Supplemental Notes - IAS 34
Supplemental Notes - IAS 34
Supplemental Notes - IAS 34
Assurance
Statements 2019
with guidance notes
Contents
Introduction1 8 Revenue 19
IFRS Example Interim Consolidated 3 9 Segment reporting 21
Financial Statements 2019
10 Seasonal fluctuations 23
Contents of Interim Financial Statements 4
11 Goodwill 23
Condensed consolidated statement of financial position 5
12 Other intangible assets 24
Condensed consolidated statement of profit or loss 7
13 Property, plant and equipment 25
Condensed consolidated statement of other 8
14 Leasing 27
comprehensive income
15 Disposal groups classified as held for sale 28
Condensed consolidated statement of changes in equity 9
and discontinued operations
Condensed consolidated statement of cash flows 11
16 Earnings per share 28
Notes to the Condensed Consolidated 12
17 Share capital 28
Financial Statements
18 Dividends 29
1 Nature of operations 13
19 Other components of equity 29
2 General information, basis of preparation 13
and statement of compliance with IFRS 20 Provisions 30
7 Business combinations 18
Important Disclaimer:
This document has been developed as an information resource. It is intended as a guide only and the application of its contents to specific situations will depend on the particular circumstances
involved. While every care is taken in its presentation, personnel who use this document to assist in evaluating compliance with International Financial Reporting Standards should have sufficient
training and experience to do so. No person should act specifically on the basis of the material contained herein without considering and taking professional advice.
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Introduction
IFRS Example Interim Consolidated Financial Statements 2019
The preparation of financial statements in accordance Condensed set of Interim Financial Statements
with International Financial Reporting Standards (IFRS) is An entity complying with IAS 34 has a choice of preparing a
challenging. Each year, new Standards and amendments condensed set of Interim Financial Statements or a full set of
are published by the International Accounting Standards IFRS financial statements. These Interim Financial Statements
Board (IASB) with the potential to significantly impact the illustrate a condensed set of Interim Financial Statements
presentation of a complete set of financial statements. based on the requirements of IAS 34.8. Where a full set of
financial statements is presented in the interim financial report,
The member firms of Grant Thornton International Ltd (‘GTIL’) the form and content of those financial statements are required
have extensive expertise in the application of IFRS. GTIL, to conform to the requirements of IAS 1 for a complete set of
through its IFRS Team, develops general guidance that supports financial statements (IAS 34.9).
its member firms’ commitment to high quality, consistent
application of IFRS and is therefore pleased to share these Local reporting requirements
insights by publishing ‘IFRS Example Interim Consolidated The requirements for interim reports vary significantly between
Financial Statements 2019’ (‘Interim Financial Statements’). jurisdictions. Entities that apply IAS 34 may also be subject
to requirements imposed by law or by a stock exchange.
The Interim Financial Statements illustrate a six month Such local requirements usually impose interim reporting
accounting period beginning on 1 January 2019. They are deadlines and may require disclosure of specified information.
based on the activities and results of Illustrative Corporation This may be presented either in the financial statements or
Ltd and its subsidiaries (‘the Group’) – a fictional consulting, in an accompanying narrative report, eg financial and other
service and retail entity that has been preparing IFRS financial highlights, chairman’s statement, operating and financial
statements for several years. The Group produces half-yearly review and specific qualitative and quantitative disclosures
interim financial reports in accordance with IAS 34 ‘Interim (collectively referred to as ‘management commentary’).
Financial Reporting’ at 30 June 2019.
The IASB’s Practice Statement ‘Management Commentary
The Interim Financial Statements have been reviewed and – A framework for presentation’ provides a broad framework
updated to reflect changes in IAS 34 and in other IFRS that of principles, qualitative characteristics and recommended
are effective for the year ending 31 December 2019. contents for high quality management commentary. Although
the Practice Statement is not mandatory, it may be used
by regulators and others to benchmark the quality of the
information presented and so its guidance should
be considered.
Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019 1
Using this publication
The form and content of Interim Financial Statements will
‘ These Interim Financial
of course depend on the activities and transactions of the Statements should not
reporting entity in concern. The objective in preparing these
Interim Financial Statements is to illustrate one possible be used as a disclosure
approach to interim reporting by an entity engaging in
transactions that are ‘typical’ across a range of non-specialist
checklist to meet the
sectors. However, as with any example, this illustration does requirements of IAS 34.
not envisage every possible transaction and therefore cannot
be regarded as comprehensive. For example, IAS 34 requires Facts and circumstances
that the Interim Financial Statements should explain significant
events and transactions that have occurred in the interim
will vary between entities
period. The required disclosures will therefore depend on and each entity should
these specific circumstances and entities will need to exercise
judgement in deciding how to meet the requirements of assess individually which
IAS 34.15. The Interim Financial Statements should be
amended, amplified or abbreviated according to the
information to disclose
importance of the area to the financial statements as a in their Interim Financial
whole. Also, these Interim Financial Statements should not be
used as a disclosure checklist to meet the requirements of Statements.’
IAS 34. Facts and circumstances will vary between entities
and each entity should assess individually which information
to disclose in their Interim Financial Statements.
