International Accounting 2 Page Essay
Conduct your own research and provide a two-page essay on why adoption of IFRS 1 was met with controversy and how E&Ys (2019) good first-time adopter, presented its statement of financial position and what alternatives were available.
Explain one of the exemptions in detail for example: Compound financial instruments IAS 32 Financial Instruments: Presentation requires an entity to split a compound financial instrument at inception intoseparate liability and equity components. If the liability component is no longer outstanding, retrospective application of IAS 32 involves separating two portions of equity. The first portion is in retained earnings and represents the cumulative interest accrued on the liability component. The other portion represents the original equity component. However, under this IFRS, a first-time adopter need not separate these two portions if the liability component is no longer outstanding at the date of transition to IFRSs.
Good First-
time Adopter
(International)
Limited
Consolidated Financial
Statements
31 December 2019
1 Good First-time Adopter (International) Limited
Contents
Abbreviations and key ……………………………………………………………………………………………………………………………………….. 2
Introduction …………………………………………………………………………………………………………………………………………………….. 3
Consolidated statement of profit or loss ………………………………………………………………………………………………………………. 9
Consolidated statement of comprehensive income ……………………………………………………………………………………………….. 11
Consolidated statement of financial position ……………………………………………………………………………………………………….. 13
Consolidated statement of changes in equity ………………………………………………………………………………………………………. 15
Consolidated statement of cash flows ………………………………………………………………………………………………………………… 18
Notes to the consolidated financial statements …………………………………………………………………………………………………… 22
Appendix Information in other illustrative financial statements available …………………………………………………………….. 161
Good First-time Adopter (International) Limited 2
Abbreviations and key
The following styles of abbreviation are used in this set of International GAAP Illustrative Financial Statements:
IAS 33.41 International Accounting Standard No. 33, paragraph 41
IAS 1.BC13 International Accounting Standard No. 1, Basis for Conclusions, paragraph 13
IFRS 2.44 International Financial Reporting Standard No. 2, paragraph 44
SIC 29.6 Standing Interpretations Committee Interpretation No. 29, paragraph 6
IFRIC 4.6 IFRS Interpretations Committee (formerly IFRIC) Interpretation No. 4, paragraph 6
IFRS 9.IG.G.2 International Financial Reporting Standard No. 9 Guidance on Implementing IFRS 9
Section G: Other, paragraph G.2
IAS 32.AG3 International Accounting Standard No. 32 Appendix A Application Guidance, paragraph AG3
Commentary The commentary explains how the requirements of IFRS have been implemented in arriving at the
illustrative disclosure
GAAP Generally Accepted Accounting Principles/Practice
IASB International Accounting Standards Board
Interpretations
Committee
IFRS Interpretations Committee
(formerly International Financial Reporting Interpretations Committee (IFRIC))
SIC Standing Interpretations Committee
3 Good First-time Adopter (International) Limited
Introduction
This publication contains an illustrative set of consolidated financial statements for Good First-time Adopter (International)
Limited (the parent) and its subsidiaries (the Group). These are the Groups first financial statements to be prepared in
accordance with International Financial Reporting Standards (IFRS) as the Group is a first-time adopter of IFRS. Good First-
time Adopter (International) Limited is a fictitious, large publicly listed manufacturing company incorporated in a fictitious
country within Europe. The presentation currency of the Group is the euro ().
Objective
This set of illustrative financial statements is one of many prepared by EY to assist you in preparing your own financial
statements. The illustrative financial statements are intended to reflect transactions, events and circumstances that we
consider to be most common for a broad range of first-time adopters of IFRS, across a wide variety of industries. Certain
disclosures are included in these financial statements merely for illustrative purposes, even though they may be regarded
as items or transactions that are not material for the Group.
How to use these illustrative financial statements to prepare entity-specific disclosures
Users of this publication are encouraged to prepare entity-specific disclosures. Transactions and arrangements other
than those applicable to the Group may require additional disclosures. It should be noted that the illustrative financial
statements of the Group are not designed to satisfy any stock market or country-specific regulatory requirements,
nor is this publication intended to reflect disclosure requirements that apply mainly to regulated or specialised
industries.
