Key Features of Preparation of Financial Statements in Accordance with IFRS
28 May 2020
On May 25, BDO Ukraine’s IFRS Partner, Katerina Rafalska, delivered the webinar on the topic: “IFRS Financial Statements. Recommendations for Preventing Errors. Expert Advice”
𝗜𝗻𝘁𝗲𝗿𝗻𝗮𝘁𝗶𝗼𝗻𝗮𝗹 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗥𝗲𝗽𝗼𝗿𝘁𝗶𝗻𝗴 𝗦𝘁𝗮𝗻𝗱𝗮𝗿𝗱𝘀 (𝗜𝗙𝗥𝗦) is a set of international accounting standards that describe how specific types of transactions and other events should be reflected in the financial statements.
During the webinar, Katerina described the most common mistakes that occur when reporting in accordance with the requirements of IFRS, announced all the features of accounting policies disclosure in financial statements under IFRS and gave her recommendations and advice regarding the preparation of such reports. Several of them are listed below.
It is important to disclose of high quality the method of valuation of fixed assets, that is a cost model or a revaluation model. Amortisation periods should preferably be displayed by classes for which information is subsequently disclosed in the note on fixed assets (disclosures in accordance with IFRS 16, paragraphs 73-74). Also, amortisation periods for one class cannot be in a very wide range (10-100 years).
And during presentation, Katerina Rafalska notes that the quality of financial statements is very important. Business entities need to disclose information that allows users of financial statements to evaluate the nature and size of the risks associated with financial instruments to which the entity is exposed to at the end of the reporting period.
What you should stress to in financial reporting forms and applications:
- Investments by equity method (you need to make sure that these investments are truly investments).
- Financial and non-financial assets (And in SFP, and in the notes, financial and non-financial assets and liabilities must be accounted for separately). It should be noted that reserves cannot be created for non-financial assets.
- In the consolidated statement of financial position in the absence of amounts related to uncontrolling participation interest shares, it is not necessary to reflect such an item with “0” at the beginning and end of the current period.
It is worth remembering that reserves cannot be held against non-financial assets.
Summing up the event, Katerina gave her recommendations on reporting
- Consistency of terminology in all financial statements is required.
- Make sure that the titles of the statements be consistent across the financial statements.
- Disclosures under IFRS 7 and IFRS 13 should be separated.
- Significant amounts of “other expenses” should be divided into several categories.
- According to IAS 21.22, 40, the average exchange rate can be used only if there is no significant exchange rate fluctuation.
- Information on investment property should be disclosed separately from fixed assets.
- Pay attention to whether loans issued or received under market conditions.
- Any non-IFRS indicator needs to be clarified in the financial statements.
Note that this webinar was one of several planned on IFRS topic and soon we will return to this topic with other events. Check for updates on the BDO in Ukraine website in the Events section.
Learn more about the services of Audit reporting prepared in accordance with international standards, here.