2 Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019
IFRS Example Interim
Consolidated Financial
Statements
Paragraph 8 of IAS 34 requires that • a statement of changes in equity The alternative methods of presenting
condensed Interim Financial Statements showing changes in equity a single statement of profit or loss and
contain at a minimum: cumulatively for the current financial other comprehensive income and of
• a condensed statement of financial year to date, with a comparative presenting a profit or loss statement
position statement for the comparable year- illustrating the ‘function of expense
• a condensed statement or condensed to-date period of the immediately format’ are included as appendices
statements of profit or loss and other preceding financial year and to the ‘IFRS Example Consolidated
comprehensive income • a statement of cash flows for the Financial Statements 2018’1.
• a condensed statement of changes current financial year to date, with
a comparative statement for the IAS 1 ‘Presentation of Financial
in equity
comparable year-to-date period of the Statements’ requires an additional
• a condensed statement of cash flows
immediately preceding financial year. statement of financial position at the
• selected explanatory notes.
start of the preceding period in certain
According to IAS 34.20, the Interim Presentation of the interim statement of circumstances (IAS 1.40A). IAS 34 does
Financial Statements (condensed or profit or loss and other comprehensive not require, and therefore these Interim
complete) shall include: income either as a single statement Financial Statements do not include,
• a statement of financial position as at or two separate statements should such a statement of financial position.
the end of the current interim period follow the presentation in the annual
financial statements (IAS 34.8A). The Entities wishing to follow best practice
and a comparative statement of
Group presents a separate profit or loss may include a statement/statements of
financial position as at the end of the
statement and a separate statement profit or loss and other comprehensive
immediately preceding financial year
of other comprehensive income in its income, a statement of changes in
• either:
annual financial statements. In addition, equity and a statement of cash flows
–– two separate statements, being a
the Group’s profit or loss statement for the immediately preceding financial
statement of profit or loss and a
illustrates the ‘nature of expense’ format. year. These Interim Financial Statements
statement of other comprehensive
Accordingly, these Interim Financial reflect this practice, with three periods
income for the current interim
Statements follow the same approach. for each of these statements and
period and cumulatively for the
associated notes.
current financial year to date, with
comparatives for the comparable
interim periods (ie comparable Interim Last Comparative
interim period and financial year period year end interim period
to date) or Statement of financial position Yes Yes Good practice
–– a single statement of profit or
loss and other comprehensive Statement of profit or loss and other Yes (current and Good Yes (current and
comprehensive income year-to-date) practice year-to-date)
income for the current interim
Yes (year-to- Good Yes (year-to-
period, and cumulatively for the Statement of changes in equity
date) practice date)
current financial year to date, with Yes (year-to- Good Yes (year-to-
Statement of cash flows
comparatives for the comparable date) practice date)
interim periods (ie comparable
interim period and financial year
to date)
In October 2018, the Grant Thornton International Ltd IFRS Team published ‘IFRS Example
1
Consolidated Financial Statements 2018’, providing an example of a full set of annual IFRS
financial statements.
4 Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019
Condensed consolidated
statement of financial position
as at 30 June 2019
(expressed in thousands of Euroland currency units, except per share amounts)
Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019 5
Condensed consolidated
statement of financial position
as at 30 June 2019
(expressed in thousands of Euroland currency units, except per share amounts)
Liabilities
IAS 1.60
Non-current
IAS 1.69
Pension and other employee
IAS 1.55 12,331 11,956 10,386
obligations
IAS 1.54(m) Borrowings 22 51,918 25,931 25,130
IAS 1.54(k) Trade and other payables 1,338 – –
IAS 1.54(o)
Deferred tax liabilities 1,359 880 1,903
IAS 1.56
IAS 1.55 Other liabilities 1,854 2,057 2,020
Non-current liabilities 68,800 40,824 39,439
IAS 1.60
Current
IAS 1.69
IAS 1.54(l) Provisions 20 615 2,280 1,215
IAS 1.55 Pension and other employee
1,625 1,398 1,467
obligations
IAS 1.54(m) Borrowings 22 6,508 5,163 5,327
IAS 1.54(k) Trade and other payables 10,552 18,805 8,497
IAS 1.54(n) Current tax liabilities 3,013 815 4,174
IAS 1.55 Contract and other liabilities 3,287 3,160 2,758
25,600 31,621 23,438
IFRS 5.38 Liabilities included in disposal
15 – 383 –
IAS 1.54(p) group classified as held for sale
Current liabilities 25,600 32,004 23,438
6 Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019
Condensed consolidated
statement of profit or loss
for the period ended 30 June 2019
(expressed in thousands of Euroland currency units, except per share amounts)
Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019 7
Condensed consolidated
statement of other
comprehensive income
for the period ended 30 June 2019
(expressed in thousands of Euroland currency units, except per share amounts)
8 Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019
Condensed consolidated
statement of changes in equity
for the period ended 30 June 2019
(expressed in thousands of Euroland currency units, except per share amounts)
Balance at 30 June 2019 15,820 40,045 580 61,060 117,505 780 118,285
IAS 1.106(d) Balance at 1 January 2018 12,000 3,050 (414) 37,748 52,384 592 52,976
Adjustment from adoption of
– – 22 (48) (26) – (26)
IFRS 9 and IFRS 15
Adjusted balance at
12,000 3,050 (392) 37,700 52,358 592 52,950
1 January 2018
Dividends – – – (3,000) (3,000) – (3,000)
Issue of share capital on exercise
270 1,415 – – 1,685 – 1,685
of employee share options
Employee share-based
– – – 165 165 – 165
compensation
IAS 1.106(d)(iii) Transactions with owners 270 1,415 – (2,835) (1,150) – (1,150)
Balance at 30 June 2018 12,270 4,465 720 42,171 59,626 648 60,274
Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019 9
Condensed consolidated
statement of changes in equity
for the period ended 30 June 2019
(expressed in thousands of Euroland currency units, except per share amounts)
IAS 1.106(d)(i) Profit for the period – – – 15,781 15,781 121 15,902
IAS 1.106(d)(ii)
Other comprehensive income – – 2,657 – 2,657 – 2,657
IAS 1.106A
Total comprehensive income for
IAS 1.106(a) – – 2,657 15,781 18,438 121 18,559
the year
Balance at 31 December 2018 13,770 19,645 2,265 50,779 86,459 713 87,172
Guidance note
IAS 34.10 requires the interim statement to include, at a minimum, each of the headings and subtotals that were included in the most recent annual financial statements while IAS 1.106
provides a list of the required items to be presented in the statement of changes in equity.