Notations shown in the right-hand margin of each page are references to IFRS paragraphs that describe the specific
disclosure requirements. Commentaries are provided to explain the basis for the disclosure or to address alternative
disclosures not included in the illustrative financial statements. For a more comprehensive list of disclosure requirements,
please refer to EY’s Online International GAAP Disclosure Checklist and EY Intelligent Checklist. If questions arise as to
the IFRS requirements, it is essential to refer to the relevant source material and, where necessary, to seek appropriate
professional advice.
Improving disclosure effectiveness
Terms such as disclosure overload and cutting the clutter, and more precisely disclosure effectiveness, describe a
problem in financial reporting that has become a priority issue for the International Accounting Standards Board (IASB or
Board), local standard setters, and regulatory bodies. The growth and complexity of financial statement disclosure is also
drawing significant attention from financial statement preparers, and more importantly, the users of financial statements.
Considering the purpose of Good First-time Adopter (International) Limited Illustrative consolidated financial statements of
a first-time adopter for the year ended 31 December 2019, the notes largely follow the order in which items are presented
in the primary financial statements. Paragraph 113 of IAS 1 Presentation of Financial Statements requires the notes to be
presented in a systematic manner and paragraph 114 provides examples of different systematic orderings and groupings
that preparers may consider. An alternative structure that some may find more effective in permitting the users to identify
the relevant information more easily, involves reorganising the notes according to their nature and perceived importance.
An illustrative ordering of the alternative structure that is based on seven different notes sections is summarised in the
table below:
Sections For example, comprising:
Corporate and Group information Corporate and Group information
Basis of preparation and other significant
accounting policies
Basis of preparation
Other significant accounting policies not covered in other sections
(below)
Changes in accounting policies and disclosures
Fair value measurement and related fair value disclosures
Impact of standards issued but not yet effective
Group business, operations, and management Revenue from contracts with customers
Financial instruments risk management objectives and policies
Hedging activities and derivatives
Capital management
Distributions made and proposed
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Good First-time Adopter (International) Limited 4
Sections For example, comprising:
Segment information
Basis of consolidation and information on material partly-owned
subsidiaries
Interest in joint ventures and investment in associates
Leases
Significant transactions and events Business combinations and acquisitions of non-controlling interests
Discontinued operations
Impairment of goodwill and intangible assets with indefinite lives
Related party disclosures
Events after the reporting period
Detailed information on statement of profit or
loss and other comprehensive income items
Other operating income and expenses
Finance income and costs
Depreciation, amortisation, foreign exchange differences and costs
of inventories
Detailed breakdown of administrative, employee benefits and
research and development expenses
Share-based payments
Components of other comprehensive income
Earnings per share
Detailed information on statement of financial
position items
Income tax
Property, plant and equipment, investment properties and
intangible assets
Financial assets and liabilities
Inventories
Trade receivables and contract assets
Cash and short-term deposits
Issued capital and reserves
Provisions
Government grants
Trade payables
Contract liabilities
Pensions and other post-employment benefits
Commitments and contingencies Other commitments
Legal claim contingency
Guarantees
Other contingent liabilities
By structuring the notes according to their nature and perceived importance, users may find it easier to extract the relevant
information. In addition, the significant accounting policies, judgements, key estimates and assumptions could alternatively
be placed within the same note as the related qualitative and quantitative disclosures to provide a more holistic discussion
to users of the financial statements. The alternative structure summarised above has been applied in Good Group
(International) Limited Alternative Format. As the key difference between the illustrative financial statements herein and
in the alternative format illustrative financial statements is the structuring of the notes, Good Group (International) Limited
Alternative Format is a useful tool for entities exploring ways to enhance the effectiveness of their financial statements
disclosures.
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5 Good First-time Adopter (International) Limited
Applying the concept of materiality requires judgement, in particular, in relation to matters of presentation and disclosure;
the inappropriate application of the concept may be another cause of the perceived disclosure problem. IFRS sets out
a set of minimum disclosure requirements which, in practice, too often is complied with without consideration of
the informations relevance for the specific entity. That is, if the transaction or item is immaterial to the entity, then it
is not relevant to users of financial statements, in which case, IFRS does not require the item to be disclosed (IAS 1.31).
