 8 a contractual obligation to deliver cash (A/P / bank X) or another financial asset (A/P / B/E) to another entity, or 8 a contractual obligation to exchange financial instruments with another entity under conditions that are potentially unfavourable. e.g.: all accounts payable, all bonds issued, other payables (taxes, …), loans 19.1.3 Liabilities and equity The fundamental principle of IAS 32 is that an instrument should be classified as either a liability or an equity instrument according to its substance, not its legal form. The key distinguishing feature is that a financial liability involves a contractual obligation either to deliver cash or another financial asset or to exchange another financial instrument with the holder under conditions that are potentially unfavourable to the issuer. An instrument that does not give rise to such a contractual obligation is an equity instrument. 19.1.4 Offsetting A financial asset and a financial liability shall be offset and the net amount reported in the balance sheet when an entity: 8 has a legally enforceable right to set off the amounts; and 8 intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. 19.1.5 The Disclosure The disclosure of IAS 32 is regulated in the paragraphs 42 till 94 and it is divided into seven main parts: 1. Format and Location 2. Risk Management Policies and Hedging Activities 3. Terms, Conditions, and Accounting Policies 4. Interest Rate Risk 5. Credit Risk 6. Fair Value 7. Other Disclosures Stated objective: • provide information to improve the understanding of the significance of financial instruments to an entity’s financial position, performance, and cash flows • assist in assessing the amounts, timing, and certainty of future cash flows • assist users of financial statements in assessing the extent of risk related to financial instruments 19.1.5.1 Format and Location [IAS 32.44] Neither the format of the information required to be disclosed nor its location within the financial statements are prescribed in this Standard. 19.1.5.2 Risk Management Policies and Hedging Policies [IAS 32.46A] An entity shall describe its financial risk management objectives and policies, including hedging policies.

23

19.1.5.3 Terms, Conditions, and Accounting Policies [IAS 32.47] For each class of financial asset, financial liability, and equity instrument IAS 32 requires disclosure of: • the extend and nature of the financial instruments, including significant terms and conditions that may affect amount, timing and certainty of future cash flows; • accounting policies and methods adopted, including the criteria for recognition and the basis of measurement applied 19.1.5.4 Interest Rate Risk [IAS 32.56] For each class of financial assets and financial liabilities an entity shall disclose: • specific information about exposure to interest rate risk (including repricing dates, maturity dates and effective interest rates); 19.1.5.5 Credit risk [IAS 32.66] Each financial asset or other financial exposures an entity shall disclose information: o Maximum credit risk exposure (without taking account of FV) o Significant concentrations of risk • P 67: 66 does not require entities to disclose assessment of probability of losses arising in the future. • P70: o Entity discloses existence and effect of legal right of set off against a financial liability. • P73 (new): an entity may be exposed to credit risk, as result of transaction (with no financial asset recognition), such as a financial guarantee. Guaranteeing an obligation of another party creates liability Î disclosure of credit risk 19.1.5.6 Fair Value [IAS 32.77] For each class of financial asset/liability an entity shall disclose information about fair value. If Fair Value of sold assets could not be reliably measured Î carrying amount + amount of gain/loss recognised shall be disclosed •

•

19.2

P77B: entity shall disclose: o Method and assumptions applied in determining Fair Values, separately for different classes of financial assets o Extent to which Fair Values are determined directly o Extent to which Fair Values are determined in full or in part o Total amount of change in fair value P85: if unquoted equity instruments are measured at cost under IAS39, because Fair Value could not be measured reliably Î information is required to disclose to assist users in making their own judgements of difference carrying amount – Fair Value. Recognition and Measurment (IAS 39)

19.2.1 Initial Measurement of Financial Assets and Financial Liabilities At initial recognition a financial asset or liability shall be measured at its cost, which is the fair value of the consideration given (in the case of an asset) or received (in the case of a liability). Additionally transaction costs that are directly attributable to the acquisition or issue are included. (§ 66) 19.2.2 Determination of the fair value a) Active Market: Quoted price 24

The existence of published price quotations in an active market is the best evidence of fair value and if they exist they shall be used by an entity for measurement of its financial assets and financial liabilities. (§ 99) b) No Active Market: Recent Market Transaction If the market for a financial instrument is not active, the best evidence of fair value is obtained by reference to recent market transactions between knowledgeable, willing parties in arm’s length transaction. If conditions have changed since the most recent market transaction adaptation based on current prices or rates is obligatory. (§ 100) c) No Active Market: Valuation Technique If a) and b) do not lead to a clear determination of fair value, an entity has to apply a valuation technique that on the one hand includes all factors that market participants would consider in setting a price and on the other hand is consistent with accepted economic methodologies (§ 100A-100D). d) No Active Market: Equity Instruments The fair value of investments in equity instruments that do not have a quoted market price in an active market is reliably measurable if the variability in the range of reasonable fair value estimates is not significant for that instrument or if the probabilities of the various estimates within the range can be reasonably assessed and used in estimating fair value (§101-102). 19.2.3 Subsequent Measurement 19.2.3.1 Subsequent Measurement of Financial Assets For the purpose of measuring a financial asset subsequent to initial recognition we have to determine in which category the asset to be valued falls (further definitions to follow): a) b) c) d)

loans and receivables originated by the entity held-to-maturity investments available-for-sale financial assets financial assets held for trading

After initial recognition, financial assets (including derivatives that are assets) are measured at fair values without any deduction for transaction costs that may occur on sale or other disposal! The following exceptions to fair value measurement have to be considered: ƒ ƒ ƒ

Loans and receivables which shall be measured at amortised cost using the effective interest method held-to-maturity investments which shall be measured at amortised cost using the effective interest method investments in equity instruments that do not have a quoted market price and whose fair value cannot be reliably measured and derivatives that are linked to these assets and must be settled by delivery of such unquoted instruments, which both shall be measured at cost

All financial assets other than those measured at fair value with changes in fair value recognized in profit or loss are subject to review for impairment. (paragraphs 109-119). Loans and receivables originated by an entity are measured at amortised cost without regard to the entity’s intention to hold them to maturity (example 1 and 2).

25

19.2.3.2 Held-to-Maturity Investments The criteria for a financial asset to be classified as held to maturity are: ƒ fixed or determinable payments ƒ fixed maturity ƒ ability to hold the asset until maturity (financial resources, no legal constraints) § 87 However, assets are not considered to be held to maturity in the following cases: ƒ ƒ ƒ

the asset is hold for an undefined period the asset is hold ready for sale (except: the sale occurs for not anticipated reasons – e.g. liquidity needs) the asset can be settled by its issuer significantly below its amortised cost

