D2-T3 - Aplicación NIIC 8 Combinaciones de Negocios - MIke Wells

International Financial Reporting Standards

IFRS judgements:

applying the IAS 8 and SME hierarchies Cartagena, November 2015

The views expressed in this presentation are those of the presenter, not necessarily those of the IASB or IFRS Foundation. ŠIFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

Framework-based approach for applying IFRS and the IFRS for SMEs

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• What are the economics of the phenomenon (eg transaction or event)?

• What information about the phenomenon is relevant for informing resource allocation decisions by existing and potential investors and lenders who cannot require information directly and that can be faithfully represented etc?

• Then consider the requirements (IFRS or IFRS for SMEs) • Make judgements to develop accounting policy • Make judgements and estimates to apply the requirements with rigour and consistency ©IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

If no IFRS specifically applies: apply the IAS 8 hierarchy

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• Objective = information relevant to resource allocation decisions by existing and potential investors, lenders and other creditors who cannot require information directly and that can be faithfully represented etc.

• Process • 1st try to analogise to requirements in IFRS dealing with similar and related issues; and • 2nd definitions, recognition criteria and measurement ‘concepts’ in Framework • may also use most recent pronouncements of others with similar conceptual framework, other accounting literature and accepted industry practices, to the extent that these do not conflict with the sources in 1 and 2 above. ©IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

Applying the IAS 8 hierarchy continued

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• IFRIC Update—March 2011: “The IFRS Interpretations Committee observed that when management develops an accounting policy through analogy to an IFRS dealing with similar and related matters, it needs to use its judgement in applying all aspects of the IFRS that are applicable to the particular issue.”

©IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

Example―mushroom farming

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What are the economics of a mushroom farmer’s living mushrooms?

What information about living mushrooms is most relevant (capable of making a difference) to resource allocation decisions by the primary users—existing and potential investors, lenders and other creditors that cannot require the reporting entity to provide information directly to them—and that can be faithfully represented?

©IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

Example―mushroom farming continued

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Which IFRS specifies accounting for a farmer’s living mushrooms?

Choose 1 of: (a) no specific IFRS therefore apply the IAS 8 hierarchy; (b) IAS 2 Inventories; (c) IAS 16 PPE; (d) IAS 38 Intangible Assets; (e) IAS 40 Investment Property; (f) IAS 41 Agriculture; (g) IFRS 6 Exploration for and Evaluation of Mineral Resources; or (h) IFRS 9 Financial Instruments. ©IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

Example―mushroom farming continued

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Which IFRS deals with a similar and related issue?

Choose 1 of: (a) no specific IFRS therefore apply the IAS 8 hierarchy; (b) IAS 2 Inventories; (c) IAS 16 PPE; (d) IAS 38 Intangible Assets; (e) IAS 40 Investment Property; (f) IAS 41 Agriculture; (g) IFRS 6 Exploration for and Evaluation of Mineral Resources; or (h) IFRS 9 Financial Instruments. ©IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

Concepts-based approach for applying the IFRS for SMEs

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• What are the economics of the phenomenon (eg transaction or event)?

• What information about the phenomenon is relevant (useful for economic decision-making) by those who cannot require information directly and that is reliable— can be faithfully represented, is free from bias etc?

• Then consider IFRS for SMEs requirements • Make judgements to develop accounting policy • Make judgements and estimates to apply the requirements with rigour and consistency ©IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

If IFRS for SMEs does not specifically address a phenomenon apply hierarchy

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• Objective = information relevant to economic decisionsmaking needs of users and that is reliable.

• Process (hierarchy) • 1st try to analogise to requirements and guidance in the IFRS for SMEs dealing with similar and related issues; and • 2nd definitions, recognition criteria and measurement ‘concepts’ in Section 2 • may also consider the requirements and guidance in full IFRSs dealing with similar and related issues, provided full IFRSs do not conflict with 1st and 2nd above. ©IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

Example―mushroom farming

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What are the economics of a farmer’s living mushrooms?

What information about living mushrooms is most relevant (useful for economic decision-making) by those who cannot require information directly and that is reliable—can be faithfully represented, is free from bias etc?

©IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

Example―mushroom farming continued

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Which Section of the IFRS for SMEs specifies accounting for a farmer’s living mushrooms?

Choose 1 of: (a) no Section therefore apply paragraphs 10.4–10.6; (b) S13 Inventories; (c) S17 PPE; (d) S18 Intangible Assets; (e) S16 Investment Property; (f) S34 Agriculture; (g) S34 Extractive Activities; (h) S11 Basic Financial Instruments; (i) S12 Other Financial Instrument Issues; or (j) S30 Foreign Currency Translation ©IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

Example―mushroom farming continued

Which Section of the IFRS for SMEs deals with a similar and related issue?

Choose 1 of: (a) no Section therefore apply paragraphs 10.4, 10.5(b) and 10.6; (b) S13 Inventories; (c) S17 PPE; (d) S18 Intangible Assets; (e) S16 Investment Property; (f) S34 Agriculture; (g) S34 Extractive Activities; (h) S11 Basic Financial Instruments; (i) S12 Other Financial Instrument Issues; or (j) S30 Foreign Currency Translation ŠIFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

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Thank you

ŠIFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

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