If immaterial information is included in the financial statements, the amount of information may potentially reduce the
transparency and usefulness of the financial statements as the material and, thus, relevant, information loses prominence.
IFRS Practice Statement 2 Making Materiality Judgements provides practical guidance and examples that companies may
find helpful in deciding whether information is material. Entities are encouraged to consider it when making materiality
judgements.
As explained above, the primary purpose of these financial statements is to illustrate how the most commonly
applicable disclosure requirements can be met. Therefore, they include disclosures that may, in practice, be
deemed not material to the Group. It is essential that entities consider their own specific circumstances when
determining which disclosures to include. These financial statements are not intended to act as guidance for making
the materiality assessments; they must always be tailored to ensure that an entitys financial statements reflect and
portray its specific circumstances and its own materiality considerations. Only then will the financial statements
provide decision-useful financial information.
For more guidance on how to improve disclosure effectiveness, please refer to our publication, Applying IFRS: Enhancing
communication effectiveness (February 2017) and Good Group (International) Limited Alternative Format.
Illustrative financial statements
We provide a number of industry-specific illustrative financial statements and illustrative financial statements addressing
specific circumstances that you may consider. The entire series of illustrative financial statements comprises:
Good Group (International) Limited
Good Group (International) Limited Alternative Format
Good Group (International) Limited Illustrative interim condensed consolidated financial statements
Good First-time Adopter (International) Limited
Supplement to Good Group (International) Limited Agriculture
Good Investment Fund Limited (Equity)
Good Investment Fund Limited (Liability)
Good Real Estate Group (International) Limited
Good Mining (International) Limited
Good Petroleum (International) Limited
Good Bank (International) Limited
Good Insurance (International) Limited
Good Life Insurance (International) Limited
Good General Insurance (International) Limited
International Financial Reporting Standards
The abbreviation IFRS is defined in paragraph 5 of the Preface to International Financial Reporting Standards to include
standards and interpretations approved by the IASB, and International Accounting Standards (IASs) and Standing
Interpretations Committee interpretations issued under previous Constitutions. This is also noted in paragraph 7 of
IAS 1 and paragraph 5 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Thus, when financial
statements are described as complying with IFRS, it means that they comply with the entire body of pronouncements
sanctioned by the IASB. This includes the IAS, IFRS and Interpretations originated by the IFRS Interpretations Committee
(formerly the SIC).
International Accounting Standards Board (IASB)
The IASB is the independent standard-setting body of the IFRS Foundation (an independent not-for-profit private sector
organisation working in the public interest). The IASB members are responsible for the development and publication of
IFRSs, including International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs), and for
approving Interpretations of IFRS as developed by the IFRS Interpretations Committee.
In fulfilling its standard-setting duties, the IASB follows a due process, of which the publication of consultative documents,
such as discussion papers and exposure drafts, for public comment is an important component.
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http://www.ifrs.org/How+we+develop+standards/How+we+develop+standards.htm
http://www.ifrs.org/How+we+develop+standards/How+we+develop+standards.htm
http://www.ifrs.org/IFRS+for+SMEs/IFRS+for+SMEs.htm
http://www.ifrs.org/Current+Projects/IFRIC+Projects/IFRIC+Projects.htm
Good First-time Adopter (International) Limited 6
The IFRS Interpretations Committee (Interpretations Committee)
The Interpretations Committee is a committee appointed by the IFRS Foundation Trustees that assists the IASB in
establishing and improving standards in financial accounting and reporting for the benefit of users, preparers and
auditors of financial statements.
The Interpretations Committee addresses issues of reasonably widespread importance, rather than issues of concern
to only a small set of entities. These include any identified financial reporting issues not addressed in IFRS. The
Interpretations Committee also advises the IASB on issues to be considered in the annual improvements to IFRS project.
IFRS as at 30 June 2019
As a general approach, these illustrative financial statements do not early adopt standards, amendments or interpretations
before their effective date.