According to this Standard, risk of non-payment does not affect the classification of an asset as “held to maturity” as long as the above stated criteria are met. Generally, an entity shall not classify any financial assets as held to maturity, if it has during the current or the two preceding financial years, sold or reclassified a significant amount of held to maturity investments before maturity (exceptions § 83 lit a-c). In this case, assets to be classified at present shall be categorized as available for sale. 19.2.3.3 Subsequent measurement of Financial Liabilities After initial recognition, an entity shall measure all financial liabilities at amortised cost using the effective interest method. However, derivatives and liabilities that are held for trading are measured at fair value, if the fair value can be clearly determined. 19.2.4 Gains and Losses A recognized gain or loss arising from a change in the fair value of a financial asset or financial liability shall be recognized as follows: a) a gain or a loss on a financial asset or financial liability held for trading shall be recognized in profit or loss for the period in which it arises. If not held for hedging, derivatives are regarded as held for trading. b) a gain or loss on an available-for-sale financial asset shall be recognized directly in equity through the statement of changes in equity (except for impairment losses) until the financial asset is derecognized. Then the cumulative gain or loss shall be recognized in profit or loss for the period. For financial assets and financial liabilities carried at amortised cost, a gain or loss is recognized in profit or loss when the financial asset or financial liability is derecognized or impaired, as well as through the amortization process. Any foreign exchange gains and losses on monetary assets and monetary liabilities are reported in profit or loss according to IAS 21. 19.2.5 Impairment and Uncollectability of Financial Assets An entity shall assess at each balance sheet date whether there is any objective evidence that a financial asset or group of assets is impaired. Objective evidence is given in the following cases: a) b) c) d)

significant financial difficulty of the issuer breach of contract forced exceptional concessions to the borrower (financial difficulties of the borrower) high probability of bankruptcy of the issuer 26

e) recognition of an impairment loss on that asset in a prior financial reporting period f) disappearance of an active market because of financial difficulties g) a historical pattern of collections of a group of financial assets that indicates the entity will not be able to collect all amounts due A significant and prolonged decline in the fair value of an investment in an equity instrument below its cost is also objective evidence of impairment. 19.2.5.1 Financial Assets carried at Amortised Cost If there is objective evidence of impairment and it is probable that an entity will not be able to collect all amounts due (principal and interest) an impairment or bad debt loss has occurred. The carrying amount of the asset shall be reduced to its estimated recoverable amount either directly or through use of an allowance account (example 3). The amount of the loss shall be included recognised in net profit or loss for the period. (§ 111)? The amount of the loss is the difference between the asset’s carrying amount and the present value of expected future cash flows discounted at the financial instrument’s original effective interest rate (recoverable amount). Cash flows related to short-term receivables generally are not discounted. The reason why the original (historical) effective interest rate is used is caused by the circumstance that this measurement is at amortised cost and not at fair value! For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics that are indicative of the debtor’s ability to pay all amounts due according to the contractual terms (for example, on the basis of a credit risk evaluation or grading process that considers asset type, industry, geographical location, collateral type, past-due status, and other relevant factors). 19.2.6 Financial Assets carried at cost If there is objective evidence of impairment, an investment in an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured or a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument, an impairment loss has occurred. The amount of the impairment loss of such a financial asset is the difference between the carrying amount of the financial asset and the present value of expected future cash flows discounted at the current market rate of interest for a similar financial asset (ie recoverable amount). Such impairment losses shall not be reversed as long as the instrument is recognised. 19.2.7 Available-for-Sale Financial Assets When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objective evidence that the asset is impaired the cumulative net loss shall be removed in equity and recognised in profit or loss for the period. The amount of the cumulative net loss is the difference between the acquisition cost (net of any principal repayment and amortisation) and current fair value (for equity instruments) or recoverable amount (for debt instruments), less any impairment loss on that financial asset previously recognised in profit or loss. The recoverable amount of a debt instrument remeasured to fair value is the present value of expected future cash flows discounted at the current market rate of interest for a similar financial asset. Impairment losses recognised in profit or loss for a financial instrument classified as available for sale shall not be reversed through profit or loss as long as the instrument is recognised. 27

19.3 Hedging (IAS 39) Hedging is the minimization of risk. balance sheet deposits loans variable interest rate fixed interest rates 7% 5% rd pay 7% and only receive 5% → hedging by 3 party 19.3.1 Fair Value Hedging …is a hedge of the exposure to changes in fair value of a recognised asset or liability or a previously unrecognised firm commitment to buy or sell an asset at a fixed price, or an identified portion of such an asset or firm commitment, that is attributable to a particular risk and could affect reported profit or loss. Examples for a fair value hedge: • • •

a hedge of exposure to changes in the fair value of fixed debt rate as a result of changes in interest rates. Such a hedge could be entered either by the issuer or by the holder. a hedge of the foreign currency risk in an unrecognised contractual commitment by an airline to purchase an aircraft for a fixed amount of a foreign currency or a hedge of the change in fuel price relating to an unrecognised contractual commitment by an electric utility to purchase fuel at a fixed price.

§153: If a fair value hedge meets the conditions in §142 during the financial reporting period, it shall be accounted for as follows: • •

the gain or loss from remeasuring the hedging instrument at fair value (for a derivative hedging instrument) or the foreign currency component of its carrying amount (for a nonderivative hedging instrument) shall be recognised immediately in profit or loss, and the gain or loss on the hedged item attributable to the hedged risk shall adjust the carrying amount of the hedged item and be recognised immediately in profit or loss. This applies even if a hedged item is otherwise measured at fair value with changes in fair value recognised directly in equity under §103 (b). It also applies if the hedged item is otherwise measured at cost.

19.3.1.1 Example 1: The following example illustrates how §153 applies to a hedge of stock with a long put: Stock Fair Value 120 Book Value 100

Derivative 20 40

with Hedge Accounting: Valuation stock: Valuation derivative:

stock / gain loss / derivative

20 20

stock / changes in FV (Equity)

20

without Hedge Accounting: Valuation stock:

28

Valuation derivative:

gain from trading / derivative

20

Fact is that in case of hedge accounting the hedging instrument and the hedged item are both recognised in the gain or loss account and not recognised seperately in equity and in the gain or loss account.

§156: An entity shall discontinue prospectively the hedge accounting specified in §153 if any one of the following occurs: •

the hedging instrument expires or is sold, terminated, or exercised (for this purpose, the replacement or a rollover of a hedging instrument into another hedging instrument is not regarded as an expiration or termination if such replacement or rollover is part of the entity’s documented hedging strategy); or

•

the hege no longer meets the criteria for hedge accounting in §142.

19.3.1.2 Example 2: The derivative, which was used for hedging the fair value of stock before, is sold on 15/5/02. Stock Fair Value 110 Book Value 120

Derivative 60 50

15.05.02 Valuation stock: loss / stock 15.05.02 Valuation derivative: derivative / gain in hedge accounting 15.05.02 Accounting of derivative sold: bank / derivative

10 10 60

The fair value of the stock increases after the sale of the derivative from 110 to 150. 30.06.02: Valuation stock:

stock / changes in fair value (equity)

40

§157: An adjustment to the carrying amount of a hedged interest-bearing financial instrument shall be amortised to profit or loss. Amortisation may begin as soon as an adjustment exists an shall begin non later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. The adjustment is based on a recalculated effective interest rate at the date amortisation begins and shall be amortised fully by maturity. 19.3.2 Macro Hedging Macro Hedging is also called asset/liability hedging. In that case the net position of assets and liabilities is hedged. We have for example assets of 300 and a liabilities of 100 and therefor a net position of 200, which is hedged with a forward or an interest rate swap. Marcor Hedging is only allowed under the following circumstances: Assest and liabilities have fixed interest rates with equal time to maturity and risk in case of a fair value hedge and variable interest rates in case of a cash flow hedge. So you can hedge the difference between the obligation of purchasing a foreign currency at 120 and the obligation of a sale at 90.