Entities have a choice to present the required reconciliations for each component of other comprehensive income either in the statement of changes in equity or in the notes to the financial
statements (IAS 1.106(d)(ii) and IAS 1.106A). This Publication presents the reconciliations for each component of other comprehensive income in the notes to the financial statements. This
reduces duplicated disclosures and presents more clearly the overall changes in equity.
10 Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019
Condensed consolidated
statement of cash flows
for the period ended 30 June 2019
(expressed in thousands of Euroland currency units, except per share amounts)
IAS 7.45 Net change in cash and cash equivalents 7,712 (1,397) 23,450
Cash and cash equivalents, beginning of year 34,729 11,219 11,219
IAS 7.28 Exchange differences on cash and cash equivalents 98 (25) 60
IAS 7.45 Cash and cash equivalents, end of period 42,539 9,797 34,729
Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019 11
Notes to the Condensed
Consolidated Financial
Statements
Guidance note
Where an entity’s interim financial report complies with IAS 34 that fact shall be disclosed (IAS 34.19). Where a condensed set
of financial statements is prepared, the basis of preparation will need to refer to the fact that these Interim Financial Statements
are ‘condensed’. An interim financial report shall not be described as complying with IFRS unless it complies with all of the
requirements of IFRS.
Interim financial reports are prepared assuming that users have access to the most recent annual financial report.
Consequently, disclosures in the interim financial report need not duplicate previously reported information (IAS 34.6).
IAS 34.16A sets out the information to be disclosed in the notes to the Interim Financial Statements, if not disclosed elsewhere
in the interim financial report.
In addition, IAS 34.15 requires disclosure of events and transactions that are significant to an understanding of the changes
in the financial position and performance of an entity since the end of the last annual reporting period. The guidance includes
some examples of events and transactions which may require disclosure, if significant (IAS 34.15B).
These Interim Financial Statements present selected explanatory notes that are intended to assist users in understanding the
results of the operations of the Group for the current interim period. As with any example, it does not envisage every possible
transaction and therefore cannot be regarded as comprehensive. Also, depending on the circumstances, certain of these
disclosures might be regarded either as voluntary or as necessary to meet the general requirements of IAS 34.
The notes to the Interim Financial Statements follow the format of the disclosures in the Group’s annual financial statements
in so far as these disclosures are required by IAS 34.
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
1. Nature of operations
The principal activities of Illustrative Corporation Ltd and subsidiaries (the Group) include selling
of telecommunications hardware and software, related after-sales service, consulting, and the
construction of telecommunications systems. These activities are grouped into the following service
lines:
• retail – focusing on the sale of the Group’s proprietary hardware and software products and
related customisation and integration services
• after-sales service – providing fixed-price maintenance of extended warranty agreements to
the Group’s retail customers
• consulting and outsourcing – advising companies on telecommunications systems strategies
and IT security, and providing IT outsourcing services including payroll and accounts payable
transaction processing
• construction – providing customers with complete telecommunications systems solutions from
design to development and installation.
Guidance note: The notes to the Interim Financial Statements only include disclosures
relevant to the fictitious entity Illustrative Corporation Ltd and subsidiaries. IFRS may require
different or additional disclosures in other situations. Disclosures should always be tailored to
reflect an entity’s specific facts and circumstances.
Illustrative Corporation Ltd (Illustrative Corporation) is the Group’s ultimate parent company. It is
a limited liability company incorporated and domiciled in Euroland. The address of its registered
office and principal place of business is 149a Great Place, 40237 Greatville, Euroland. Illustrative
Corporation’s shares are listed on the Greatstocks Stock Exchange.
The Interim Financial Statements have been approved for issue by the Board of Directors on
14 August 2019.
Guidance note: Other general information required in the local jurisdiction may be included
here, for example, if the Interim Financial Statements are unaudited.
Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019 13
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
IFRS 16 ‘Leases’
IFRS 16.C5(b) IFRS 16 ‘Leases’ replaces IAS 17 ‘Leases’ along with three Interpretations (IFRIC 4 ‘Determining
IFRS 16.C7 whether an Arrangement contains a Lease’, SIC 15 ‘Operating Leases-Incentives’ and SIC 27
‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’). The new Standard
has been applied using the modified retrospective approach, with the cumulative effect of adopting
IFRS 16 being recognised in equity as an adjustment to the opening balance of retained earnings
for the current period. Prior periods have not been restated.
IFRS 16.C3 For contracts in place at the date of initial application, the Group has elected to apply the
definition of a lease from IAS 17 and IFRIC 4 and has not applied IFRS 16 to arrangements that
were previously not identified as lease under IAS 17 and IFRIC 4.
IFRS 16.C10(d) The Group has elected not to include initial direct costs in the measurement of the right-of-use asset for
IFRS 16.C8b(ii) operating leases in existence at the date of initial application of IFRS 16, being 1 January 2019. At this
date, the Group has also elected to measure the right-of-use assets at an amount equal to the lease
liability adjusted for any prepaid or accrued lease payments that existed at the date of transition.
IFRS 16.C10(b) Instead of performing an impairment review on the right-of-use assets at the date of initial
application, the Group has relied on its historic assessment as to whether leases were onerous
immediately before the date of initial application of IFRS 16.
IFRS 16.C10(c) On transition, for leases previously accounted for as operating leases with a remaining lease
IFRS 16.C9(a) term of less than 12 months and for leases of low-value assets the Group has applied the optional
exemptions to not recognise right-of-use assets but to account for the lease expense on a straight-
line basis over the remaining lease term.
IFRS 16.C11 For those leases previously classified as finance leases, the right-of-use asset and lease liability are
measured at the date of initial application at the same amounts as under IAS 17 immediately before
the date of initial application.
IFRS 16.C12(a) On transition to IFRS 16 the weighted average incremental borrowing rate applied to lease liabilities
recognised under IFRS 16 was 6.5%.
IFRS 16.C10(e) The Group has benefited from the use of hindsight for determining lease term when considering
options to extend and terminate leases.
The following is a reconciliation of total operating lease commitments at 31 December 2018 to the
lease liabilities recognised at 1 January 2019:
IFRS 16.C12(b) Total operating lease commitments disclosed at 31 December 2018 42,456
Recognition exemptions:
• Leases of low value assets (798)
• Leases with remaining lease term of less than 12 months (1,324)
Variable lease payments not recognised (4,746)
Other minor adjustments relating to commitment disclosures –
(6,868)
Operating lease liabilities before discounting 35,588
Discounted using incremental borrowing rate (3,821)
Operating lease liabilities 31,767
Reasonably certain extension options –
Finance lease obligations (Note 14) 4,572
Total lease liabilities recognised under IFRS 16 at 1 January 2019 36,339
14 Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
Guidance note: IAS 34 requires entities to explain significant events and transactions that
have occurred in the interim period. The information to be provided will therefore depend
on entity-specific circumstances and not all entities need to provide the same disclosures
provided here in their interim financial statements. As these Example Interim Consolidated
Financial Statements are provided for illustrative purposes only, we have included these
disclosures. Other entities will need to exercise their judgement in deciding how to best meet
the requirements of IAS 34. We also encourage publicly-listed entities to enquire with their local
regulatory authority to ascertain whether jurisdiction-specific requirements might apply.
Other pronouncements
Other accounting pronouncements which have become effective from 1 January 2019 and
have therefore been adopted do not have a significant impact on the Group’s financial results or
position.
Guidance note: Other Standards and amendments that are effective for the first time in 2019
(for entities with a 31 December 2019 year-end) and could be applicable to the Group are:
• IFRIC 23 Uncertainty over Income Tax Treatments
• IFRS 9 Prepayment Features with Negative Compensation (Amendments to IFRS 9)
• IAS 28 Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28)
• Annual Improvements to IFRS 2015-2017 Cycle
• Plan Amendment, Curtailment or Settlement (Amendments to IAS 19)
These amendments do not have a significant impact on these Interim Financial Statements and
therefore the disclosures have not been made. However, whilst they do not affect these Interim
Financial Statements they will impact some entities. Entities should assess the impact of these
new Standards on their financial statements based on their own facts and circumstances and
make appropriate disclosures.
Guidance note: IAS 34.28 requires the use of the discrete period approach. This requires
that items of income and expenses should be recognised and measured on a basis consistent
with that used in preparing the annual financial statements, and that no adjustments should
be made for events expected to occur subsequent to the end of the interim period. IAS 34.28
notes that the frequency of an entity’s reporting should not affect its annual results. There are
however some situations where annual reporting can be altered. One example is impairment
of goodwill. IFRIC 10 ‘Interim Financial Reporting and Impairment’ (IFRIC 10) notes that an
entity shall not reverse an impairment loss recognised in a previous interim period even if the
impairment loss would not have been recognised had the impairment assessment been made
only at the end of the annual reporting period (IFRIC 10.8).