The standards applied in these illustrative financial statements are those that were in issue as at 30 June 2019
and effective for annual periods beginning on or after 1 January 2019. It is important to note that these illustrative
financial statements will require continual updating as standards are issued and/or revised and as they become effective.
Users of this publication are cautioned to check that there has been no change in requirements of IFRS between
30 June 2019 and the date on which their financial statements are authorised for issue. In accordance with paragraph 30
of IAS 8, specific disclosure requirements apply for standards and interpretations issued but not yet effective (see Note 36
of these illustrative financial statements). Furthermore, if the financial year of an entity is other than the calendar year,
new and revised standards applied in these illustrative financial statements may not be applicable. For an overview of the
upcoming changes in standards and interpretations, please refer to our quarterly IFRS Update publication.
Accounting policies in the first IFRS financial statements
IFRS 1 requires an entity to use the same accounting policies in its opening IFRS statement of financial position and
throughout all periods presented in its first IFRS financial statements. Those accounting policies must comply with each
IFRS effective at the end of its first IFRS reporting period, except as specified in IFRS 1 (e.g., when the exceptions in
IFRS 1 prohibit retrospective application or an entity avails itself of one of IFRS 1s voluntary exemptions). An entity must
not apply different versions of IFRSs that were effective at earlier dates. An entity may apply a new IFRS that is not yet
mandatory if that IFRS permits early application.
A first-time adopter of IFRS does not apply the IAS 8 Accounting Policies, Changes in Accounting Estimate and Errors
requirements to changes in accounting policies that occur when an entity first adopts IFRS. Rather, a first-time adopter of
IFRS must provide an explanation of transition adjustments and reconciliations of equity and comprehensive income. If a
first-time adopter changes its accounting policies or its use of the IFRS 1 exemptions during the period covered by the first
IFRS financial statements, for example, if the entity had published interim financial statements in accordance with
IAS 34 Interim Financial Reporting, it must explain how this change affected its previously reported financial position,
financial performance and cash flows. The entity must also update the equity and comprehensive income reconciliations as
of the transition date and as of the end of and for the comparative period, respectively. Note 2.4 of this publication
illustrates how a first-time adopter may provide the explanation of transition adjustments and reconciliations required by
IFRS 1.
Allowed alternative accounting treatments
In some cases, IFRS permit more than one accounting treatment for a transaction or event. Preparers of financial
statements should select the treatment that is most relevant to their business and circumstances as their accounting policy.
IAS 8 requires an entity to select and apply its accounting policies consistently for similar transactions, events and/or
conditions, unless an IFRS specifically requires or permits categorisation of items for which different policies may be
appropriate. Where an IFRS requires or permits such categorisation, an appropriate accounting policy is selected and
applied consistently to each category. Therefore, once a choice of one of the alternative treatments has been made, it
becomes an accounting policy and must be applied consistently. After an entity has presented its first IFRS financial
statements, changes in accounting policies should only be made if required by a standard or interpretation, or if the change
results in the financial statements providing reliable and more relevant information.
In this publication, when a choice is permitted by IFRS, the Group has adopted one of the treatments as appropriate to
the circumstances of the Group. In these cases, the commentary provides details of which policy has been selected,
and the reasons for this policy selection.
7 Good First-time Adopter (International) Limited
Financial review by management
Many entities present a financial review by management that is outside the financial statements. IFRS does not require
the presentation of such information, although paragraph 13 of IAS 1 gives a brief outline of what may be included in an
annual report. IFRS Practice Statement 1, Management Commentary provides a non-binding framework for the
presentation of a management commentary that relates to financial statements prepared in accordance with IFRS.
If a company decides to follow the guidance in the Practice Statement, management is encouraged to explain the extent to
which the Practice Statement has been followed. A statement of compliance with the Practice Statement is only permitted
if it is followed in its entirety. The content of a financial review by management is often determined by local market
requirements or issues specific to a particular jurisdiction.
No financial review by management has been included for the Group.
Effective for annual periods ending 31 December 2019
The Good First-time Adopter (International) Limited consolidated financial statements have been prepared to comply with
all IFRS standards and interpretations effective as of its first IFRS reporting period which is 31 December 2019. Note 36
provides a listing of standards and interpretations that have been issued but are not effective as of 31 December 2019 and
have therefore not been adopted by the Group.
