KK 1
General Framework for Preparing Financial Statements
99 A change in accounting policies shall be applied retrospectively, retroactive to the beginning of the earliest period presented, except in cases where (a) a change in accounting policy arises from a new IFRS and that IFRS prescribes different transition methods to the new policy, or (b) the effect of the change in accounting policy on prior accounting periods cannot be reliably estimated.
99A Small business entities are exempt from the application of paragraph 99. These entities apply changes in accounting policies prospectively.
116 The accounting for events that occur after the reporting period ends but before the date the financial statements are authorized for publication depends on whether those events require adjustment.
117 The post-period event for which adjustments must be made is an event that highlights conditions that existed at the reporting period's end date. An economic entity must adjust the amounts recognized in its financial statements, including providing appropriate explanatory disclosures, to reflect adjusting events after the reporting period has ended.
118 Events for which no adjustments are made are those that do not indicate conditions that existed after the reporting period has closed. The economic entity will not adjust the amounts recognized in its financial statements to reflect events for which no adjustments are made after the reporting period has ended. The effect of events for which no adjustments are made will be described in the explanatory notes to the financial statements if they are material.
118A Paragraphs 116–118 are not applicable to small economic units as defined in the Accounting Law.
Explanatory Notes
120. The economic unit must present in the explanatory notes to the financial statements a summary of the principal accounting policies used in their preparation.
121. In cases where a change in this Standard affects the current period or any prior period, or may have an effect on future periods, the economic entity shall provide the following explanatory information: (a) the nature of the change in accounting policy; (b) for the current period and each prior period presented, to the extent practicable, the amount of the adjustment for each affected line item of the financial statements; (c) the amount of the adjustment relating to periods prior to those presented, to the extent applicable; (d) an explanation in cases where it is not practicable to determine the amounts stated in (b) or (c) above; Financial statements for subsequent periods need not repeat this explanatory information.
121A The requirements of paragraph 121 do not apply to small business entities, as defined in the Accounting Act.
122. In cases where a voluntary change in accounting policy affects the current period or any prior period, the economic entity must provide the following explanatory information: (a) the type of change in accounting policy; (b) the reasons why the application of the new accounting policy provides reliable and more appropriate information; (c) to the extent applicable, the amount of the adjustment for each affected line item of the financial statements, shown separately: (i) for the current period; (ii) for each prior period presented; and (iii) in the aggregate for periods before those presented.
123. If the manner of presenting accounting policies and/or accounting information has changed, then the explanatory notes will explain: (a) a description of the change and the reason for the change; (b) its effect on the items of the statement of financial position and the statement of financial performance; (c) if the change is not applied retrospectively, an explanation of the situation, a description of the effect of the new policy, and the prior periods affected by the change.
123A The requirements of paragraphs 122 and 123 apply to small economic units only in cases when:
- a voluntary change in accounting policy affects the current period or any prior period or
- if the manner of presenting accounting policies and/or accounting information has changed
Small business entities must provide the following explanatory information: (a) the type of change in accounting policy or change in the presentation of financial information; (b) the reasons why the adoption of the new accounting policy or new presentation ensures reliable and more appropriate information;
124. In those cases where, in the interest of presenting the most true and fair view, the provisions of certain National Accounting Standards have not been applied, then the explanatory notes shall explain: (a) the provision of the NAS that was not followed; (b) the reason for not complying with it; (c) the effect on the items of the statement of financial position and the statement of financial performance.
124A The requirement set forth in paragraph 124(c) does not apply to small economic units.
125. The economic entity shall provide explanatory information on the type of each change in accounting estimate and the effect of the change on assets, liabilities, revenues, and expenses for the current period. If the economic entity can estimate the effect of the change over one or more future periods, then it should provide explanatory information about those estimates. Small business entities are exempt from providing further disclosures to explain the effect of changes in accounting estimates in future periods.