29

19.3.3 Cash Flow Hedging …§137 (b) is a hedge of the exposure to variability in cash flows that • is attributable to a particular risk associated with a recognised asset or liability (such as all or some future interest payments on variable rate debt) or a forecast transaction (such as an anticipated purchase or sale) and • could affect reported profit or loss 19.3.3.1 Example 3 The cash flow of a bearing interest obligaton should be hedged with a swap Conditions of the obligation: time to maturity of 3 years, nominal value 1000, LIBOR at issuing 3.5 % (per 31.12.) swap: 3 years, fixed interests of 3.5 % are received, variable rate also 3.5 % is paid Overview cash flows obligation cash in swap cash in swap cash out total cash in

year 1 35 35 35 35

year 2 35 35 35 35

01.01.02 obligations / bank 01.01.02 swap / bank In which cases Hedge is applied? hedge – efficiency

1.000,-0,--

∆ FV of expected cash flow ∆ FV derivative

80 – 125 %

year 3 35 35 35 35

(we don’t pay expenses for the swap)

The cumulative gain and losses on the hedging instrument = change in fair value of the derivative The cumulative change in fair value of the expected future cash flow = change in fair value of the hedged cash flow 19.3.3.2 Case 1 Hedge efficiency: 100 % we assume that the variable interest rate decreases from 3.5 % fo 3.0 % at the date of purchase cash flows obligation cash in swap cash in swap cash out total cash in 01.01.02

year 1 30 35 30 35

derivative (debitor) / equity

year 2 30 35 30 35 15,--

year 3 30 35 30 35 (measurment at fair value swap 5 x 3 year, no profit or loss)

30

this follows §160;: if the hedge of a forecast transaction results in the recognition of an asset or liability then the associated gains or losses that were recognised directly in equity in accordance with §158 shall be reclassified into profit or loss in the same periods during which the asset acquired or liability incurred affects profit or loss. However, if an entity expects at any time that all or a portion of a net loss recognised directly in equity will not be recovered in one or more future periods, it shall reclassify immediately into profit or loss the amount that is not expected to be recovered. 31.12.02

bank / interest income

30,--

(from obligation)

equity / bank

30,--

(interest expense - swap)

bank / equitiy

35,--

equity / interest income obligation

5,--

equity / derivative

5,--

(interest income - swap)

(value of swaps decrease)

Conclusion: if we have a hedge of 100 % the hedged interest income flows into the profit and loss account in time. 19.3.3.3 Case 2 Hedge efficiency ≠ 100 % but between 80 - 125 % If the hedging instrument is measured in this case, we get a loss or gain, which is only partly efficient. §158 (if §142 is met) (a) the portion of the gain or loss on the hedging instrument that is determined to be an effictive hedge (§142) shall be recongnised directly in equity through the statement of changes in equity and (b) the ineffective portion of the gain or loss on the hedging instrument shall be recogniesed - immediately in profit or loss if the hedging instrument is a derivative; or - in accordance with §103 in the limited circumstances in which the hedging instrument is not a derivative. 19.3.3.4 Example 4 Booked efficient gains in derivative: 10 Fair value of derivative increases by 10 Fair value of cumulative Cash Flows on hedged item decrease by 11 (since issue decrease alltogether by 18) The separate component of equity associated with the hedged item is adjusted to the lesser of the following (in absolute amounts): -

the cumulative gain or loss on the hedging instrument for inception of the hedge and

31

-

the cumulative change in fair value of the expected future cash flows on the hedged item from inception of the hedge

Efficient gain in derivative: Change fair value of expected future cash flows: Efficient part Inefficient part

Æ Æ

derivative / equitiy derivative / realized gain

20 (10 + 10) 18 8,-2,--

19.3.3.5 Case 3 If the rule of 80 – 125 % is not met, the hedge must be discontinued immediately. Also, if any one of the following occurs -

if the hedging instrument expires or is sold, terminated or exercised (for this purpose, the replacement or a rollover of a hedging instrument into another instrument is not regarded as an expiration or termination if such rollover is part of the entity’s documented hedging strategy) Æ cumulative gain or loss on hedging instrument which had been reported directly in equity (§158 a) shall remain separately in equity until forecast transaction occurs Æ §160, 162

-

The hedge no longer meets the criteria for hedge accountig in §142 Æ same

-

The forcast transaction is no longer expected to occur, in which case any related cumulative gain or los has been recognised directly in equity shall be recognised in profit or loss account for the period. (A forecast transaction that is no longer highly probable – §149 may still be expected to occur) §162 for all cash flow hedges other than those covered by § 160, amounts that had been recognised directly in equity shall be included in profit or loss in the same period or periods during which the hedged forecast transaction affects proit or loss (e.g. when a forecasted sale actually occurs)

20 EXKURS: Mezzanin-Finanzierung Unternehmen befinden sich oft in der Lage, dass ihre Eigenkapitalquote unter 30 % liegt und deswegen Banken nicht bereit sind Geld zur Verfügung zu stellen. So wählen diese Unternehmen eine Finanzierungstrategie, die zwischen Eigenkapital und Bankschulden (senior debt) liegen, also nicht so risikolos wie Eigenkapital sind: Preferred Shares (aktienähnlich) werden später als senior debt zurückbezahlt. Diese Schuld wird nur soweit beglichen, als sie im Cash Flow Platz hat (wird behandelt wie Ausschüttung). Reicht die Ausschüttung nicht aus, so bekommen jene Personen, die nicht bedien werden können Mitspracherechte in Form von so genannten B-shares (0,5 % Mitsprache in Summe) [Die A-Shares sind die common shares mit 99,5%)]. SO werden quasi die Mezzanin-Darlehensgeber von den common shares bezahlt, da je länger sie warten müssen, desto höher wird ihrer Mitsprache bewertet. Preferred shares sind financial liabilities, nicht equity

21 Changes in IAS by 17th December 2003 On December 17th the several IFRS where “improved” → improvement project IAS 16, 17, 24, 28, 31, 32, 39, 33, 40 were updated

32

These improvement only partly covered what was stated in the ED (exposure drafts) → drastical changes only in • Fixed assets • Leasing • IAS 32 • IAS 39 In IAS 32 and 39 definitions of equity and debt was changed: These new rules lead to the fact: Shares of co-operatives will not be equity any more (because they are putable). A shareholder is able to return his shares to the co-operative and will be reimbursed → shareholder can decide when and how he wants to return his shares → that’s a put → Raiffeisen Bank has no equity due to IFRS. Im Sinne der Bankcontrolloren hat die Bank natürlich noch Eigenkapital. The nominal value of the shares will not be presented as equity but as e.g. part of liability → only returned earnings. The Rado Bank in the Netherlands is also a co-op, but the bank decides if it wants to pay back. In IAS 39 the continuing involvement approach was abandoned. Now you can derecognize the whole asset but have to recognize provisions for the bared risk. Macro-hedging: opportunity for banks and insurance companies not to hedge individual assets and liabilities but a whole bundle. Difference between CF-hedge (presented in equity) and Fair value hedge (presented in the P&L). Core deposits (Primäreinlagen) may not be hedged as fair value hedges but only as CF-hedges. → all fluctuations are presented in equity (volatility within equity) → investments banks will present the volatility in the P&L and equity will be stable The Board issued several interpretations (several thousand pages) and an ED on Extractive Industries. They have to account for exploration (finding resources, estimate their amount, …). This standard allows the firms to follow US-GAAP) IAS 30 Banks: New standard that deals with financial liability and its named will be changed.

