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Contents
34.2 Agriculture – recognition and measurement.
34.2.1 Extract from FRS102: Section 34.2-.34.3B.
34.2.2.1 The meaning of biological assets and examples.
34.2.2.1.1 Agricultural activity defined.
34.2.2.1.1.1 Requirements for biological transformation.
34.2.2.1.1.2 Requirements for biological transformation to be managed.
34.2.2.1.2 Biological asset defined.
34.2.2.2 Recognition criteria.
34.2.2.3 Accounting for agricultural produce within the scope of Section 34.
34.2.2.4 Items excluded from the definition of agriculture.
34.2.2.5 Accounting policy choices:
34.2.2.5.3 Accounting policy choice by class.
34.2.2.6 Accounting for agricultural produce after point of harvest.
34.3 Measurement – fair value model.
34.3.1 Extract from FRS102: Section 34.4-.34.6A.
34.3.2.1 Initial and subsequent recognition.
34.3.2.2. Fair value hierarchy model.
34.3.2.2.1 Active market defined.
34.3.2.2.1.1. What market to use where there is more than one market and markets in other locations.
34.3.2.2.1.1.1 More than one market to sell the produce.
34.3.2.2.1.1.2 Market in different locations.
34.3.2.2.1.1.3 Use of cash flow model to determine fair value.
34.3.2.3 Application of the fair value model.
34.3.2.4 Fair values cannot be reliably measured.
34.5 Disclosures – fair value model.
34.5.1 Extract from FRS102: Section 34.7-34.7B.
34.5.2.2.1 Extract from accounting policies note for forestry.
34.5.2.2.2 Extract from accounting policies note for livestock (Extracted from Appendix to IAS 41).
34.5.2.3 Critical accounting estimates and judgments disclosure.
34.5.2.4 Notes to financial statements.
34.7 Measurement – cost model.
34.7.1 Extract from FRS102: Section 34.8-34.9.
34.7.2.1 Initial and subsequent measurement/
34.7.2.2 Choices when applying the cost model to agricultural produce.
34.8 Disclosures – cost model.
34.8.1 Extract from FRS102: Section 34.10-34.9.
34.8.2.3 Notes to the financial statements.
34.9.1 Extract from FRS102: Section 34.11-.34.11C.
34.10 Service Concession Arrangements.
34.10.1 Extract from FRS102: Section 34.12-.34.16A.
34.10.2.2 Service conditions arrangements defined.
34.10.2.2.1 Conditions that must apply.
34.11.1 Extract from FRS102: Section 34.17-.34.33.
34.11.2.2 Financial institution defined.
34.12 Retirement Benefit Plans: Financial Statements.
34.12.1 Extract from FRS102: Section 34.34-.34.48.
34.12.2.2 Full set of financial statements.
34.13.1 Extract from FRS102: Section 34.49-.34.56.
34.13.2.1 Heritage asset – defined.
34.13.2.2 Recognition and measurement.
34.13.2.3 What about old heritage assets where there are no records to determine cost.
34.13.2.4 Where should heritage assets be disclosed on the balance sheet.
34.13.2.5.1 Possible reasons for impairment.
34.13.2.6 Useful life and residual value.
34.13.2.7 Heritage assets received free of charge.
34.13.2.8.2 Illustration of some of the disclosure requirements for heritage assets.
34.14.1 Extract from FRS102: Section 34.57-.34.63 and Appendix A to Section 34.
34.15 Public benefit entities: Incoming Resources from Non-Exchange Transactions.
34.15.1 Extract from FRS102: Section PBE34.64-.PBE34.74 and Appendix B to Section 34.
34.15.2.1 Public benefit entity defined.
34.15.2.1.1 Requirement to disclose that an entity is a public benefit entity.
34.15.2.2 Special rules for public benefit entities.
34.15.2.2.1 Assets held for provision of social benefits.
34.15.2.2.2 Income resources from non-exchange transactions.
34.15.2.2.2.2 Accounting for non-exchange accounting.
34.15.2.2.2.2.1 Recognition for goods and measurement for goods.
34.15.2.2.2.2.1.1 Performance related conditions defined.
34.15.2.2.2.2.1.2 Conditions that are not performance related.
34.15.2.2.2.2.1.3 Examples of non-exchange resource transactions received in the form of goods.
34.15.2.2.2.2.2 Non-exchange resources received in the form of services/facilities.
34.15.2.2.2.2.2.2 Recognition and measurement.
34.15.2.2.2.2.2.2.1 Examples of non-exchange Transactions where services/facilities provided.
34.15.2.2.3 Public benefit entity combinations.
34.15.2.2.3.1.1 Business combinations defined.
34.15.2.2.3.2 Accounting Requirements.
34.15.2.2.3.2.1 Gift of a business for nil or nominal consideration.
34.15.2.2.3.2.1.1 Example of business combinations which is a gift that is not a merger.
34.15.2.2.3.2.1.2 Disclosures.
34.15.2.2.3.2.2 Examples illustrating merger accounting.
34.15.2.2.3.2.3 Meets the definition of a true acquisition and the purchase method applies.
34.15.2.2.3.2.3.1 Example business combination: Not a merger or gift – Purchase accounting method.
34.15.2.2.4 Public benefit concessionary loans.
34.15.2.2.4.2 Public benefit entity loan defined.
34.15.2.2.4.3 Accounting treatment of public benefit concessionary loans choices. 4
34.15.2.2.4.5 Examples of concessionary loans.
34.15.2.2.5 Government grants and accounting requirements.
34.15.2.2.5.1.1 Grants of all natures – Performance model.
34.15.2.2.5.1.2 Accrual model FRS 102 only.
34.15.2.2.5.2 Example of government grant accounting of PBE’S.
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The below extracts and guidance is applicable for periods beginning before 1 January 2019 and are based on the September 2015 version of FRS 102. For periods beginning on or after 1 January 2019, the March 2018 version of FRS 102 applies which incorporates the changes made by the Triennial review of FRS 102. Note the March 2018 version of FRS 102 can be voluntarily applies for periods beginning before 1 January 2019. For the extracts from the March 2018 version of FRS 102 and the related guidance please click on the following link. For details of a summary of the main changes as a result of the triennial review please see the following link.
