2,640
3,747
Amortization of capitalized
borrowing costs3
–4
–3
Interest
income
70
46
Interest
expense
–176
–139
Profit before income taxes
2,530
3,651
1 Information on adjustments to prior-year figures is disclosed in Note 1 of
the Notes to the Interim Consolidated Financial Statements.
2 The first quarter of 2017 mainly comprises the reversal of an impairment of
Daimler’s equity investments in BAIC Motor of €240 million.
3 Amortization of capitalized borrowing costs is not considered in internal
performance measure »EBIT«, but is included in cost of sales.
3080 Chapter 37
4.5
Fair value disclosures for financial instruments
IAS 34 requires that an entity should include the following in its interim financial report
in relation to financial instruments: [IAS 34.16A(j)]
(a) disclosures to help users of the financial statements assess the valuation techniques
and inputs used to develop the fair value measurements used for financial
instruments in the statement of financial position and, for financial instruments
measured using unobservable inputs, the effect of those measurements on profit
or loss or other comprehensive income in the period [IFRS 13.91] (see Chapter 14
at 20.1);
(b) certain disclosures for fair value measurements that are recognised in the
statement of financial position after initial recognition, including the carrying
amount, categorisation within the fair value hierarchy and additional disclosures
for those not classified as level 1 (see Chapter 14 at 20.3); [IFRS 13.93]
(c) accounting policy disclosures relating to how the entity has determined
appropriate classes of financial assets and liabilities for which information about
fair value measurement is given; how it determined when transfers between levels
of the fair value hierarchy have occurred; and how the entity has measured any
groups of financial assets and liabilities managed on the basis of its net exposure
(see Chapter 14 at 20.1.2.A and 20.2); [IFRS 13.94-96]
(d) disclosures regarding liabilities measured at fair value and issued with an
inseparable third-party credit enhancement (see Chapter 14 at 20.5); [IFRS 13.98] and
(e) disclosures about fair value required by IFRS 7, including for each class of financial
asset and financial liability a comparison between fair value and carrying amount,
unless the carrying amount is a reasonable approximation of the fair value,
[IFRS 7.25, 26, 29(a)], and disclosures relating to the deferral and subsequent
recognition of gains and losses arising when fair value is determined using
unobservable inputs or when the fair value cannot be determined reliably (see
Chapter 50 at 4.5). [IFRS 7.28].
Quantitative disclosures would normally be given in a tabular format unless another
format is more appropriate. [IFRS 13.99]. The entity should assess whether the disclosures
are sufficient to meet the disclosure objectives of IFRS 13. This requires judgements to
be made about the level of detail; how much emphasis to place on each of the various
requirements; and level of aggregation or disaggregation. If necessary, additional
information should be given in order to meet those objectives (see Chapter 14 at 20.1).
[IFRS 13.92].
Interim financial reporting 3081
The Extract below from the half-year financial report of Slater and Gordon illustrates the
valuation techniques used, fair value hierarchy and recurring level 3 fair value disclosures.
Extract 37.25: Slater and Gordon Limited (Half-Year ended 31 December 2017)
Notes to Financial Statements [extract]
Note 4.
Assets and Liabilities [extract]
c) Fair Value Measurements [Extract]
i) Fair Value Hierarchy [Extract]
31 December 2017
Level 1
Level 2
Level 3
Total
Recurring fair value measurements
$’000
$’000
$’000
$’000
Financial liabilities
Derivative financial instruments – interest rate swaps
–
217
–
217
–
217
–
217
30 June 2017
Level 1
Level 2
Level 3
Total
Recurring Fair Value Measurements
$’000
$’000
$’000
$’000
Financial liabilities
Derivative financial instruments – interest rate swaps
–
1,419
–
1,419
Contingent consideration(1)
– –
455
455
–
1,419
455
1,874
(1)
Part of Vendor Liabilities which were included in Payables in the Statement of Financial Position
ii) Valuation Techniques and Inputs used in Level 2 and 3 Fair Value Measurements
The fair value of the interest rate swaps is measured with reference to market data which can be used to estimate
future cash flows. The key input into this valuation is the interest rate swap revaluation statement as provided by
Westpac Banking Corporation and National Australia Bank.
