IFRS for SMEs illustrative consolidated financial …

1 IFRS for smes illustrative consolidated financial statementsIFRS FOR smes illustrative financial STATEMENTS2 This publication has been prepared for illustrative purposes only and does not constitute accounting or other professional advice, nor is it a substitute for reference to the source standard, interpretations and legislative International Limited accepts no responsibility for losses occasioned by any party acting or not acting as a result of this material. It is produced for use by PKF International Limited network member firms only and should not be circulated outside the FOR smes illustrative financial STATEMENTS1 Table of ContentsIntroduction 3 consolidated statement of comprehensive income and retained earnings for the year ended 31 December 20XX 6(Alternative 1 - Illustrating the classification of expenses by function) 6 consolidated statement of comprehensive income for the year ended 31 December 20XX 7(Alternative 2 - Illustrating the classification of expenses by nature and incorporating other comprehensive income)

2 7 consolidated statement of financial position at 31 December 20XX 8 consolidated statement of changes in equity at 31 December 20XX 9 consolidated statement of cash flows for the year ended 31 December 20XX 10 Notes to the financial statements for the year ended 31 December 20XX 121. Basis of preparation and accounting policies 132. Information about key sources of estimation uncertainty and judgements 243. Restriction on payment of dividend 244. Changes in accounting policies 245. Revenue 256. Other income 257. Finance costs 258. Profit before tax 269. Income tax expense 2610. Other comprehensive income 2811. Cash and cash equivalents 2812. Trade and other receivables 2813. Inventories 2814. Investment in associate 2915. Property, plant and equipment 3016. Investment property 3117. Intangible assets 3218. Deferred tax 3319. Bank overdraft and loan 3420.

3 Trade payables 3421. Provision 3422. Employee benefit obligation-long-service awards 3523. Obligations under finance leases 3624. Commitments under operating leases 3725. Disposal of assets 3726. Share capital 3727. Contingent liabilities 3828. Events after the end of the reporting period 3829. Related party transactions 3930. Approval of financial statements 39 Appendix A: IFRS for smes disclosure checklist 40 IFRS FOR smes illustrative financial STATEMENTS2 IFRS FOR smes illustrative financial STATEMENTS3 IntroductionThese illustrative financial statements present the consolidated financial statements of Universal Reporting (Pty) Ltd, an imaginary group consisting of a holding company, a wholly-owned subsidiary and an investment in an associate, applying the International financial Reporting Standard for Small and Medium-Sized Entities (IFRS for smes ) for the year ended 31 December 20XX.

4 The IFRS for smes on which the illustrative financial statements have been prepared was issued in May 2015 and becomes effective for periods beginning on or after 1 January are prepared on the assumption that the group is not a first time adopter. Therefore, the specific disclosure requirements set out in Section 35 are not included. The disclosures illustrated are compliant with the IFRS for smes . Where an accounting standard allows a choice between different measurement models, the financial statements illustrates and applies a single measurement model in accordance with the applicable section of the IFRS for smes . No audit report has been included as this will vary between companies based on the circumstances and local legislative requirements in each case. Furthermore, individual jurisdictions may impose additional restrictions or requirements which have not been reflected.

5 Commentary notes have been provided in some cases to further explain the illustrated disclosures and to set out additional disclosure requirements not specifically illustrated in the illustrative financial statements. Source references for the illustrative disclosure have also been included in the right hand margin of the financial statements and commentary notes. Examples of source references used are: = Paragraph 48 of Section 11 of the IFRS for disclosures required by the following sections have not been included: Section 12 Other financial Instruments Issues Section 15 Investments in Joint Ventures Section 19 Business Combinations (to the extent that it relates to businesses acquired in the reporting period) Section 24 Government Grants Section 26 Share-based Payment Section 31 Hyperinflation Section 34 Specialised Activities While every care has been taken in its preparation, these illustrative financial statements only provide a general guide and are not a substitute for professional advice.