Good First-time Adopter (International) Limited 8
Commentary
Good First-time Adopter (International) Limited is a limited company incorporated and domiciled in Euroland and whose shares are
publicly traded. Financial statements of that category of entity are usually subject to mandatory audit either under International
Standards on Auditing (ISA) or local audit standards and auditors report should be disclosed together with the annual financial
statements. However, this publication is not intended to provide guidance on the application of ISA 700 (Revised) Forming an Opinion
and Reporting on Financial Statements or the specific requirements of individual jurisdictions. Hence, an illustrative auditors report
on the consolidated financial statements of Good First-time Adopter (International) Limited has not been included.
Good First-time Adopter
(International) Limited
Consolidated Financial Statements
31 December 2019
9 Good First-time Adopter (International) Limited
Consolidated statement of profit or loss
for the year ended 31 December 2019
IFRS 1.21
IAS 1.10(b)
IAS 1.51(c)
2019 2018
000 000 IAS 1.51(d),(e)
Notes
Continuing operations IAS 1.81A
Revenue from contracts with customers 4 179,058 159,088 IFRS 15.113(a)
Rental income 18 1,404 1,377
Revenue 180,462 160,465 IAS 1.82(a)
Cost of sales (136,549) (128,386) IAS 1.103
Gross profit 43,913 32,079 IAS 1.85, IAS 1.103
Other operating income 13.1 2,435 2,548 IAS 1.103
Selling and distribution expenses (14,001) (12,964) IAS 1.99, IAS 1.103
Administrative expenses 13.9 (18,290) (12,011) IAS 1.99, IAS 1.103
Other operating expenses 13.2 (2,554) (353) IAS 1.99, IAS 1.103
Operating profit 11,503 9,299 IAS 1.85, IAS 1.BC55-56
Finance costs 13.3 (1,366) (1,268) IAS 1.82(b), IFRS 7.20
Finance income 13.4 202 145
Other income 13.5 98 66
Share of profit of an associate and a joint venture 10,11 671 638 IAS 1.82(c)
Profit before tax from continuing operations 11,108 8,880 IAS 1.85
Income tax expense 15 (3,098) (2,233) IAS 1.82(d), IAS 12.77
Profit for the year from continuing operations 8,010 6,647 IAS 1.85
Discontinued operations
Profit/(loss) after tax for the year from
discontinued operations 14 220 (188)
IAS 1.82 (ea)
IFRS 5.33(a)
Profit for the year 8,230 6,459 IAS 1.81A(a)
Attributable to:
Equity holders of the parent 7,942 6,220 IAS 1.81B (a) (ii)
Non-controlling interests 288 239 IAS 1.81B (a)(i)
8,230 6,459
Earnings per share 16 IAS 33.66
Basic, profit for the year attributable to
ordinary equity holders of the parent 0.38 0.33
Diluted, profit for the year attributable to
ordinary equity holders of the parent
0.38 0.32
Earnings per share for continuing operations 16
Basic, profit from continuing operations
attributable to ordinary equity holders of the
parent
0.37 0.34
Diluted, profit from continuing operations
attributable to ordinary equity holders of the
parent
0.37 0.33
Y. Shimomura, Chairman
E. Rullan, Group Chief Executive
29 January 2020
Good First-time Adopter (International) Limited 10
Commentary
IAS 1.10 suggests titles for the primary financial statements, such as statement of profit or loss and other comprehensive income
or statement of financial position. Entities are, however, permitted to use other titles, such as income statement or balance
sheet. The Group applies the titles suggested in IAS 1. IFRS 15.113(a) requires revenue recognised from contracts with customers
to be disclosed separately from other sources of revenue, unless presented separately in the statement of comprehensive income
or statement of profit or loss. The Group has elected to present the revenue from contracts with customers as a line item in the
statement of profit or loss separate from the other source of revenue. IFRS 15 only applies to a subset of total revenue (i.e.,
revenue from contracts with customers).
