Conceptual principles of financial reporting

IAS 40 — Investment Property

Property held to earn rentals or for capital gains rather than for use in an activity.

Model	Valuation	Impact
Fair Value	Market	Changes to Profit No Depreciation
Cost IAS 16	Cost – Depreciation	Fair Value is disclosed in the notes

Transfers from/to investment property are permitted upon a change in use.

IAS 23 — Borrowing Costs

Interest and other expenses associated with borrowings.

Capitalization:
Only for qualifying assets — those requiring significant time to prepare.

Conditions for commencing capitalization:

• Borrowing costs have commenced;
• Work on the asset is underway;
• Costs of the asset have been incurred.

Cessates when the asset is ready for use.

Loan Type	Formula
Special	% minus investment income
General	Weighted Average Rate × Asset Cost

IAS 37 — Provisions, Contingent Liabilities, and Assets

Term	Definition
Provision (estimated liability)	Liability of an indefinite amount or term
Contingent liability	Possible obligation dependent on a future event
Contingent asset	Possible asset confirmed by a future event

Recognition criteria for a provision:

• Liability exists;
• An outflow of resources is probable;
• Can be estimated.

Provisions are recognized,

contingent liabilities are only disclosed.

Examples: lawsuits, restructurings, onerous contracts.

IAS 21 — Foreign Exchange Rates

Functional currency — the currency of the primary economic environment.

Item Type	Restatement
Monetary	At Closing Rate
Non-monetary	At Historical Rate (if not at Fair Value)
Income and Expense	At Transaction Date Rate

Exchange rate differences:

• For transactions — in profit;
• For foreign transactions — in other comprehensive income (upon consolidation).

IFRS 9 — Financial Instruments

Financial asset — cash, or the right to receive or exchange benefits.
Financial liability — an obligation to deliver cash.

Asset Classification:

Category	Model	Example
Amortized Cost	Hold for Cash	Loans, Receivables
Fair Through Earnings	Trading Assets, Derivatives	Equity
Fair Through OCI	For Liquidity Management	Debt ts/b

Impairment:
Expected Credit Loss (ECL) Model.

Stage 1 – 12 months;

Stage 2 – Lifetime;

Stage 3 – Default.