22 Insurance contracts Consider the balance sheet and the P&L of an insurance company: P&L premium income all income received from policy holders saving component insurance component no longer part of P& L keeps being part of P&L → becomes liability balance Financial Assets IAS 39 held for trading to gain catastrophe provision profit and measured at fair value equalisation provision liabilities (deposit) measured at cost partly for company partly for policy holder discretionary participation feature

33

Das discretionary participation feature wird nicht voll asugeschüttet, damit man zum Bsp. bei einer Lebensversicherung auch in Jahren, wo die Versicherung eigentlich keinen Gewinn macht einen Gewinn erhält. What happens to the nature of financial assets, when the interest rate rises? – The nominal value decreases because the Rendite of financial assets consists of two terms: nominal value plus interest → if interest goes up, the nominal value has to go down → On the left hand side of the balance sheet capital is terminated, whereas on the right hand side everything stays the same due to measurement at cost. e.g.: interest at buying date: i=3% now: i=8% → loss created now: i=2% → profit created The benefit of the insurance contract standard is the differentiation between a saving and insurance component but the problem according to different measurement on the credit and deposit side of the balance causes problem. (In US-GAAP these problems are solved via shadow accounting, which means the mismatch between deposit and credit side is compensated by creation of prepaid expenses or unearned revenues).

23 Provisions (IAS 37) Liabilities are present obligations resulting from an event in the past. The difference between liabilities and provisions is that provisions are uncertain in time or in amount. Provisions are a subgroup of liabilities. Contingent liabilities are presented under the balance sheet total under Austrian HGB and under IFRS they do not exist because they are uncertain in time and amount – they cn only be shown in the notes. Provisions are measured at the PV of future payments → calculate the expectation value and discount it to the PV → provisions are some kind of exemption because liabilities are usually not discounted.

24 Events After the Balance Sheet Date (IAS 10) IAS 10 was approved by the IASC Board in March 1999 and became effective for annual financial statements covering periods beginning on or after 1st January 2000. Key Definitions Event after the balance sheet date: An event, which could be favourable or unfavourable, that occurs between the balance sheet date and the date that the financial statements are authorised for issue. [IAS 10.3] Adjusting event: An event after the balance sheet date that provides further evidence of conditions that existed at the balance sheet, including an event that indicates that the going concern assumption in relation to the whole or part of the enterprise is not appropriate. [IAS 10.3] Non-adjusting event: An event after the balance sheet date that is indicative of a condition that arose after the balance sheet date. [IAS 10.3] Accounting •

Adjust financial statements for adjusting events – events after the balance sheet date that provide further evidence of conditions that existed at the balance sheet, including events that

34

• •

indicate that the going concern assumption in relation to the whole or part of the enterprise is not appropriate. [IAS 10.8] Do not adjust for non-adjusting events – events or conditions that arose after the balance sheet date. [IAS 10.10] If an entity declares dividends after the balance sheet date, the entity shall not recognise those dividends as a liability at the balance sheet date. That is a non-adjusting event. [IAS 10.12]

Going Concern Issues Arising After Balance Sheet Date An entity shall not prepare its financial statements on a going concern basis if management determines after the balance sheet date either that it intends to liquidate the entity or to cease trading, or that it has no realistic alternative but to do so. [IAS 10.14] Disclosure Non-adjusting events should be disclosed if they are of such importance that non-disclosure would affect the ability of users to make proper evaluations and decisions. The required disclosure is a) the nature of the event and b) an estimate of its financial effect or a statement that a reasonable estimate of the effect cannot be made. [IAS 10.21] A company should update disclosures that relate to conditions that existed at the balance sheet date to reflect any new information that it receives after the balance sheet date about those conditions. [IAS 10.19] Companies must disclose the date when the financial statements were authorised for issue and who gave that authorisation. If the enterprise's owners or others have the power to amend the financial statements after issuance, the enterprise must disclose that fact. [IAS 10.17] Summary of IAS 10 • • • •

•

•

•

an enterprise should adjust its financial statements for events after the balance sheet date that provide further evidence of conditions that existed at the balance sheet; an enterprise should not adjust its financial statements for events after the balance sheet date that are indicative of conditions that arose after the balance sheet date; if dividends to holders of equity instruments are proposed or declared after the balance sheet date, an enterprise should not recognise those dividends as a liability; an enterprise may give the disclosure of proposed dividends (required by IAS 1: Presentation of Financial Statements) either on the face of the balance sheet as an appropriation within equity or in the notes to the financial statements; an enterprise should not prepare its financial statements on a going concern basis if management determines after the balance sheet date either that it intends to liquidate the enterprise or to cease trading, or that it has no realistic alternative but to do so; there should no longer be a requirement to adjust the financial statements where an event after the balance sheet date indicates that the going concern assumption is not appropriate for part of an enterprise; an enterprise should disclose the date when the financial statements were authorised for issue and who gave that authorisation. If the enterprise's owners or others have the power to amend the financial statements after issuance, the enterprise should disclose that fact; and

35

•

an enterprise should update disclosures that relate to conditions that existed at the balance sheet date in the light of any new information that it receives after the balance sheet date about those conditions.

25 Emission Rights IFRIC draft interpretation, dealing with accounting of emission rights, referring to: - IAS 20 Accounting for Government Grants and Disclosure of Government Assistance - IAS 36 Impairment of Assets - IAS 37 Provisions, Contingent Liabilities and Contingent Assets - IAS 38 Intangible Assets IFRIC draft interpretation, that arises from a “cap and trade” scheme, having the following features: - Rights (allowances) to emit pollutant at a specified level are allocated to participants of the scheme by the government or government agency. Allowances are allocated free of charge or the participants pay for them. - Allowances for a compliance period are issued to each participant at the beginning of a period, actual emissions are verified at the end of the period in question. - Participants can → emit pollutants equal to the level allocated; → emit a lower level of pollutants and sell the excess allowances; → emit a higher level of pollutants, buy additional allowances for the excess emissions or pay a penalty; - At the end of the compliance period, a participant is required to deliver allowances equal to its actual emissions, if not → pay a penalty (in form of cash payment, reductions in the allowances allocated for subsequent periods and restrictions on its operations) - Unused allowances can be carried forward to be used against future emissions. - Arising of a liquid market, brokers buy allowances from and sell them to participants in the scheme. a) An emission rights scheme gives rise to an asset (for allowances held) and a liability, deferred income and/or income. An allowance is seen as an asset and a liability in the sense of the Framework. → a resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise → a present obligation arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits The allowance and the obligation have independent existences. b) Allowances, whether allocated by government or purchased, are intangible assets. → an identifiable non-monetary asset without physical substance held for use in the production or supply of goods or services, for rental to others, or for administrative purposes Measurement: -

Allowances that are allocated for less than their fair value shall be measured initially at their fair value. Allowances shall not be amortized but may be impaired. 36

-

Where allowances are allocated for less than fair value, the difference between the amount paid and fair value is a government grant which is initially recognized as deferred income in the balance sheet and subsequently recognized as income on a systematic basis over the compliance period for which the allowances were allocated.

c) As emissions are made, a liability is recognized for the obligation to deliver allowances equal to emissions that have been made or to pay a penalty. The liability for the obligation arises with the emission not with the receipt of allowances. Measurement: -

-

The liability is a provision and according to IAS 37.36 it shall be measured at the best estimate of the expenditure required to settle the present obligation at the balance sheet date. This will normally be the present market price of the number of allowances required to cover emissions made up to the balance sheet date. If the participant’s best estimate is that some or all of the obligation will be settled by incurring a cash penalty, it shall measure that part of its obligation at the cost of the penalty rather than the market price of the relevant number of allowances.

