This series of blogs describes how the SAP® BusinessObjectsTM Financial Consolidation Starter Kit for IFRS has been configured to meet International Financial Reporting Standards (IFRS). It focuses on standards dedicated to:
a statement of cash flows for which IAS 1 refers to IAS 7 for its content (see blog # 3 )
notes comprising a summary of significant accounting policies and other explanatory information
There is no prescribed format for the financial statements; however there are minimum disclosures to be displayed. The IFRS XBRL Taxonomy 2009, published by the IASC Foundation in April 2009, proposes formats that have been used as templates for configuring the starter kit.
Statement of Financial Position
IAS 1 requirements
An entity should present current and non-current assets, and current and non-current liabilities, as separate classifications in its statement of financial position, except when a presentation based on liquidity provides information that is reliable and more relevant.
It proposes two formats of the consolidated statement of financial position (non-current / current and by liquidity)
In the starter kit
The statement of financial position delivered in the starter kit uses the XBRL current / non-current presentation. The distinction between current and non-current items is made through the chart of accounts.
For each kind of asset or liability that may comprise both current and non-current amounts, two accounts have been created. For example, borrowing are split into accounts L1510 (non-current portion) and L2510 (current portion).
Statement of Comprehensive Income
IAS 1 requirements
An entity should present all items of income and expense recognized in a period either:
in a single statement of comprehensive income
in two statements: a separate income statement and a second statement beginning with profit or loss and displaying components of other comprehensive income (OCI)
An analysis of expenses (by nature or by function) must be disclosed in the primary statements or in the notes.
All items of income and expense are deemed to arise from an entity's ordinary activities. No item should be presented as an extraordinary item.
For OCI, reclassification adjustments must be disclosed (in the statement or in the notes) as well as the income tax relating to each component (including reclassification adjustments). Components of OCI include:
changes in revaluation surplus
actuarial gains and losses on defined benefit plans
gains and losses arising from the translation of the financial statements of a foreign operation
gains and losses on remeasuring available-for-sale financial assets
the effective portion of gains and losses on hedging instruments in a cash flow hedge
The share of other comprehensive income of associates and joint-ventures accounted for using the equity method should be presented separately in the statement of comprehensive income.
The IFRS XBRL Taxonomy 2009 proposes two separate income statements (nature / function) and two statements of comprehensive income (with or without details on tax) that both exclude profit or loss items.
In the starter kit
The starter kit comprises three statements for reporting comprehensive income:
a single statement of comprehensive income
a separate income statement
a statement of OCI, beginning with profit or loss and displaying each component of OCI
As regards P&L items, expenses are analyzed by function, the most commonly used analysis.
Other components of comprehensive income are displayed:
net of related tax effects in the single statement of comprehensive income, without any distinction between movements of the period and reclassification adjustments
with all details required in the statement of OCI (reclassification adjustments, tax effect)
Configuration of the statement of OCI
Unlike P&L items, components of OCI (defined by IAS 1 as income or expenses that are not recognized in P&L) do not correspond to accounts at closing in the general ledger but are movements of the period booked in equity. In the starter kit, components of OCI are identified using dedicated equity accounts associated to one or more flows. For more information, see the Design description of the starter kit on SAP Service Marketplace.
Statement of Changes in Equity
IAS 1 requirements
An entity should present a statement of changes in equity displaying:
total comprehensive income for the period, showing separately the total amounts attributable to owners of the parent and to non-controlling interests
for each component of equity, the effects of retrospective application or retrospective restatement recognized in accordance with IAS 8
the amount of transactions with owners in their capacity as owners, showing separately contributions by and distributions to owners
for each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, separately disclosing each change
XBRL Taxonomy / In the starter kit
The statement of changes in equity delivered in the starter kit is based on XBRL templates, with some modifications.
The components of equity are the following: issued capital, share premium, treasury shares, other reserves, retained earnings, non-controlling interests.
Reconciliation between opening and closing shows the following items:
Changes in accounting policies
Issue of shares
Issue of convertible notes
Purchase and disposal of treasury shares
Transactions with non-controlling interests
As for the statement of comprehensive income, data displayed in the statement of changes in equity is calculated by consolidation rules and can be analyzed, via dedicated reports, to retrieve the original accounts / flows.
IAS 1 does not provide a comprehensive list of required disclosures. These are listed by topic in each IFRS.
As disclosures required by IFRS are very numerous and as it is difficult to select those which are common to all entities, disclosure requirements have not been included in the starter kit.