34.11 Financial Institutions
34.11.1 Extract from FRS102: Section 34.17-.34.33
34.17 A financial institution (other than a retirement benefit plan) applying this FRS shall, in addition to the disclosure requirements in Section 11 Basic Financial Instruments and Section 12 Other Financial Instruments Issues, provide the disclosures in paragraphs 34.19 to 34.33. The disclosures in paragraphs 34.19 to 34.33 are required to be provided in:
(a) the individual financial statements of a financial institution (other than a retirement benefit plan); and
(b) the consolidated financial statements of a group containing a financial institution (other than a retirement benefit plan) when the financial instruments held by the financial institution are material to the group. Where this is the case, the disclosures apply regardless of whether the principal activity of the group is being a financial institution or not. The disclosures in paragraphs 34.19 to 34.33 only need to be given in respect of financial instruments held by entities within the group that are financial institutions (other than retirement benefit plans).
34.18 A retirement benefit plan shall provide the disclosures in paragraphs 34.35 to 34.48 of this FRS.
Disclosures
Significance of financial instruments for financial position and performance
34.19 A financial institution shall disclose information that enables users of its financial statements to evaluate the significance of financial instruments for its financial position and performance.
34.20 A financial institution shall disclose a disaggregation of the statement of financial position line item by class of financial instrument. A class is a grouping of financial instruments that is appropriate to the nature of the information disclosed and that takes into account the characteristics of those financial instruments.
Impairment
34.21 Where a financial institution uses a separate allowance account to record impairments, it shall disclose a reconciliation of changes in that account during the period for each class of financial asset.
Fair value
34.22 For financial instruments held at fair value in the statement of financial position, a financial institution shall disclose for each class of financial instrument, an analysis of the level in the fair value hierarchy (as set out in paragraph 11.27) into which the fair value measurements are categorised.
Nature and extent of risks arising from financial instruments
34.23 A financial institution shall disclose information that enables users of its financial statements to evaluate the nature and extent of credit risk, liquidity risk and market risk arising from financial instruments to which the financial institution is exposed at the end of the reporting period.
34.24 For each type of risk arising from financial instruments, a financial institution shall disclose:
(a) the exposures to risk and how they arise;
(b) its objectives, policies and processes for managing the risk and the methods used to measure the risk; and
(c) any changes in (a) or (b) from the previous period.
Credit risk
34.25 A financial institution shall disclose by class of financial instrument:
(a) The amount that best represents its maximum exposure to credit risk at the end of the reporting period. This disclosure is not required for financial instruments whose carrying amount best represents the maximum exposure to credit risk.
(b) A description of collateral held as security and of other credit enhancements, and the extent to which these mitigate credit risk.
(c) The amount by which any related credit derivatives or similar instruments mitigate that maximum exposure to credit risk.
(d) Information about the credit quality of financial assets that are neither past due nor impaired.
34.26 A financial institution shall provide, by class of financial asset, an analysis of:
(a) the age of financial assets that are past due as at the end of the reporting period but not impaired; and
(b) the financial assets that are individually determined to be impaired as at the end of the reporting period, including the factors the financial institution considered in determining that they are impaired.
34.27 When a financial institution obtains financial or non-financial assets during the period by taking possession of collateral it holds as security or calling on other credit enhancements (e.g. guarantees), and such assets meet the recognition criteria in other sections, a financial institution shall disclose:
(a) the nature and carrying amount of the assets obtained; and
(b) when the assets are not readily convertible into cash, its policies for disposing of such assets or for using them in its operations.
Liquidity risk
34.28 A financial institution shall provide a maturity analysis for financial liabilities that shows the remaining contractual maturities at undiscounted amounts separated between derivative and non-derivative financial liabilities.
Market risk
34.29 A financial institution shall provide a sensitivity analysis for each type of market risk (eg interest rate risk, currency risk, other price risk) it is exposed to, showing the impact on profit or loss and equity. Details of the methods and assumptions used should be provided.