126. In those cases where material errors are discovered from prior periods, the explanatory notes shall present: (a) the type of error in the prior period; (b) for each prior period presented, to the extent applicable, the amount of the adjustment for each affected line item of the financial statements; (c) to the extent applicable, the amount of the adjustment at the beginning of the earliest prior period presented; (d) an explanation if the determination of the amounts described in (b) or (c) above is not applicable. The financial statements for subsequent periods need not repeat this explanatory information.
126A Small business entities, when material errors are discovered, present in the explanatory notes the type of error from the prior period and the effect of its correction on assets, liabilities, revenues, and expenses for the current period.
127. The explanatory notes must describe the material events for which adjustments may be made after the reporting period has ended, as well as their effect on the financial figures presented in the financial statements.
128. The economic entity shall provide the following explanatory information for each category of post-period-end event that cannot be adjusted: (a) the type of event; (b) an estimate of its financial effect; (c) a statement that no such estimate can be made.
128A The requirements of paragraphs 127 and 128 do not apply to small economic units.
129. If there is uncertainty regarding the continuity of the economic entity's operations, the explanatory notes should disclose the factors causing this uncertainty. If the financial statements have been prepared on the basis of winding up the economic unit's operations, the reason and the basis for their preparation shall be explained.
SKK 2
Presentation of Financial Statements
90. An economic entity should provide information in the explanatory notes about key assumptions about the future, and other major sources of estimation uncertainty at the reporting date, which are highly likely to result in a material adjustment to the net carrying amounts of the assets and liabilities within the next financial year. With respect to these assets and liabilities, the notes should include details of: (a) their nature; (b) their carrying amount at the end of the reporting period.
90A Small economic units are exempt from the application of paragraph 90.
SKK 3
Financial Instruments
Explanatory Notes
38. An economic entity should provide information on the carrying amount of each of the following categories of financial assets and liabilities (in aggregate) at the reporting date, either in the statement of financial position or in the notes:
(a) financial assets that are debt instruments measured at amortized cost (paragraph 15(a)).
(b) financial liabilities measured at amortized cost (paragraph 15(a)).
(f) loans measured at cost less impairment (paragraph 15(b)).
39. An entity should provide explanatory information that enables users of the financial statements to assess the significance of financial instruments to the entity's position and performance. For example, information on long-term borrowings would normally include the terms and conditions of the debt instrument (such as the interest rate, maturity, repayment schedule, and the restrictions the debt instrument imposes on the entity).
Deregistration
40. If an entity has transferred financial assets to a third party in a transaction that does not qualify for derecognition (see paragraphs 28–30), the entity must provide explanatory information for each of the following classes of financial assets:
(a) the nature of the assets;
(b) the nature of the risks and rewards associated with ownership to which the unit remains exposed;
(c) the carrying amounts of assets and of any corresponding liabilities that the entity continues to recognize.
Collateral
41. When an entity has pledged financial assets as collateral for existing or contingent liabilities, it should provide the following explanatory information: (a) the carrying amount of the financial assets pledged as collateral; (b) the terms and conditions of the collateral.
Non-payments and violations in repayable loans
42. For borrowings payable recognized at the reporting date for which there have been past due payments or non-payment of principal, interest, or breaches of repayment terms that have not been remedied as of the reporting date, an economic entity must provide explanatory information as follows:
(a) the details of this violation or non-payment;
(b) the carrying amount of loans payable as of the reporting date;
(c) if the breach or non-payment has been remedied, or if the terms of the loan payable have been renegotiated, before the financial statements were approved for publication.
Income, expense, profit, or loss statements.
43. An entity shall provide explanatory information for the following items of income, expenses, gains or losses: (a) income, expenses, gains or losses, from: (i) financial assets measured at amortized cost. (ii) financial liabilities measured at amortized cost. (b) total interest income and total interest expense (calculated using the effective interest method). (c) the amount of any impairment loss for each class of financial assets.
43A Small economic units are exempt from the application of paragraphs 38–43.