The fair value of contingent consideration payable in a business combination was measured with reference to current
fee and performance forecasts which can be used to estimate future cash flows. The final tranche of contingent
consideration was paid in December 2017. The key inputs into this valuation at 30 June 2017 were the estimated
future cash flows and the average discount rate of 9% used to determine the present value of the future cash flows.
iii) Reconciliation of Recurring Level 3 Fair Value Movements
31 Dec 2017
30 Jun 2017
$’000 $’000
Opening balance
455
2,068
Payments relating to contingent consideration
(425)
(1,505)
Fair value movement on contingent consideration(2)
(30) (108)
Closing balance
–
455
(2)
Unrealised (gains)/losses are recognised in the Statement of Profit or Loss and Other Comprehensive Income
within Other Income.
3082 Chapter 37
4.6
Disclosure of compliance with IFRS
If an interim financial report complies with the requirements of IAS 34, this fact should
be disclosed. Furthermore, an interim financial report should not be described as
complying with IFRS unless it complies with all the requirements of International
Financial Reporting Standards, [IAS 34.19], a requirement similar to that found in IAS 1.
[IAS 1.16]. Therefore, an entity would only provide a statement of compliance with IFRS
(as opposed to IAS 34 alone) in its interim report if it prepared a complete set of interim
financial statements.
Extract 37.26: BMW AG (interim ended March 2016)
Condensed Notes to the Group Financial Statement to 31 March 2016 [extract]
Accounting Principles and Policies [extract]
1 Basis of preparation [extract]
The Group Financial Statements of BMW AG at 31 December 2015 were drawn up in accordance with International
Financial Reporting Standards (IFRSs), as applicable in the European Union (EU) at that date. The Interim Group
Financial Statements (Interim Report) at 31 March 2016, which have been prepared in accordance with International
Accounting Standard (IAS) 34 (Interim Financial Reporting), have been drawn up using, in all material respects, the
same accounting methods as those utilised in the 2015 Group Financial Statements. The BMW Group applies the
option of publishing condensed group financial statements. All Interpretations issued by the International Financial
Reporting Interpretations Committee (IFRIC) which were mandatory at 31 March 2016 have been applied. The
Interim Report also complies with German Accounting Standard No. 16 (GAS 16) – Interim Financial Reporting –
issued by the German Accounting Standards Committee e.V. (GASC).
When entities either choose or are required by local regulations to meet other
requirements in addition to IAS 34, the statement of compliance can be more
complicated. In the extract above, BMW simply adds a statement confirming its
compliance with the specific German Accounting Standard on interim reporting.
Additional complexity can arise when the entity seeks to meet the requirements of its
(IFRS-based) local GAAP as well as IFRS as issued by the IASB. Extract 37.27 below
shows how the dual listed BHP Billiton disclosed compliance with IFRS, IFRS as
endorsed by the EU, Australian Accounting Standards and the requirements of the
Financial Conduct Authority in the UK.
Extract 37.27: BHP Billiton plc (interim ended December 2016)
Notes to the Financial Information [extract]
1. Accounting
policies [extract]
This general purpose financial report for the half year ended 31 December 2016 is unaudited and has been prepared
in accordance with IAS 34 “Interim Financial Reporting” as issued by the International Accounting Standards Board
(IASB), IAS 34 “Interim Financial Reporting” as adopted by the EU, AASB 134 “Interim Financial Reporting” as
issued by the Australian Accounting Standards Board (AASB) and the Disclosure and Transparency Rules of the
Financial Conduct Authority in the United Kingdom and the Australian Corporations Act 2001 as applicable to
interim financial reporting.
Interim financial reporting 3083
The extract above also highlights a compliance issue for adopters of IFRS-based
standards, such as entities in Australia and the European Union. Because of the time
taken to secure local endorsement of IFRS issued by the IASB, an entity may not be
able to state at a particular reporting date that the financial statements comply with both
IFRS as issued by the IASB and IFRS as endorsed locally.
For example, when the Interpretations Committee issues an interpretation that is
effective for the annual period which includes the current interim reporting period,
entities may choose not to comply with IAS 34 in their interim financial statements
rather than risk applying an interpretation in their full year financial statements that is
not yet locally endorsed. Alternatively, an entity may publish interim financial
information prepared under locally endorsed IFRS, for example, IFRS as adopted by
the European Union. In such cases, the basis of preparation should state that IAS 34 is
being applied in this context.