4.1 Leases
As described in Note 3, the Group has applied IFRS 16 using the modified retrospective approach
and therefore comparative information has not been restated. This means comparative information
is still reported under IAS 17 and IFRIC 4.
Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019 15
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
IFRS 16.32-33 The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement
date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.
The Group also assesses the right-of-use asset for impairment when such indicators exist.
IFRS 16.26 At the commencement date, the Group measures the lease liability at the present value of the lease
payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is
readily available or the Group’s incremental borrowing rate.
IFRS 16.27 Lease payments included in the measurement of the lease liability are made up of fixed payments
(including in substance fixed), variable payments based on an index or rate, amounts expected
to be payable under a residual value guarantee and payments arising from options reasonably
certain to be exercised.
IFRS 16.36 Subsequent to initial measurement, the liability will be reduced for payments made and increased
for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in
in-substance fixed payments.
IFRS 16.39
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use
asset, or profit and loss if the right-of-use asset is already reduced to zero.
IFRS 16.60 The Group has elected to account for short-term leases and leases of low-value assets using the
practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in
relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term.
IFRS 16.47-48 On the statement of financial position, right-of-use assets have been included in property, plant
and equipment (except those meeting the definition of investment property) and lease liabilities
have been included in trade and other payables.
IFRS 16.61 As a lessor the Group classifies its leases as either operating or finance leases.
IFRS 16.62 A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental
to ownership of the underlying asset, and classified as an operating lease if it does not.
16 Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
For leases of land and buildings, the minimum lease payments are first allocated to each
component based on the relative fair values of the respective lease interests. Each component is
then evaluated separately for possible treatment as a finance lease, taking into consideration the
fact that land normally has an indefinite economic life.
See the accounting policy note in the year-end financial statements for the depreciation methods
and useful lives for assets held under finance leases. The interest element of lease payments is
charged to profit or loss, as finance costs over the period of the lease.
Operating leases
IAS 17.33 All other leases are treated as operating leases. Where the Group is a lessee, payments on
operating lease agreements are recognised as an expense on a straight-line basis over the lease
term. Associated costs, such as maintenance and insurance, are expensed as incurred.
5. Estimates
IAS 34.41 When preparing the Interim Financial Statements, management undertakes a number of
IAS 34.16A(d) judgements, estimates and assumptions about recognition and measurement of assets, liabilities,
income and expenses. The actual results may differ from the judgements, estimates and
assumptions made by management, and will seldom equal the estimated results.
IAS 34.28 The judgements, estimates and assumptions applied in the Interim Financial Statements, including
IAS 34.B12 the key sources of estimation uncertainty, were the same as those applied in the Group’s last
annual financial statements for the year ended 31 December 2018. The only exceptions are the
estimate of income tax liabilities which is determined in the Interim Financial Statements using
the estimated average annual effective income tax rate applied to the pre-tax income of the
interim period.
Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019 17
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
Overall, the Group is in a strong position and has sufficient capital and liquidity to service its
operating activities and debt. The Group’s objectives and policies for managing capital, credit risk
and liquidity risk are described in its recent annual financial statements.
7. Business Combinations
IAS 34.16A(i) On 5 April 2019, the Group acquired 100% of the issued share capital and voting rights of
IFRS 3.B64(a)-(d) Sysmagic Limited (Sysmagic), a company based in the United Kingdom that operates within the
service segment. The objective of the acquisition is to further increase the Group’s market share in
providing customised IT and telecommunication systems services.
Inventories 7,500
Trade and other receivables 4,449
IAS 7.40(c) Cash and cash equivalents 324
Total current assets 12,273
Borrowings (2,543)
Deferred tax liabilities (1,335)
Total non-current liabilities (3,878)
Provisions (780)
Other liabilities (1,855)
Trade and other payables (4,165)
Total current liabilities (6,800)
18 Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
Consideration transferred
IFRS 3.B64(m) Acquisition-related costs amounting to CU 304 are not included as part of consideration transferred
and have been recognised as an expense in the consolidated statement of profit or loss, as part of
other expenses.
IFRS 3.B64(h)(i-iii) The fair value of the trade and other receivables acquired as part of the business combination
amounted to CU 4,449 with a gross contractual amount of CU 4,569. As of the acquisition date,
the Group’s best estimate of the contractual cash flows not expected to be collected amounted to
CU 120.
Goodwill
IFRS 3.B64(e) The goodwill that arose on the combination can be attributed to the synergies expected to be
IAS 36.133 derived from the combination and the value of the workforce of Sysmagic which cannot be
IFRS 3.B64(k)
recognised as an intangible asset. Goodwill has been provisionally allocated to cash-generating
units at 30 June 2019 and is attributable to the service segment. The goodwill that arose from this
business combination is not expected to be deductible for tax purposes.
8. Revenue
IFRS 15.116 For the first six months of 2019, revenue includes CU 1,359 (first six months of 2018: CU 1,267) from
the contract liability balance at the beginning of the period, and CU 67 (first six months of 2018:
CU 63) from performance obligations satisfied (or partially satisfied) in previous periods due to
changes in transaction price.