34.30 If a financial institution prepares a sensitivity analysis, such as value-at-risk, that reflects interdependencies between risk variables (eg interest rates and exchange rates) and uses it to manage financial risks, it may use that sensitivity analysis instead.
Capital
34.31 A financial institution shall disclose information that enables users of its financial statements to evaluate the entity’s objectives, policies and processes for managing capital. A financial institution shall disclose the following:
(a) Qualitative information about its objectives, policies and processes for managing capital, including:
(i) a description of what it manages as capital;
(ii) when an entity is subject to externally imposed capital requirements, the nature of those requirements and how those requirements are incorporated into the management of capital; and
(iii) how it is meeting its objectives for managing capital.
(b) Summary quantitative data about what it manages as capital. Some entities regard some financial liabilities (eg some forms of subordinated debt) as part of capital. Other entities regard capital as excluding some components of equity (eg components arising from cash flow hedges).
(c) Any changes in (a) and (b) from the previous period.
(d) Whether during the period it complied with any externally imposed capital requirements to which it is subject.
(e) When the entity has not complied with such externally imposed capital requirements, the consequences of such non-compliance.
A financial institution bases these disclosures on the information provided internally to key management personnel.
34.32 A financial institution may manage capital in a number of ways and be subject to a number of different capital requirements. For example, a conglomerate may include entities that undertake insurance activities and banking activities and those entities may operate in several jurisdictions. When an aggregate disclosure of capital requirements and how capital is managed would not provide useful information or would distort a financial statement user’s understanding of the financial institution’s capital resources, the financial institution shall disclose separate information for each capital requirement to which the entity is subject.
Reporting cash flows on a net basis
34.33 A financial institution that presents a statement of cash flow in accordance with Section 7 Statement of Cash Flows may report cash flows arising from each of the following activities on a net basis:
(a) cash receipts and payments for the acceptance and repayment of deposits with a fixed maturity date;
(b) the placement of deposits with and withdrawal of deposits from other financial institutions; and
(c) cash advances and loans made to customers and the repayment of those advances and loans.
This paragraph does not impose a requirement to produce a cash flow statement.
34.11.2 OmniPro comment
34.11.2.1 Overview
Section 34.17 to 34.33 of FRS 102 imposes significant disclosure requirements on financial institutions. The application of the above disclosure requirements is not within the scope of this website.
34.11.2.2 Financial institution defined
Appendix I of FRS 102 defines a financial institution as:
A bank which:
– has permission under Part IV of the Financial Services and Markets Act 2000 to accept deposits and:
– which is a credit institution; or
– whose Part IV permission includes a requirement that it complies with the rules in the General Prudential sourcebook and the Prudential sourcebook for Bank, Building Societies and Investment Firms relating to banks, but which is not a building society, a friendly society or a credit union;
– an EEA bank which is a full credit institution;
– a building society which is defined in section 119(1) of the Building Societies Act 1986 as a building society incorporated (or deemed to be incorporated) under that Act;
– a credit union, being a body corporate registered under the Industrial and Provident Societies Act 1965 as a credit union in accordance with the Credit Unions Act 1979, which is an authorised person;
– a custodian bank, broker-dealer or stockbroker;
– an incorporated friendly society incorporated under the Friendly Societies Act 1992 or a registered friendly society registered under section 7(1)(a) of the Friendly Societies Act 1974 or any enactment which it replaced, including any registered branches;
– an entity that undertakes the business of effecting or carrying out insurance contracts, including general and life assurance entities;
– an investment trust, Irish Investment Company, venture capital trust, mutual fund, exchange traded fund, unit trust, open-ended investment company (OEIC);
– a retirement benefit plan; or
– any other entity whose principal activity is to generate wealth or manage risk through financial instruments.
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Examples
Example 2: Application of the fair value model com.
Example 3: Application of the fair value model – livestock.
Example 4: Biological Assets held at fair value.
Example 5: Extract from notes to the financial statements for biological assets held at fair value.
Example 6: Extract from accounting policies notes for livestock/biological assets carried at cost.
Example 14: Donated goods or services – fixed assets.
Example 15: Donated goods or services – donated goods held for resale – impractical to measure.
Example 16: Donated goods or services – donated goods held for resale – practical to measure.
Example 18: Donated goods or services – donated services.
Example 19: Business Combinations: Gifts of business etc.
Example 20: Business Combinations: Mergers.
Example 21: Concessionary loans – option not to discount.
Example 22: Concessionary loans – option to discount.
Example 24: Accruals model (applicable for FRS 102 only and not Charities SORP) – capital grant.
Example 25: Accruals model (applicable for FRS 102 only and not Charities SORP) – revenue grant.
Example 26: Accruals model (applicable for FRS 102 only and not Charities SORP) – revenue grant.
Example 27: Performance model (applicable for FRS 102 and Charities SORP) – revenue grant.
Example 28: Performance model – Revenue Grant.
Example 29: Capital grants (FRS 102 and FRS 102 SORP – performance model).
Example 30: Grants and performance conditions.
Example 31: Grants and performance conditions.
Example 32: Grants and performance conditions.
Example 33: Grants and performance conditions.
Example 34: Grants and performance conditions.
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