6 Section 3 financial Statement Presentation of the IFRS for smes defines a complete set of financial statements and prescribes general standards of financial statement presentation. Sections 4-8 prescribe the format and content of the individual financial statements and notes. Other sections of the IFRS for smes establish additional presentation and disclosure requirements. The financial statements set out below illustrate how those presentation and disclosure requirements might be met by a typical small or medium-sized entity. Of course, each entity will need to consider the content, sequencing and format of presentation in that entity s particular circumstances. These illustrative financial statements should not be regarded as a template appropriate for all illustrative statement of financial position presents current assets followed by non-current assets, and presents current liabilities followed by non-current liabilities and then by equity ( most liquid items first).

7 In some jurisdictions, the sequencing is typically reversed ( most liquid items last), and that is also permitted by the IFRS for smes . Consistently with paragraph of the IFRS for smes , an entity may use titles for the financial statements other than those used in these FOR smes illustrative financial STATEMENTS4 Universal Reporting (Pty) Ltd financial statements For the year ended 31 December 20 XXIFRS FOR smes illustrative financial STATEMENTS4 IFRS FOR smes illustrative financial STATEMENTS5A full set of financial statements must be prepared at least annually. When the entity s reporting year-end changes and the financial statements are presented for a period longer or shorter than one year, the following must be disclosed:a. The fact that the financial statements are presented for a period longer or shorter than one year;b. The reason for using a longer or shorter period; andc.

8 The fact that the comparative amounts are not entirely comparable. When the presentation or classification of items in the financial statements are changed, an entity shall reclassify the comparative information as well, unless it is impracticable to do so. When comparative amounts are reclassified, the following shall be disclosed:a. The nature of the reclassification;b. The amounts of each item or class of items reclassified; andc. The reason for the reclassification. An entity shall disclose comparative information in respect of the previous comparable period for all amounts presented in the current period s financial statements. As a result, a complete set of financial statements shall present, as a minimum, two of each of the required financial (a) (b) (c) (a) (b) (c) & material class of similar items shall be presented entity shall clearly identify each of the financial statements and the notes and distinguish them from other information contained in the same document.

9 In addition, the following shall also be disclosed:a. The name of the reporting entity and any changes to its name since the end of the previous reporting period;b. Whether the financial statements cover a single entity or a group;c. The date of the reporting period and the period covered by the financial statements;d. The presentation currency; ande. The level of (a) (b) (c) (d) (e) IFRS FOR smes illustrative financial STATEMENTS6 consolidated statement of comprehensive income and retained earnings for the year ended 31 December 20XX(ALTERNATIVE 1 - ILLUSTRATING THE CLASSIFICATION OF EXPENSES BY FUNCTION) (a)Cost of (b)Gross (b)Administrative (b)Other (b)Finance (b)Profit before tax (d)Profit for the earnings at start of (a) (b)Retained earnings at end of (e) Universal Reporting (Pty) LtdNote: The format illustrated above aggregates expenses according to their function as part of cost of sales or other expenses.

10 As a minimum, an entity discloses it cost of sales separately from other expenses. In accordance with paragraph , the illustrative financial statements present a single statement of comprehensive income and retained earnings in place of two separate statements a statement of comprehensive income and a statement of changes in equity. This may be done if the only changes to the equity of an entity during the periods for which financial statements are presented arise from profit or loss, payment of dividends, corrections of prior period errors and changes in accounting policy. (Because there are no items of other comprehensive income, this statement could have been titled statement of income and retained earnings.) IFRS FOR smes illustrative financial STATEMENTS7 There are four items of Other Comprehensive Income:Reclassification to (g)a. Some gains and losses arising on translating the financial statements of a foreign operation although this section of the standard has not been specifically excluded the majority of IFRS for SME users are highly unlikely to have foreign operations and thus the decision was made not to overly complicate the illustrative financials with disclosures which would only serve a very small number of the users of this guide.