26 Share based payment The meaning of share based payment is that someone gets shares/ options in return for services rendered. Due to IAS SBP is an expense, whereas US-GAAP it is not. The primary objective of financial statements is to provide high quality, transparent and comparable information to help users make economic decisions. Entities often issue shares or share options to pay employees or other parties. Share and share option plans are a common feature of employee pay, not only for directors and senior executives. Some entities issue shares or share options to pay suppliers, such as suppliers of professional services.Few countries have standards on the topic. This is of particular concern in Europe, where the use of share-based payment has increased in recent years and continues to spread. The Board has therefore issued this Exposure Draft as part of its due process in developing a new IFRS on share-based payment. Much of the complexity surrounding accounting for share-based payments relates to employee share options. However the scope of the proposed IFRS is broader than that. It covers transactions in which shares or other equity instruments, which are granted to employees. It also covers transactions with parties, other than employees, in which goods or services are received as consideration for the issue of shares, options or other equity instruments. It also covers payments in cash (or other assets) that are „share-based“, because the amount of the payment is based on the price of the entity’s shares or other entity instruments, eg cash share appreciation rights. Typically, employee share purchase plans provide employees with an opportunity to buy a specific number of shares at a discounted price, ie at an amount that is less than the fair value of the shares. The employee’s entitlement to discounted shares is usually conditional. Specific conditions can be such as remaining in the service of the entity for a specific period.

26.1 TRANSFERS OF EQUITY INSTRUMENTS TO EMPLOYEESIn some situations, an entity might not issue shares or options to the employees (or other parties) direct. Instead, a shareholder might transfer equity instruments to the employees (or other parties). Two transactions can be observed: • one transaction in which the entity has reacquired equity instruments for nil consideration • second transaction in which the entity has received services (or goods) as consideration for equity instruments issued for employees The second transaction is a share-based payment transaction. A transfer is not a share-based payment transaction if the transfer of equity instruments to an employee or other party is clearly for 37

purpose other than payment for goods or services supplied to the entity. For example, if the transfer is to settle a shareholder’s personal obligation that is unrelated to employment by the entity. Or in case of a personal gift of shareholder to an employee. 26.2

RECOGNITION OF EXPENSES ARISING FROM EQUITY-SETTLED SHAREBASED PAYMENT TRANSACTIONS The following arguments commonly made against expense recognition: 1. The entity is not a party to the transactionSome argue that the transaction is between the shareholders and the employees, not the entity and the employees. The Board did not accept this argument. Entities, not share-holders, set up employee share plans and entities, not shareholders, issue options to their employees. The equity instruments are issued in return for services rendered by the employees and the entity, not the shareholders, receives those services. Therefore the Board concluded that the entity should account for the services received in return for the equity instruments issued. 2. The employees do not provide services for the options because the employees are paid in cash (or other assets) for their services. If it were true that employees do not provide services for their options, this would mean that entities are issuing valuable share options and getting nothing in return. Typically, shares or options granted to employees form one part of their pay package. For example, an employee might have a pay package consisting of: a basic cash salary, a company car, pension, healthcare benefits and other benefits including shares and options. So, the employee provides services for the entire pay package. In summary, options or other equity instruments are granted to employees because they are employees. 3. There is no cost to the entity, therefore there is no expense.Some argue that because share-based payments do not require the entity to sacrifice any cash or other assets, there is no cost to the entity, and therefore no expenses should be recognized. The Board regards this argument unsound, because it overlooks that: every time an entity receives resources, there is no outflow of cash or other assets, and on every occasion the resources received as consideration for the issue of equity instruments are recognized in the financial statements the expenses arises from the consumption of those resources, not from outflow of assets The only difference in the case of employee services (or other services) received as consideration for the issue of shares or options is that usually the resources received are consumed immediately upon receipt. But the Board concluded that the timing of consumption does not change the principle, the financial statements should recognise the consumption of resources. 26.2.1 MEASUREMENT OF SHARE-BASED PAYMENT TRANSACTIONSTo recognise equity-settled share-based payment transactions, it is necessary to decide how the transactions should be measured. In terms of accounting principles, there are 2 basic questions: –which measurement basis should be applied? –when should that measurement basis be applied? The Board discussed the following measurement bases, to decide which should be applied in principle: historical cost, intrinsic value, minimum value, fair valuehistorical cost: entities commonly repurchase their own shares, either directly or through a vehicle such as trust, which are used to fulfil promised grants of shares to employees or the exercise of employee options. A possible 38

basis for measuring a grant of options should be the historical cost (purchase price) of its own shares that an entity holds, even they were acquired before the award was made. If the cash flows related to anything other than the entity’s own shares this approach would be appropriate. For example: ABC LTD bought shares in another entity, DEF LTD for a total cost of CU (currency units) 500.000,00 And later sold the shares to employees for a total of CU 400.000,000 The entity would recognise an expense for the CU 100.000,00 But when the analysis is applied to the entity’s own shares, the logic breaks down. The entity’s own shares are not an asset of the entity. Board concluded that historical cost is not appropriate. • •

•

intrinsic value: is the difference between the market price of the underlying shares and the exercise price of the option. The intrinsic value of an option does not fully reflect its value. minimum value: is based on the premise that someone who wants to buy a call option on a share would be willing to pay at least (and the option writer would demand at least) the value of the right to defer payment of the exercise price until the end of the option’s term. Board concluded that minimum value is not an appropriate measurement basis, because ignoring the effects of volatility ignores a potentially large part of an options value. fair value: is the amount at which an equity instrument granted could be exchanged between knowledgeable, willing parties. It captures both intrinsic value and time value and therefore provides a measure of the option’s total value. Measuring share-based payment transactions at fair value ensures that those transactions are represented faithfully in the financial statements, and consistently with other transaction in which the entity receives resources as consideration for the issue of equity instruments. For transactions with employees, the entity shall measure the fair value of the employee services received by reference to the fair value of the equity instruments granted, because the latter fair value is more readily 'determinable than the fair value of the employee services received. If the equity instruments granted vest immediately, the counterparty is not required to complete a specified period of service before becoming unconditionally entitled to those equity instruments. If the equity instruments granted do not vest until the counterparty completes a specified period of service, the entity shall presume that the services to be rendered by the counterparty as consideration for those equity Instruments will be received in the future, during the vesting period. The entity shall measure the services received in each period by multiplying the number of units of service received from the counterparty (or counterparties) during that period by the deemed fair value per unit of service. If a counterparty ceases to render service during the period (eg an employee leaves), the entity shall include the services received from that counterparty before cessation of service in determining the number of units of service received during the period, but shall not recognise any further amounts in respect of that counterparty. An entity shall measure the fair value of equity instruments granted, based an market prices if available, taking into account the terms and conditions upon which those equity instruments were granted. The fair value of options granted shall be measured at the market price of traded options with similar terms and conditions. However, in many cases such traded options do not exist, because the options granted are subject to terms and conditions that do not apply to traded options. If traded options with similar terms and conditions do not exist, the fair value of the options granted shall be estimated by applying an option pricing model, such as the Black-Scholes model or a binomial model. The model applied shall take into account all of the following factors:

39

If a grant of shares or options is conditional upon satisfying specified vesting conditions, those conditions shall be taken into account when an entity measures the fair value of the shares or options granted. For example, a grant of shares or options to an employee is typically conditional an the employee's remaining in the entity's employ for a specified period of time. There might also be performance conditions that must be satisfied, such as the entity's achieving a specified growth in profit or a specified increase in the entity's share price. Vesting conditions shall be taken into account either by incorporating them into the application of an option pricing model or by making an appropriate adjustment to the value produced by such a model. If the entity cancels a grant of shares or options during the vesting period (other than a grant cancelled by forfeiture when the vesting conditions are not satisfied): a) the entity shall continue to account for services rendered by the counterparty during the remainder of the vesting period, as if that grant had not been cancelled. b) any payment made to the counterparty an the cancellation of the grant shall be accounted for as the repurchase of an equity interest, I ie as a deduction from equity, except to the extent that the payment exceeds the fair value of the shares or options granted, measured at the repurchase date. Any such excess shall be recognised as an expense. c) if new options are granted to the counterparty and, an the date when those new options are granted, the entity identifies the new options granted as replacement options for the cancelled options, the entity shall account for the granting of replacement options in the same way as a repricing of options. The incremental value granted is the difference between the fair value of the replacement options and the net fair value of the cancelled options, at the date the replacement options are granted. The net fair value of the cancelled options is their fair value less the amount of any payment made to the counterparty an cancellation of the options that is accounted for as a deduction from equity in accordance with (b) above. If the entity does not identify new options granted as replacement options for the cancelled options, the entity shall account for those new options as a new option grant. If an entity repurchases vested equity instruments, the payment made to the counterparty shall be accounted for as a deduction from equity, except to the extent that the payment exceeds the fair value of the equity instruments repurchased at the repurchase date. Any such excess shall be recognised as an expense. 26.3 MEASUREMENT DATE grant date is the date when the entity and the employee enter into agreement, whereby the employee is granted rights to the share option, provided that specific conditions are met, such as the employee’s remaining in the entity’s employ for a specific period. service date is the date when the employee renders the services necessary to become unconditionally entitled to the option-vesting date is the date when the employee has satisfied all the conditions necessary to become entitled to the option. For example, if the employee is required to remain in the entity’s employ for 3 years, vesting date is at the end of that 3-year period. exercise date is when the option is exercised The Board concluded that grant date is the appropriate measurement date. 26.4 CASH-SETTLED SHARE-BASED PAYMENT TRANSACTIONS For cash-settled share-based payment transactions, the entity shall measure the goods or services acquired and the liability incurred at the fair value of the liability. Until the liability is settled, the entity shall remeasure the fair value of the liability at each reporting date, with any changes in fair value recognised in profit or loss. For example, an entity might grant share appreciation rights to employees as part of their pay package, whereby the employees will become entitled to a future cash payment (rather than an equity instrument), based an the increase in the entity's share price from a specified level over a specified period of time. The liability shall be measured, initially and at each reporting date until settled, at the fair value of the share appreciation rights, by applying an option pricing model, taking into account the terms and 40

conditions an which the share appreciation rights were granted,-and the extent to which the employees have rendered service to date. 26.5 SHARE-BASED PAYMENT TRANSACTIONS WITH CASH ALTERNATIVES For share-based payment transactions in which either the entity or the counterparty may choose whether the entity settles the transaction in cash or by issuing equity instruments, the entity shall account for that transaction, or the components of that transaction, as a cash-settled share-based payment transaction if the entity has incurred a liability to settle in cash or other assets, or as an equity-settled share-based payment transaction if no such liability has been incurred. The entity shall first measure the fair value of the debt component, and then measure the fair value of the equity component-taking into account that the counterparty must forfeit the rght to receive cash to receive the equity instrument. Fair value of one settlement alternative is the same as the other. 26.6

SHARE-BASED PAYMENT TRANSACTIONS IN WHICH THE ENTITY HAS THE CHOICE OF SETTLEMENT For a share-based payment transaction in which an entity may choose whether to settle in cash or by issuing equity instruments, the entity shall determine whether it has a present obligation to settle in cash and account for the share-based payment transaction accordingly. The entity has a present obligation to settle in cash if the choice of settlement in equity instruments is not substantive, or if the entity has a past practice or a stated policy of settling in cash. If no such obligation exists, the entity shall account for the transaction in accordance with the requirements applying to equity-settled transactions. Upon settlement: a) if the entity elects to settle in cash, the cash payment shall be accounted for as the repurchase of an equity interest, ie as a deduction from equity, except as noted in (c) below. b) (b) if the entity elects to settle by issuing equity instruments, no further accounting is required (other than a transfer from one component of equity to another, if necessary), except as noted in (c) below. c) (c) if the entity elects the settlement alternative with the higher fair value, as at the date of settlement, the entity shall recognise an additional expense for the excess value given, ie the difference between the cash paid (the fair value of the equity instruments issued) and the fair value of the equity instruments that would otherwise have been issued (the amount of cash that would otherwise have been paid). 26.7 DISCLOSURES An entity shall disclose information that enables users of the financial statements to understand the nature and extent of share-based payment arrangements that existed during the period. To give effect to the principle in paragraph 45, the entity shall disclose at least the following: a) A description of each type of share-based payment arrangement that existed at any time during the period, including details of: whether the rights granted by the entity to employees or other parties pursuant to the arrangement consisted of rights to shares, share options, other equity instruments, cash or other assets; i) when those rights were granted; ii) Chose to whom the rights were granted (eg a description of the number and class of employees participating in a group employee share plan); iii) the contractual life of options granted; iv) whether the exercise price is fixed or variable (and, if variable, how the exercise price is determined); and v) A description of the vesting requirements, including service conditions and performance conditions. 41

b) the number and weighted average exercise prices of options for each of the following groups of options: (i) outstanding at the beginning of the period; (ii) granted during the period; (iii)forfeited during the period; (iv) exercised during the period; (v) expired during the period; (v) outstanding at the end of the period; and (vii) exercisable at the end of the period. c) for options exercised during the period, the weighted average share price at the date of exercise. An entity shall disclose information to enable users of the financial statements to understand how the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period was determined. An entity shall disclose information that enables users of the financial statements to understand the effect of expenses arising from share-based payment transactions and the entity's profit or loss for the period. 26.8 Example An entity grants 100 options to each of its 500 employees. Each grant is conditional upon the employee working for the entity over the next years. The entity estimates that the fair value of each option is CU15,* before adjusting for the possibility of forfeiture due to failure of the employee to complete the required three-year period of service. On the basis of a weighted average probability, the entity estimates that 20 per cent of employees will leave during the three-year period and therefore forfeit their rights to the options. Therefore, the total fair value of the options granted = 500 employees x 100 options x CU15 x 80% = CU600,000. The entity also estimates, on the basis of a weighted average probability, that the employee departures will be spread evenly over the three years.Therefore, the entity expects to receive 3 years' service from 400 employees (500 x 80%), and it also expects to receive services from the other 20% of employees before they leave. Because their departures are expected to occur evenly over the three years, the entity expects to receive, on average, 1.5 years of service from each of the 100 employees who are expected to leave before vesting date. Therefore, the entity expects to receive in total (3 years' service * 400 ernployees) + (1 .5 years' service x 100 employees) = 1,350 'years' (units) of service from the employees. To determine the fair value of each unit of service expected to be received, the fair value of the options granted (CU600,000) is divided by the number of units of service expected to be received during the vesting period (1,350), which gives a deemed fair value of CU444.44 per unit of employee service. If everything turns out exactly as expected, the entity recognises the following amounts during the vesting period, for services received as consideration for the options. CU Year 1 (467 + (33 x 0.5)) units of service x CU444.44 = Year 2 (433 + (34 x 0.5)) units of service x CU444.44 = Year 3 (400+ (33 x 0.5» units of service x CU444.44 =