IFRS 15 defines revenue as income arising in the course of an entitys ordinary activities, but it excludes some revenue contracts
from its scope (e.g., leases). IFRS 15 does not explicitly require an entity to use the term revenue from contracts with customers.
Therefore, entities may use different terminology in their financial statements to describe revenue arising from transactions that
are within the scope of IFRS 15. However, entities should ensure the terms used are not misleading and allow users to distinguish
revenue from contracts with customers from other sources of revenue.
The Group also presented a line item for total revenue on the face of the statement of profit or loss as required by IAS 1.82(a).
The Group presented rental income as part of revenue as it arises in the course of its ordinary activities.
Cost of sales includes costs of inventories recognised as expense. IAS 2.34 requires that when inventories are sold, the carrying
amount of those inventories must be recognised as an expense in the period in which the related revenue is recognised.
IAS 1.99 requires expenses to be analysed either by their nature or by their function within the statement of profit or loss,
whichever provides information that is reliable and more relevant. If expenses are analysed by function, information about the
nature of expenses must be disclosed in the notes. The Group has presented the analysis of expenses by function. In Appendix 3 of
Good Group (International) Limited 2019, the consolidated statement of profit or loss is presented with an analysis of expenses by
nature.
The Group has presented operating profit in the statement of profit or loss although not required by IAS 1. The terms operating
profit or operating income are not defined in IFRS. IAS 1.BC56 states that the IASB recognises that an entity may elect to disclose
the results of operating activities, or a similar line item, even though this term is not defined. The entity should ensure the amount
disclosed is representative of activities that would normally be considered to be operating. For instance, it would be inappropriate
to exclude items clearly related to operations (such as inventory write-downs and restructuring and relocation expenses) because
they occur irregularly or infrequently or are unusual in amount. Similarly, it would be inappropriate to exclude items on the grounds
that they do not involve cash flows, such as depreciation and amortisation expenses (IAS 1.BC56). In practice, other titles, such as
earnings before interest and taxation (EBIT), are sometimes used to refer to an operating result. Such subtotals are subject to the
guidance included in IAS 1.85A.
The Group has presented its share of profit of an associate and joint venture using the equity method under IAS 28 Investments in
Associates and Joint Ventures after the line-item operating profit. IAS 1.82(c) requires share of the profit or loss of associates and
joint ventures accounted for using the equity method to be presented in a separate line item on the face of the statement profit or
loss. In complying with this requirement, the Group combines the share of profit or loss from an associate and a joint venture in one
line item. Regulators or standard-setters in certain jurisdictions recommend or accept share of the profit/loss of equity method
investees being presented with reference to whether the operations of the investees are closely related to that of the reporting
entity. This may result in the share of profit/loss of certain equity method investees being included in the operating profit, while
the share of profit/loss of other equity method investees being excluded from operating profit. In other jurisdictions, regulators or
standard-setters believe that IAS 1.82(c) requires that share of profit/loss of equity method investees be presented as one line item
(or, alternatively, as two or more adjacent line items, with a separate line for the sub-total). This may cause diversity in practice.
IAS 33.68 requires presentation of basic and diluted earnings per share (EPS) for discontinued operations either on the face of
the statement of profit or loss or in the notes to the financial statements. The Group has elected to show this information with other
disclosures required for discontinued operations in Note 14 and to show the EPS information for continuing operations on the face
of the statement of profit or loss.
IAS 1.82(ba) requires that the statement of profit or loss include line items that present the impairment losses (including reversals
of impairment losses or impairment gains) determined in accordance with IFRS 9. The Group did not present its impairment losses
determined in accordance with IFRS 9 separately in the statement of profit or loss as the amounts are not considered material.
IFRS 16.49 requires a lessee to present in the statement of profit or loss, the interest expense on lease liabilities separately from
the depreciation charge for the right-of-use asset. The interest expense on the lease liabilities is a component of finance costs, which
IAS 1.82(b) requires to be presented separately in the statement of profit or loss. Consistent with this requirement, the Group
presented interest expense on lease liabilities under finance costs and the depreciation charge on the right-of-use asset under cost
of sales and adminis