Guidance note: IAS 34 requires entities to explain the significant events and transactions that
have occurred in the interim period. The information to be provided will therefore depend on
entity-specific circumstances and not all entities may need to provide the detailed disclosures
described by IFRS 15 (shown here) in their interim financial statements. As these Example
Interim Consolidated Financial Statements are provided for illustrative purposes only, we have
included these disclosures. Other entities will need to exercise their judgement in deciding how
to best meet the requirements of IAS 34.
As the Group does not enter into contracts with its customers where, once performance has
occurred, the Group’s right to consideration is dependent on anything other than the passage
of time, the Group does not presently have any contract assets.
For purposes of these Interim Financial Statements, it is assumed that changes to the
Group’s contract liabilities (ie deferred revenue) are attributable solely to the satisfaction of
performance obligations. For other entities, where contract liability balances are affected
by other significant factors, IFRS 15.118 requires these changes to be explained. For
example, changes due to business combinations or a change in the time frame required for a
performance obligation to be satisfied.
Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019 19
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
The above revenue figures exclude rental income from investment property (Note 9) which is
included in revenue in the statement of profit or loss.
20 Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
IFRS 15.120 The following aggregated amounts of transaction prices relate to the performance obligations from
existing contracts that are unsatisfied or partially unsatisfied as at 30 June 2019:
Prepayments and other assets contain both deferred IT set-up costs and prepayment. IT set-up
costs comprise between 1% and 2% of the total labour and materials costs incurred.
Non-current
Deferred customer set-up costs 104 80 185
Total 307 291 591
9. Segment reporting
IAS 34.16A(g) The Group has three operating segments: consulting, service and retail. In identifying these
operating segments, management generally follows the Group’s service lines representing its
main products and services. These operating segments are monitored by the Group’s chief
operating decision maker and strategic decisions are made on the basis of adjusted segment
reporting results.
Each of these operating segments is managed separately as each requires different technologies,
marketing approaches and other resources. All inter-segment transfers are carried out at arm’s
length prices based on prices charged to unrelated customers in stand-alone sales of identical
goods or services.
In addition, two minor operating segments are combined below under other segments. The main
sources of revenue for this segment is the sale and disposal of used IT equipment that the Group
collects from its customers.
IAS 34.16A(g)(v) During the six month period to 30 June 2019, there have been no changes from prior periods in the
measurement methods used to determine operating segments and reported segment profit or loss.
IAS 34.16A(g)(i-iv) The revenues and profit generated by each of the Group’s operating segments and segment assets
and liabilities are summarised as follows:
Segment operating
IFRS 8.23 16,978 2,827 5,421 112 25,338
profit
Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019 21
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
Segment operating
IFRS 8.23 10,176 (280) 2,755 (24) 12,627
profit
Segment operating
IFRS 8.23 16,207 2,410 9,408 (8) 28,017
profit
IAS 34.16A(g)(vi) The Group’s segment operating profit reconciles to the Group’s profit before tax as presented in its
financial statements as follows:
22 Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
The percentage of the first six months revenues in 2019 is higher than 2018 due to the effect of
an additional three months revenues contributed by a new subsidiary acquired in 2019 (see
Note 6). Excluding these items, the revenues for the six months ended 30 June 2019 represent
approximately 45% of the annual level of maintenance and installation revenues for the year
ended 31 December 2018.
11. Goodwill
Guidance note: In addition to the requirement of IAS 34.16A(c) to disclose the nature and
amount of items affecting assets that are unusual because of their nature, size or incidence,
this disclosure is also part of the required disclosure under IFRS 3 ‘Business Combinations’ for
the business combination that occurred in the current interim period.
Accumulated impairment
IFRS 3.B67(d)(i) Balance at beginning of period (989) (190) (190)
IFRS 3.B67(d)(v) Impairment loss recognised – – (799)
IFRS 3.B67(d)(vi) New exchange difference – – –
IFRS 3.B67(d)(viii) Balance at end of the period (989) (190) (989)
Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019 23
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
IAS 34.15 The following tables show the movements in intangible assets:
24 Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
Guidance note: In these Interim Financial Statements this information is considered a necessary
disclosure because of the significant additions and the impact of the business combination.
Depending on the circumstances, this type of disclosure might be regarded either as voluntary
or as necessary to meet the requirements of IAS 34.15C and IAS 34.16A(c). Other examples of
events and transactions where IAS 34 requires disclosures are included in IAS 34.15B.
IAS 34.15B(d) The following tables show the movements in property, plant and equipment:
Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019 25
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
IFRS 16.53(j) Included in the net carrying amount of property, plant and equipment are right-of-use assets as
IFRS 16.47(a)(ii)
follows:
CU 30 June 2019
Buildings 32,432
IT equipment 1,402
Total right-of-use assets 33,834
26 Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
14. Leasing
IFRS 16.47(b) Lease liabilities are presented in the statement of financial position within borrowings as follows:
The Group has leases for the main warehouse and related facilities, an office and production
building, and some IT equipment. The lease liabilities are secured by the related underlying assets.