214,889

Total over three years

600.000

200,000 185,111

42

If fewer employees leave than originally estimated, or those that leave stay longer before leaving, the total amount will be higher than in Scenario 1, because more services would be received than expected. For example, suppose that only 50 employees leave, and they all leave at the end of year 2: Year 1 500 units of service x CU444.44 =

222,222

500 units of service x CU444.44 =

222,222

450 units of service x CU444.44 = Total over three years

200.000 644.444

Year 2 Year 3

If more employees leave than originally estimated, or they leave earlier than expected, the total amounts recognised will be lower than earlier, because fewer services would be received than expected. Suppose 75 employees leave halfway through year 1, another 75 leave three months from the start of year 2 and 40 leave halfway through year 3, so there are 310 employees at the end of year 3. Year 1: (425 + (75 * 0,5)) * 444,44 = 205.554 Year 2: (350 + (75 *0,25)) * 444,44 = 163.887 Year 3: (310 + (40 * 0,5)) * 444,44 = 146.667 Total over 3 years

= 516.108

43

27 Words and Phrases 27.1 English – German allocation allocation to (long-term) reserves allowance account amortize amortized cost application appraisal arm’s length transaction audit opinion bad debt loss bill of exchange bill of exchange (B/E) building society business combination carrying amount cash & cash equivalents catastrophe provision collateral (security) (e.g.: reservation of ownership commodity-based contract compliance period compound instruments cost equity method cost of goods sold (COGS) credit and funding risk deferred income deferred income deferred lax liability deferred tax asset defined benefit plan defined contribution plan derivative financial instruments derivatives disclosure earnings per share (EPS) effective interest endorsement enforcement enterprises entity equalisation provision equity instrument equity instruments equity method investments

Zuteilung, Kontingent Dotierung von (langfristigen) Rücklagen Abschreibungskonto abschrieben, amortisieren, tilgen fortgeschriebene Anschaffungskosten Applikation, Anwendung, Programm, Software Bewertungsgutachten Abschluss auf rein geschäftlicher Grundlage (z.B.: zu Marktpreisen) Bestätigungsvermerk Forderungsausfall Wechsel Wechsel Bausparkassa Unternehmenszusammenschluss Buchwert Zahlungsmittel Katastrophenrückstellung Sicherheit (z.B.: Eigentumsvorbehalt) Warentermingeschäfte Erfüllungszeitraum zusammengesetzte Finanzinstrument (beinhalten beides, Schuld und Eigenkapital) Kostenarten Ausfalls- und Liquiditätsrisiko Bewertungsreserve Bewertungsreserve latente Steuerschuld latente Steuerforderungen leistungsorientierte Betriebspension beitragsorientiertes Betriebspension derivative Finanzinstrumente z.B. Optionen, Termingeschäfte, Swaps Derivate Angaben Gewinn pro Aktie Effektiver Zinssatz zum Gesetz machen die Einhaltung des Gesetzes überprüfen Unternehmen Rechtspersönlichkeit, Unternehmen Schwankungsrückstellung Eigenkapitalinstrument Dividendenpapiere Equity-Beteiligungen 44

equity securities expenditure expense exposure fair value fair value

Eigenkapitaltitel Ausgaben Aufwand Aussetzung, Aufdeckung beizulegender Zeitwert Tageswert, Marktwert, Verkehrswert, beizulegender Wert feasibility Durchführbarkeit finance lease Leasing über überwiegenden Teil der wirtschaftlichen ND und Eigentumsübergang am Ende der Vertragszeit. financial asset finanzieller Vermögenswert financial asset Finanzanlagen, Forderung als Vermögenswert financial assets Wertpapiere und Finanzanlagen financial instrument Finanzinstrument financial liability finanzielle Verbindlichkeit fixed asset movement schedule Anlagenspiegel fully diluted EPS voll verwässerte Aktien future economic benefit Zukünftiger wirtschaftlicher Nutzen government agencies öffentliche Institutionen hedging Absicherung zukünftiger Geschäfte historical cost concept Anschaffungskostenprinzip impairment Neubewertung incorporated bodies Kapitalgesellschaften individuals Personen infrastructure (Web Sites) Infrastruktur: Hard- und Software in einem einzelnen Computer oder einem Computernetz, die die Grundlagen für Datenverarbeitung und Datenaustausch darstellen. initial recognition Erstaktivierung intangible asset inmaterielles Anlagevermögen immaterielle Vermögenswerte Intangible asset - an identifiable nonidentifizierbare nicht monetäre monetary asset without physical substance Vermögenswerte, ohne physische Substanz, held for use in the production or supply of goods and services, for rental to others, or for die für den Gebrauch in der Produktion, in der Güter- und Dienstleistungsversorgung, für die administrative purposes Vermietung an Dritte oder für Verwaltungszwecke gehalten werden. intangible assets immaterielle Vermögenswerte Internally generated intangible assets Selbsterstellte immaterielle Vermögenswerte internet service provider „Internet-Dienstbereitsteller Firma/Institution, die meist gegen Gebühren über eigene Teilnetze Zugang zum Internet bietet. inventories Vorräte issued capital Nennkapital mandatory redemption vorgeschriebene Abzahlung matching periodengerechter Erfolgsausweis minority Interest Minderheitenanteile minority interests Minderheitenanteile am Ergebnis monetary financial assets/liabilities monetäre Finanzinstrumente (haben einen 45

net loss of the year noncurrent liabilities offset operating lease overhead expenditure partnerships pollutant pooling interest method preferred share prepaid expenses presentation primary financial instruments pro rata consolidation profit of the year property, plant & equipment (PPE) provision provisions prudence quoted price recent market transaction recognition recognize reservation of ownership reserves residual interest retransfer of (long-term) reserves revaluations surplus security severance payment share (much wider range of meaning in English language) split accounting stewardship strike-price tangible asset to amortize intangible asset to capitalize sth to consolidate to depreciate tangible asset to expense total cost format trade payables trade receivables unearned revenues useful life valuation technique

festen oder bestimmbaren Geldbetrag) Jahresüberschuss langfristige Verbindlichkeiten Ausgleich „kurzfristiges“ Leasing gewöhnliche Betriebsausgaben Personengesellschaften Schadstoff Interessenszusammenführungsmethode Vorzugsaktie aktive Rechnungsabgrenzungsposten Darstellung originäre (klassische) Finanzinstrumente z.B. Forderungen, Verbindlichkeiten, Eigenkapital Quotenkonsolidierung Jahresüberschuss Sachanlagen Rückstellung Rückstellungen Vorsichtigkeitsprinzip Gelisteter Preis (Börse) Markttransaktion vor kurzer Zeit (Kauf / Verkauf) Aktivierung Vermögensgegenstand oder Verbindlichkeit im Jahresabschluss dem Grunde nach berücksichtigen Eigentumsvorbehalt Rücklagen Residualanspruch Auflösung (langfristiger) Rücklagen Neubewerbungsrücklage Wertpapier Abfertigung Aktie getrenntes ausweisen von Schulden und Eigenkapital Verwaltung Ausübungspreis materielles Anlagevermögen abschreiben aktivieren voll konsolidieren abschreiben als Aufwand buchen Kostenstellen Verbindlichkeiten aus L+L Forderungen aus L+L passive Rechnungsabgrenzungsposten Nutzungsdauer Bewertungsmethode 46