4.7
Disclosure in relation to change in going concern assumption
Although IAS 34 does not specifically address the issue of going concern, the general
requirements of IAS 1 apply to both a complete set and to condensed interim financial
statements. [IAS 1.4]. IAS 1 states that when preparing financial statements, management
assesses an entity’s ability to continue as a going concern, and that the financial
statements are prepared on a going concern basis unless management either intends to
liquidate the entity or cease trading, or has no realistic alternative but to do so. [IAS 1.25].
The going concern assessment is discussed in more detail in Chapter 3 at 4.1.2.
Under IAS 1, the assessment is made based on all available information about the future,
which at a minimum is twelve months from the end of the reporting period. [IAS 1.26].
Therefore, with respect to interim reporting under IAS 34, the minimum period for
management’s assessment is also at least twelve months from the interim reporting date;
it is not limited, for example, to one year from the date of the most recent annual
financial statements.
Example 37.2: Going concern assessment
An entity’s financial year-end is 31 December (calendar year) and its annual financial statements as of
31 December 2018 are prepared on a going concern basis. In assessing the going concern assumption as at
31 December 2018, management considered all future available information through to 31 December 2019.
In preparing its quarterly interim financial statements (condensed or complete) as at 31 March 2019,
management should evaluate all future available information to at least 31 March 2020.
If management becomes aware, in making its assessment, of material uncertainties
related to events or conditions that may cast significant doubt upon the entity’s ability
to continue as a going concern, the entity should disclose those uncertainties in its
interim financial statements. If the entity does not prepare financial statements on a
going concern basis, it should disclose that fact, together with the basis on which it
prepared the financial statements and the reason why the entity is not regarded as a
going concern. [IAS 1.25].
3084 Chapter 37
5
PERIODS FOR WHICH INTERIM FINANCIAL
STATEMENTS ARE REQUIRED TO BE PRESENTED
Irrespective of whether an entity presents condensed or complete interim financial
statements, the components of its interim reports should include information for the
following periods: [IAS 34.20]
(a) statement of financial position as of the end of the current interim period and a
comparative statement of financial position as of the end of the immediately
preceding year;
(b) statements of profit or loss and other comprehensive income for the current
interim period and cumulatively for the current year-to-date, with comparative
statements of profit or loss and other comprehensive income for the comparable
interim periods (current and year-to-date) of the immediately preceding year;
(c) statement of changes in equity cumulatively for the current year-to-date period,
with a comparative statement for the comparable year-to-date period of the
immediately preceding year; and
(d) statement of cash flows cumulatively for the current year-to-date, with a
comparative statement for the comparable year-to-date period of the immediately
preceding year.
An interim report may present for each period either a single statement of ‘profit or loss
and other comprehensive income’, or separate statements of ‘profit or loss’ and
‘comprehensive income’. [IAS 1.10A, IAS 34.20(b)]. The
condensed statement of
comprehensive income referred to at (b) above should be presented in a manner
consistent with the entity’s annual financial statements. Accordingly, if the entity
presents a separate statement for items of profit or loss in its annual financial statements,
it should present a separate condensed statement of profit or loss in the interim financial
report. [IAS 34.8A].
If an entity’s business is highly seasonal, then the standard encourages reporting
additional financial information for the twelve months up to the end of the interim
period, and comparative information for the prior twelve-month period, in addition to
the financial statements for the periods set out above. [IAS 34.21].
The standard does not require an entity to present a statement of financial position as
at the end of the comparable interim period. However, in practice many entities
reporting under IFRS disclose this information, either on a voluntary basis, or due to
local regulations. Similarly, many entities also present the income statement for the
immediately preceding full year. Such presentation is allowed under IAS 34, but any
additional information included in the interim financial statements should be prepared
and presented in compliance with the standard.
The examples below illustrate the periods that an entity is required and encouraged to
disclose under IAS 34. [IAS 34.22, Illustrative examples, part A].
Interim financial reporting 3085
Example 37.3: Entity publishes interim financial reports half-yearly
If an entity’s financial year ends on 31 December (calendar year), it should present the following financial
statements (condensed or complete) in its half-yearly interim financial report as of 30 June 2019:
End of the
Immediately
End of the current comparative
preceding
Half-yearly interim report
interim period
interim period
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 610