Future minimum lease payments at 30 June 2019 were as follows:
30 June 2018
Lease payments 718 1,838 4,304 6,860
Finance charges (210) (568) (768) (1,546)
Net present values 508 1,270 3,536 5,314
31 December 2018
Lease payments 727 1,415 3,539 5,681
Finance charges (215) (330) (564) (1,109)
Net present values 512 1,085 2,975 4,572
The expense relating to payments not included in the measurement of a lease liability is as follows:
Guidance note: These are not all the disclosure requirements of IFRS 16. Disclosures have
been selected for these Interim Financial Statements in order to understand the changes as a
result of IFRS 16 and meet the requirements of IAS 34. The information provided will therefore
depend on entity-specific circumstances and not all entities need to provide the same
disclosures in their interim financial statements. Entities will need to exercise their judgement in
deciding how to best meet the requirements of IAS 34.
Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019 27
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
IAS 33.70(a) Both the basic and diluted earnings per share have been calculated using the profit attributable to
shareholders of the parent company (Illustrative Corporation) as the numerator, ie no adjustments
to profits were necessary during the six month periods to 30 June 2019 and 30 June 2018 or the
year ended 31 December 2018.
IAS 33.70(b) The weighted average number of shares for the purposes of the calculation of diluted earnings per
share can be reconciled to the weighted average number of ordinary shares used in the calculation
of basic earnings per share as follows:
Illustrative Corporation also issued 1,700,000 shares on 1 April 2019 for cash, corresponding to
13.9% of total shares issued. Each share has the same right to receive dividends and the repayment
of capital and represents one vote at the shareholders’ meeting of Illustrative Corporation.
28 Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
IAS 1.79(a)(iv) Amounts in thousand shares: 30 Jun 2019 30 Jun 2018 31 Dec 2018
IAS 1.79(a)(ii) Shares issued and fully paid:
– Beginning of the period 13,770 12,000 12,000
– Issued on exercise of employee share options 350 270 270
– Share issue, private placement 1,700 – 1,500
Shares issued and fully paid 15,820 12,270 13,770
Shares authorised for share-based payments 600 600 600
IAS 1.79(a)(i) Total shares authorised at the end of the period 16,420 12,870 14,370
18. Dividends
IAS 34.16A(f) During the six month period to 30 June 2019 Illustrative Corporation paid dividends of
CU 6,855 to its equity shareholders (six month period to 30 June 2018: CU 3,000; December 2018:
CU 3,000). This represents a payment of CU 0.50 per share (six month period to 30 June 2018: CU
0.25; December 2018: CU 0.25). No dividends were paid on new shares issued in 2018 pursuant to
the Group’s share-based payment scheme.
Guidance note: This type of disclosure is not specifically required by IAS 34. However, in these
Interim Financial Statements, this information is considered necessary due to the change in the
presentation of the reconciliations of each item of comprehensive income.
IAS 1.106(d)(ii) The following tables show the movements in other components of equity
IAS 1.106A
Translation Revaluation Cash-flow Net defined Total
reserve reserve hedges benefit
plan
Balance at 1 January 2019 (847) 901 392 1,819 2,265
Remeasurement of net defined
IAS 19.120(c) – – – (2,201) (2,201)
benefit liability
Cash flow hedges
IFRS 7.23(c) – current period gains – – 215 – 215
IFRS 7.23(d)
– reclassification to profit or loss – – 157 – 157
IAS 1.92
Exchange differences on
IAS 21.52(b) (575) – – – (575)
translating foreign operations
Equity accounted investments – – 15 – 15
IAS 12.81(ab)
Tax benefit 173 – – 531 704
IAS 1.90
Other comprehensive income for
the period (all attributable to the (402) – 387 (1,670) (1,685)
parent)
Balance at 30 June 2019 (1,249) 901 779 149 580
Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019 29
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
20. Provisions
IAS 34.15B(c) A restructuring provision was recognised by the Group in its annual financial statements as at
31 December 2018 in relation to the ‘Phoenix Programme’, amounting to CU 724. The estimate of
the restructuring provision was reduced by CU 600 at 30 June 2019 due to a positive outcome of
claims brought against the Group by former employees. The Group’s management still expects
to settle the remaining termination remuneration in 2019, predominantly through out of court
settlements.
The remaining balance of CU 491 is made up of other provisions relating to legal and other claims
by customers, such as warranties for which customers are covered for the cost of repairs.
30 Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019 31
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
Guidance note: IAS 34 requires that Interim Financial Statements include certain of
the disclosures about fair value of financial instruments set out in IFRS 13 ‘Fair Value
Measurement’ and IFRS 7 ‘Financial Instruments: Disclosures’. These disclosures include the
classification of fair values within a three-level hierarchy. The three levels are defined based on
the observability of significant inputs to the measurement, as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly
• Level 3: unobservable inputs for the asset or liability.
32 Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
IAS 34.16A(j) The following table shows the levels within the hierarchy of financial assets and liabilities measured
at fair value on a recurring basis at 30 June 2019, 30 June 2018 and 31 December 2018.
Financial liabilities
Contingent consideration – – (630) (630)
Total financial liabilities – – (630) (630)
Net fair value 1,104 673 122 1,899
Financial liabilities
Contingent consideration – – (605) (605)
Total financial liabilities – – (605) (605)
Net fair value 1,106 813 134 2,053
Financial liabilities
Contingent consideration – – (620) (620)
Total financial liabilities – – (620) (620)
Net fair value 1,076 716 132 1,924
Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019 33
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
IFRS 13.93(c) There were no transfers between Level 1 and Level 2 during the six month period to 30 June 2019 or
the year to 31 December 2018.