SKK 4
Inventories
Explanatory Notes
34. In the supplementary information to the financial statements regarding inventories, the following information must be presented:
(a) the accounting policies used as well as the formulas used for calculating cost;
(b) the carrying amount of all inventory items; and their carrying amount according to the classification made by the business entity.;
(c) the value of inventories recognized as expense during the accounting period;
(d) the amount of any inventory write-down or reversal of prior write-downs;
(e) the book value of the inventory given as collateral;
(f) the accounting value of inventories held by third parties;
(g) information on inventory, amounts, and, where possible, the valuation calculation that are not recorded in the position statement.
of the economic unit but held in safekeeping.
34A Small economic units are exempt from the application of points (f) and (g) of paragraph 34.
SKK 5
Tangible long-term assets and intangible long-term assets
Explanatory Notes
108. The financial statements explain the measurement bases used to determine the gross carrying amount (applicable only to AAM), the methods and rates of depreciation (or useful life) used for depreciating all groups of AAM and AAJM, an analysis of the change in their carrying amount, as well as a reconciliation of the following information:
(a) cost, accumulated depreciation, and book value at the beginning of the fiscal year;
(b) purchases and improvements during the accounting period;
(c) additions from business combinations;
(d) depreciation expenses;
(e) reductions from impairment losses;
(f) recoveries of prior impairment losses;
(g) retirements/sales;
(h) reclassifications (including long-term assets held for sale);
(i) other changes;
(j) cost, accumulated depreciation, and book value at the end of the accounting period.
This reconciliation should not be presented for the prior period.
109. Also, the entity's economic units, excluding small economic units, shall provide the following information: (a) The carrying amount of AAM and AAJM items held as collateral for borrowings, or in which the economic unit has a restricted interest; (b) the amount of contractual commitments for the purchase of land, buildings, machinery, and equipment.
114. An economic unit should provide the following explanatory information for all long-term investments:
(a) the methods and significant assumptions used in determining the fair value of long-term invested assets;
(b) the extent to which the fair value of the long-term invested asset (as measured or disclosed in the explanatory notes to the financial statements) is based on an appraisal made by an independent expert who holds a recognized and relevant professional qualification and has recent experience in the country and asset class of the long-term investment being appraised.
If no such assessment has been conducted, explanatory information must be provided regarding this fact.;
(c) the existence and amount of limitations on the ability to realize the invested long-term asset or the remittances of income from its withdrawal from use;
(d) contractual obligations for the purchase, construction, and development of the long-term invested asset or for repairs, maintenance, or expansions;
(e) the reconciliation between the accounting values of long-term assets at the beginning and end of the period, showing separately:
(i) additions, providing explanatory information in particular for those additions that result from acquisitions through business combinations;
(ii) net gains or losses from fair value adjustments;
(iii) transfers to land, buildings, machinery, and equipment, when a reliable measure of fair value is no longer available, without unnecessary cost or effort;
(iv) transfers to and from inventories or assets owned by the owner;
(v) other changes.
This reconciliation should not be presented for prior periods.
114A Small business entities, if they do not elect to apply the fair value model to invested assets, are exempt from applying the
points (a), (b), (c) and (e.ii) of paragraph 114.
SKK 9
Business Combinations and Consolidation
Explanatory Notes
For business combinations completed during the reporting period.
59. For each business combination carried out during the period, the buyer will provide the following explanatory information:
(a) the names and descriptions of the economic units or combined businesses;
(b) the date of purchase;
(c) the percentage of common equity instruments purchased;
(d) the cost of the combination and a description of the components of that cost (such as cash, equity instruments, and debt instruments);
(d) the amounts known as of the date of acquisition for each class of assets of the acquired unit, liabilities and contingent liabilities, including goodwill;
(f) Excess amounts recognized in profit or loss in accordance with paragraph 32 and in the sub-line of the income statement in which the excess is recognized.
For all business combinations
60. A buyer will provide explanatory information for reconciling the carrying amount of goodwill at the beginning and end of the reporting period, showing separately:
(a) changes arising from combinations of new business;
(b) impairment losses;
(c) the decommissioning of previously acquired businesses;
(d) other changes.
This reconciliation should not be presented for prior periods.
