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VALUE IFRS Plc Illustrative IFRS Consolidated Financial Statements December 2019

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VALUE IFRS Plc Illustrative IFRS consolidated financial statements December 2019 This publication presents the sample annual financial reports of a fictional listed company, VALUE IFRS Plc. It illustrates the financial reporting requirements that would apply to such a company under International Financial Reporting Standards as issued at 31 May 2019. Supporting commentary is also provided. For the purposes of this publication, VALUE IFRS Plc is listed on a fictive Stock Exchange and is the parent entity in a consolidated entity. VALUE IFRS Plc 2019 is for illustrative purposes only and should be used in conjunction with the relevant financial reporting standards and any other reporting pronouncements and legislation applicable in specific jurisdictions. Global Accounting Consulting Services PricewaterhouseCoopers LLP This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. About PwC At PwC, our purpose is to build trust in society and solve important problems. We're a network of firms in 158 countries with more than 250,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com © 2019 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. VALUE IFRS Plc Illustrative IFRS consolidated financial statements December 2019 Financial statements 6 Statement of profit or loss 9 Statement of comprehensive income 10 Balance sheet 17 Statement of changes in equity 21 Statement of cash flows 24 Notes to the financial statements 27 Significant changes in the current reporting period 29 How numbers are calculated 30 Risk 116 Segment information 31 Critical estimates, judgements and errors 117 Profit and loss 36 Financial risk management 120 Balance sheet 52 Capital management 140 Cash flows 113 Unrecognised items 157 Group structure 143 Contingent liabilities and contingent assets 158 Business combination 144 Commitments 159 Discontinued operation 147 Events occurring after the reporting period 160 Interests in other entities 150 Further details 162 Related party transactions 163 Share-based payments 167 Earnings per share 172 Offsetting financial assets and financial liabilities 175 Assets pledged as security 177 Accounting policies 178 Changes in accounting policies 195 Independent auditor's report 200 Appendices 201 PwC 2 Introduction This publication presents illustrative consolidated financial statements for a fictitious listed company, VALUE IFRS Plc. The financial statements comply with International Financial Reporting Standards (IFRS) as issued at 31 May 2019 and that apply to financial years commencing on or after 1 January 2019. We have attempted to create a realistic set of financial statements for VALUE IFRS Plc, a corporate entity that manufactures goods, provides services and holds investment property. However, as this publication is a reference tool, we have not removed any disclosures based on materiality. Instead, we have included illustrative disclosures for as many common scenarios as possible. Please note that the amounts disclosed in this publication are purely for illustrative purposes and may not be consistent throughout the publication. New disclosure requirements and changes in accounting policies Most companies will have to make changes to their disclosures in 2019, to reflect the adoption of IFRS 16 Leases. This publication shows how the adoption of the standard may affect a corporate entity. Note 26 provides example disclosures which explain the impact of the changes in accounting policy. The new leasing disclosures are illustrated in note 8(b) and in note 8(c). You can find new or revised disclosures by looking for shading in the reference column. In compiling the illustrative disclosures, we have made a number of assumptions in relation to the adoption of IFRS 16. In particular, VALUE IFRS Plc: has applied the simplified transition approach and has not restated comparative information does not have any right-of-use assets that would meet the definition of investment property does not have any finance leases as lessor, and did not have to recognise any adjustments in relation to the assets held as lessor under operating leases. For further specific assumptions made, please refer to the commentary to note 26. In addition, we have added comparative information to some of the financial instruments disclosures that were new last year and where comparatives were therefore not required (see note 7 and note 12). We have also made a few improvements to existing disclosures. The other amendments to standards that apply from 1 January 2019 and that are unrelated to the adoption of IFRS 16 are primarily clarifications, see Appendix D. We have assumed that none of them required a change in VALUE IFRS Plc’s accounting policies. However, this assumption will not necessarily apply to all entities. Where there has been a change in policy that has a material impact on the reported amounts, this would also need to be disclosed in note 26. While the IASB issued a revised Conceptual Framework for Financial Reporting in March 2018 which will be used immediately by the Board and Interpretations Committee in developing new pronouncements, preparers will only commence referring to the new framework from 1 January 2020. We have therefore continued referring to the existing framework in this publication. Early adoption of standards VALUE IFRS Plc generally adopts standards early if they clarify existing practice but do not introduce substantive changes. These include standards issued by the IASB as part of the improvements programme or the amendments made to IAS 1 and IAS 8 in relation to the definition of material. As required under IFRS, the impacts of standards and interpretations that have not been early adopted and that are expected to have a material effect on the entity are disclosed in accounting policy note 25(a). A summary of all pronouncements relevant for annual reporting periods ending on or after 31 December 2019 is included in Appendix D. For updates after the cut-off date for our publication, see www.pwc.com/ifrs. Using this publication The source for each disclosure requirement is given in the reference column. Shading in this column indicates changes made as a result of new or revised requirements that become applicable for the first time this year. There is also commentary that (i) explains some of the more challenging areas, (ii) lists disclosures that have not been included because they are not relevant to VALUE IFRS Plc, and (iii) provides additional disclosure examples. The appendices give further information about the operating and financial review (management commentary), alternative formats for the statement of profit or loss and other comprehensive income and the statement of cash flows, and industry- specific disclosures. A summary of all standards that apply for the first time to annual reports beginning on or after 1 January 2019 is included in Appendix D, and abbreviations used in this publication are listed in Appendix E. PwC 3 As VALUE IFRS Plc is an existing preparer of IFRS consolidated financial statements, IFRS 1 First-time Adoption of International Financial Reporting Standards does not apply. Guidance on financial statements for first-time adopters of IFRS is available in Chapter 2 of our Manual of Accounting. The example disclosures are not the only acceptable form of presenting financial statements. Alternative presentations may be acceptable if they comply with the specific disclosure requirements prescribed in IFRS. Readers may find our IFRS disclosure checklist 2019 useful to identify other disclosures that may be relevant under the circumstances but are not illustrated in this publication. Some of the disclosures in this publication would likely be immaterial if VALUE IFRS Plc was a ‘real life’ company. The purpose of this publication is to provide a broad selection of illustrative disclosures which cover most common scenarios encountered in practice. The underlying story of the company only provides the framework for these disclosures and the amounts disclosed are for illustration purposes only. Disclosures should not be included where they are not relevant or not material in specific circumstances. Guidance on assessing materiality is provided in IAS 1 Presentation of Financial Statements and the non-mandatory IFRS Practice Statement 2 Making Materiality Judgements. Preparers of financial reports should also consider local legal and regulatory requirements which may stipulate additional disclosures that are not illustrated in this publication. Format There is a general view that financial reports have become too complex and difficult to read and that financial reporting tends to focus more on compliance than communication. At the same time, users’ tolerance for sifting through information to find what they need continues to decline. This has implications for the reputation of companies who fail to keep pace. A global study confirmed this trend, with the majority of analysts stating that the quality of reporting directly influenced their opinion of the quality of management. To demonstrate what companies could do to make their financial report more relevant, we have ‘streamlined’ the financial report to reflect some of the best practices that have been emerging
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