The probability-weighted cash outflows before discounting are CU 655 at 30 June 2019,
30 June 2018 and 31 December 2018. It reflects a management’s estimate of a 50% probability
that the contract’s target level will be achieved.
The discount rate used at 30 June 2019, 30 June 2018 and 31 December 2018 is 4.4%, 4.6%
and 4.4%, respectively. These discount rates are based on the Group’s estimated incremental
borrowing rate for unsecured liabilities at each reporting date, and therefore reflect the Group’s
credit position.
The significant input for the fair value estimate is the management’s estimate of the probability
that the contract’s target level will be achieved. The following table provides information about the
sensitivity of the fair value measurement to changes in that input:
There are no major interrelationships between the significant input (management’s estimate of the
probability that the contract’s target level will be achieved) and the unobservable inputs.
34 Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
The reconciliation of the carrying amounts of financial instruments classified within Level 3 is as
follows:
Contingent Investment in
consideration XY Ltd
IFRS 13.93(e) Balance at 1 January 2018 – 433
IFRS 9 transition adjustment – 27
IFRS 13.93(e)(iii) Issued in relation to business combination (600) –
IFRS 13.93(e)(i)
Amount recognised in profit or loss (5) 278
IFRS 13.93(f)
Balance at 30 June 2018 (605) 738
IFRS 13.93(e)(i)
Amount recognised in profit or loss (15) 14
IFRS 13.93(f)
Balance at 31 December 2018 (620) 752
IFRS 13.93(e)(i)
Amount recognised in profit or loss (10) –
IFRS 13.93(f)
Balance at 30 June 2019 (630) 752
IFRS 13.93(f) The total amount included in profit or loss for unrealised losses on level 3 instruments:
The estimated fair values of classes of other financial instruments measured at amortised cost at
30 June 2019, 30 June 2018 and 31 December 2018 are:
Financial liabilities
Non-current borrowings:
– US-dollar loans 7,437 7,480 7,533 7,545 7,801 7,770
– Non-convertible bond 7,800 7,858 8,320 8,480 8,259 8,300
– Subordinated shareholder loan 4,750 4,500 5,050 5,100 4,975 5,000
Total 19,987 19,838 20,903 21,125 21,035 21,070
Current borrowings
– US-dollar loans 250 250 250 250 250 250
– Other bank borrowings 3,736 3,736 4,405 4,405 4,565 4,565
Total 3,986 3,986 4,655 4,655 4,815 4,815
a
These financial assets are included in ‘’Other long-term financial assets’’. The line item also includes listed securities and the investment in XY Ltd
which are carried at fair value at 30 June 2019, 30 June 2018 and 31 December 2018 of CU 1,167, CU 1,194 and CU 1,173 (see above), respectively.
Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019 35
Notes to the condensed consolidated financial statements
For the period ended 30 June 2019 (expressed in thousands of Euroland currency units, except per share amounts)
IFRS 7.29 The carrying amount of the following financial assets and liabilities is considered a reasonable
approximation of fair value:
• trade and other receivables
• cash and cash equivalents
• trade and other payables.
Guidance note: IAS 34.16A(h) requires disclosure of events after the interim period that have
not been reflected in the Interim Financial Statements. IAS 34 does not specify the level of
detail required. This example illustrates the disclosures required by IFRS 3 for combinations
arising after the reporting date. Other approaches may also be acceptable.
IAS 34.16A(h) On 29 July 2019 the Group acquired 100% of the issued share capital of Servers.com Limited
IFRS 3.B66 (Servers.com), a company based in Euroland. The objective of the acquisition is to expand the
IFRS 3.B64(a-d)
operations of the Group’s retail segment.
IFRS 3.B64(f)(i, The acquisition was settled in cash and by issuing 500,000 shares of Illustrative Corporation. The
iii, iv) purchase agreement also provides for an additional consideration of CU 1,500 payable if the
IFRS 3.B64(g)(ii)
average profits of Servers.com for 2019 and 2020 exceeds a target level agreed by both parties.
Any additional consideration will be paid on 30 July 2021.
IFRS 3.B64(f)(iv) The fair value of the equity shares issued was based on the market value of the Group’s traded
equity shares at the date of acquisition.
Guidance note: The determination of the acquisition-date fair value of the contingent
consideration should consider the expected outcome of the contingency. This example
illustrates one possible approach to estimating the fair value of the contingent consideration.
IFRS 3.B64(g)(iii) The fair value of the contingent consideration represents the Group’s estimate of the probable
cash outflows (ie reflecting management’s estimate of a 50% probability that the targets will be
achieved) discounted using an interest rate of 5%.
IFRS 3.B66 The Group is in the process of determining the fair values of the acquired assets and assumed
liabilities of Servers.com. The valuation is expected to be completed before year-end.
36 Illustrative Corporation Group: IFRS Example Interim Consolidated Financial Statements – 30 June 2019
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