60A The notes to the financial statements explain:
– the methods used to calculate the value of the goodwill in the business combination;
– any significant change in its value compared to the previous fiscal year.
Controlled units
Providing explanatory information in the consolidated financial statements
61. The following disclosures should be made in the consolidated financial statements:
(a) the fact that the statements are consolidated financial statements;
more than half of the voting power;
preparation of consolidated financial statements;
(d) the nature and extent of any material restrictions (e.g., arising from borrowing agreements or regulatory requirements) on the ability of the controlled entities to transfer funds to the parent company in the form of dividends or to repay loans.
61A Small business entities that choose to prepare consolidated financial statements apply the explanatory note requirements of paragraphs 59–
SKK 11
Tax on profit
Explanatory Notes
38. An economic entity should provide explanatory information that enables users of its financial statements to assess the nature and financial effect of the current or deferred tax consequences of transactions and other recognized events.
39. An economic unit should disclose separately the major components of tax expenses (income). Such components of tax expenses (income) may include: (a) current tax expenses (income); (b) any adjustment recognized in the reporting period for current tax of prior periods; (c) the amount of the deferred tax expense (income) relating to the recognition and reversal of temporary differences; (d) the amount of the deferred tax expense (income) relating to changes in tax rates or the imposition of new taxes; (e) the effect on deferred tax liabilities arising from a change in the expected outcome of a review by tax authorities (see paragraph 31); (f) adjustments to deferred tax liabilities arising from a change in the tax status of the economic entity or its shareholders/partners; (g) any change in the amount of the provision (see paragraphs 28 and 29); (h) the amount of the tax expense relating to changes in accounting policies and errors (see IFRS 1 General Framework for the Preparation of Financial Statements).
40. An economic unit must separately disclose as follows:
(a) the total amounts of current and deferred taxes relating to items charged or credited directly to equity;
(b) an explanation of the main differences between the values declared in the capital and the values reported to the tax authorities;
(c) an explanation of the changes in the applicable tax rate(s) compared to the prior reporting period;
(d) for any temporary difference and for any unused tax loss or deductible (refundable) tax:
(i) the amount of deferred tax liabilities, deferred tax assets and the provision at the end of the reporting period and;
(ii) an analysis of the change in deferred tax liabilities, deferred tax assets, and the provision during the period.
(e) the expiration date, if any, of temporary differences, tax losses, and unused deductible (refundable) taxes;
(f) in the circumstances described in paragraph 32, an explanation of the nature of the possible tax consequences that may result from the payment of dividends to the unit's shareholders.
40A If small business entities that choose to apply the relief provided in paragraph 4 of this Standard apply the requirements of paragraphs 38–40 on a partial basis, to the extent that they relate to current taxation. Otherwise, if they recognize deferred taxes, they must present in the explanatory notes everything required by paragraphs 38–40.
SKK 13
Biological assets and concession agreements
Explanatory Notes
Explanatory notes on biological assets
Biological assets held at fair value
29A. If small business entities choose to measure biological assets at fair value, the explanatory notes to the financial statements must provide the full information required by paragraph 29.
Cost-held biological assets
30. The following information shall be disclosed in the financial statements regarding biological assets measured at cost:
(a) a description of each class of biological assets;
(b) an explanation of why fair value cannot be measured reliably;
(c) the method of depreciation used;
(d) useful lives or the depreciation rate used;
(e) the gross book value and accumulated amortization (together with accumulated impairment losses) at the beginning and end of the period.
30A Small business entities that elect not to carry biological assets at fair value are exempt from applying paragraph 30(b).
SKK 15
For the Accounting and Financial Reporting of Economic Microentities
Explanatory Notes
58. The explanatory notes to the financial statements also include:
(a) The description of the micro-entity's activity and its primary activity.;
(b) References to the accounting standards used to prepare the financial statements;
(c) Explanations of the accounting policies for inventories;
(d) Explanations of contingent assets and liabilities;
(e) Any other information important for understanding the financial statements.
Download here
Source: National Council of Accountancy.