27.2 German - English allocation cost equity method internet service provider

operating lease severance payment arm’s length transaction to amortize intangible asset to depreciate tangible asset allowance account amortize hedging share (much wider range of meaning in English language) prepaid expenses to capitalize sth recognition to expense disclosure fixed asset movement schedule historical cost concept application retransfer of (long-term) reserves expense credit and funding risk expenditure offset exposure strike-price building society defined contribution plan fair value audit opinion appraisal valuation technique deferred income deferred income carrying amount presentation derivatives derivative financial instruments enforcement equity instruments allocation to (long-term) reserves feasibility effective interest

Zuteilung, Kontingent „Internet-Dienstbereitsteller Firma/Institution, die meist gegen Gebühren über eigene Teilnetze Zugang zum Internet bietet. „kurzfristiges“ Leasing Abfertigung Abschluss auf rein geschäftlicher Grundlage (z.B.: zu Marktpreisen) abschreiben abschreiben Abschreibungskonto abschrieben, amortisieren, tilgen Absicherung zukünftiger Geschäfte Aktie aktive Rechnungsabgrenzungsposten aktivieren Aktivierung als Aufwand buchen Angaben Anlagenspiegel Anschaffungskostenprinzip Applikation, Anwendung, Programm, Software Auflösung (langfristiger) Rücklagen Aufwand Ausfalls- und Liquiditätsrisiko Ausgaben Ausgleich Aussetzung, Aufdeckung Ausübungspreis Bausparkassa beitragsorientiertes Betriebspension beizulegender Zeitwert Bestätigungsvermerk Bewertungsgutachten Bewertungsmethode Bewertungsreserve Bewertungsreserve Buchwert Darstellung Derivate derivative Finanzinstrumente z.B. Optionen, Termingeschäfte, Swaps die Einhaltung des Gesetzes überprüfen Dividendenpapiere Dotierung von (langfristigen) Rücklagen Durchführbarkeit Effektiver Zinssatz 47

equity instrument equity securities reservation of ownership equity method investments compliance period initial recognition financial asset financial liability financial asset financial instrument trade receivables bad debt loss amortized cost quoted price

Eigenkapitalinstrument Eigenkapitaltitel Eigentumsvorbehalt Equity-Beteiligungen Erfüllungszeitraum Erstaktivierung Finanzanlagen, Forderung als Vermögenswert finanzielle Verbindlichkeit finanzieller Vermögenswert Finanzinstrument Forderungen aus L+L Forderungsausfall fortgeschriebene Anschaffungskosten Gelisteter Preis (Börse) getrenntes ausweisen von Schulden und split accounting Eigenkapital earnings per share (EPS) Gewinn pro Aktie overhead expenditure gewöhnliche Betriebsausgaben intangible assets immaterielle Vermögenswerte immaterielle Vermögenswerte Intangible asset - an identifiable nonidentifizierbare nicht monetäre monetary asset without physical substance Vermögenswerte, ohne physische Substanz, held for use in the production or supply of goods and services, for rental to others, or for die für den Gebrauch in der Produktion, in der Güter- und Dienstleistungsversorgung, für die administrative purposes Vermietung an Dritte oder für Verwaltungszwecke gehalten werden. infrastructure (Web Sites) Infrastruktur: Hard- und Software in einem einzelnen Computer oder einem Computernetz, die die Grundlagen für Datenverarbeitung und Datenaustausch darstellen. intangible asset inmaterielles Anlagevermögen pooling interest method Interessenszusammenführungsmethode net loss of the year Jahresüberschuss profit of the year Jahresüberschuss incorporated bodies Kapitalgesellschaften catastrophe provision Katastrophenrückstellung cost of goods sold (COGS) Kostenarten total cost format Kostenstellen noncurrent liabilities langfristige Verbindlichkeiten deferred tax asset latente Steuerforderungen deferred lax liability latente Steuerschuld finance lease Leasing über überwiegenden Teil der wirtschaftlichen ND und Eigentumsübergang am Ende der Vertragszeit. defined benefit plan leistungsorientierte Betriebspension recent market transaction Markttransaktion vor kurzer Zeit (Kauf / Verkauf) tangible asset materielles Anlagevermögen minority Interest Minderheitenanteile minority interests Minderheitenanteile am Ergebnis monetary financial assets/liabilities monetäre Finanzinstrumente (haben einen 48

issued capital revaluations surplus impairment useful life government agencies primary financial instruments unearned revenues matching individuals partnerships pro rata consolidation entity residual interest reserves provision provisions property, plant & equipment (PPE) pollutant equalisation provision Internally generated intangible assets collateral (security) (e.g.: reservation of ownership fair value enterprises business combination trade payables recognize stewardship to consolidate fully diluted EPS mandatory redemption inventories prudence preferred share commodity-based contract bill of exchange bill of exchange (B/E) security financial assets cash & cash equivalents future economic benefit endorsement compound instruments

festen oder bestimmbaren Geldbetrag) Nennkapital Neubewerbungsrücklage Neubewertung Nutzungsdauer öffentliche Institutionen originäre (klassische) Finanzinstrumente z.B. Forderungen, Verbindlichkeiten, Eigenkapital passive Rechnungsabgrenzungsposten periodengerechter Erfolgsausweis Personen Personengesellschaften Quotenkonsolidierung Rechtspersönlichkeit, Unternehmen Residualanspruch Rücklagen Rückstellung Rückstellungen Sachanlagen Schadstoff Schwankungsrückstellung Selbsterstellte immaterielle Vermögenswerte Sicherheit (z.B.: Eigentumsvorbehalt) Tageswert, Marktwert, Verkehrswert, beizulegender Wert Unternehmen Unternehmenszusammenschluss Verbindlichkeiten aus L+L Vermögensgegenstand oder Verbindlichkeit im Jahresabschluss dem Grunde nach berücksichtigen Verwaltung voll konsolidieren voll verwässerte Aktien vorgeschriebene Abzahlung Vorräte Vorsichtigkeitsprinzip Vorzugsaktie Warentermingeschäfte Wechsel Wechsel Wertpapier Wertpapiere und Finanzanlagen Zahlungsmittel Zukünftiger wirtschaftlicher Nutzen zum Gesetz machen zusammengesetzte Finanzinstrument (beinhalten beides, Schuld und Eigenkapital)

49