Disclosure checklist Guide to annual financial statements IFRS Standards® P P P P September 2018 kpmg.com/ifrs Contents Contents About this guide 1 6 Voluntary early adoption of IFRSs 146 6.1 IFRS 16 Leases 146 References and abbreviations 4 6.2 IFRIC 23 Uncertainty over Income Tax The checklist 5 Treatments 150 6.3 Prepayment Features with Negative 1 General presentation 5 Compensation (Amendments to IFRS 9) 151 1.1 Presentation of financial statements 5 6.4 Long-term Interests in Associates and Joint 1.2 Changes in equity 20 Ventures (Amendments to IAS 28) 152 1.3 Statement of cash flows 21 6.5 Plan Amendment, Curtailment or Settlement 1.4 Basis of accounting 28 (Amendments to IAS 19) 153 1.5 Fair value measurement 33 6.6 Annual Improvements to IFRS Standards 1.6 Consolidated and separate financial 2015–2017 Cycle (Amendments to IFRS 3) 154 statements 36 6.7 Annual Improvements to IFRS Standards 1.7 Business combinations 42 2015–2017 Cycle (Amendments to IFRS 11) 154 1.8 Foreign currency translation and hyperinflation 47 6.8 Annual Improvements to IFRS Standards 1.9 Accounting policies, errors and estimates 48 2015–2017 Cycle (Amendments to IAS 12) 155 1.10 Events after the reporting period 50 6.9 Annual Improvements to IFRS Standards 2 Statement of financial position 52 2015–2017 Cycle (Amendments to IAS 23) 155 2.1 Property, plant and equipment 52 6.10 IFRS 17 Insurance Contracts 156 2.2 Intangible assets and goodwill 53 2.3 Investment property 55 Appendices 2.4 Associates and joint arrangements 57 I New standards or amendments for 2018 and 2.5 Financial instruments 61 forthcoming requirements 167 2.6 Inventories 85 II Requirements relevant to insurers that apply the 2.7 Biological assets 86 temporary exemption from IFRS 9 169 2.8 Impairment of non-financial assets 87 2.9 Equity 91 Keeping in touch 188 2.10 Provisions 92 2.11 Income taxes 93 2.12 Contingent assets and liabilities 95 3 Statement of profit or loss and OCI 97 3.1 Revenue 97 3.2 Government grants 101 3.3 Employee benefits 102 3.4 Share-based payments 107 3.5 Borrowing costs 110 4 Special topics 111 4.1 Leases 111 4.2 Service concession arrangements 113 4.3 Operating segments 114 4.4 Earnings per share 118 4.5 Non-current assets held for sale or held for distribution 120 4.6 Related party disclosures 121 4.7 Investment entities 128 4.8 Insurance contracts 130 4.9 Extractive activities 136 4.10 Common control transactions and Newco formations 136 5 First-time adoption of IFRS 138 5.1 First-time adoption of IFRS 138 5.2 Regulatory deferral accounts and first-time adoption of IFRS 141 About this guide This guide has been produced by the KPMG International Standards Group (part of KPMG IFRG Limited). It is intended to help entities to prepare and present financial statements in accordance with IFRS by identifying the potential disclosures required. In addition, it includes the minimum disclosures required in the financial statements of a first- time adopter of IFRS. Impact of the major IFRS 9 and IFRS 15 new standards IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers are effective for the first time for entities with an annual reporting period beginning on or after 1 January 2018. Applying the new standards is expected to significantly affect the disclosures included in the financial statements. – Disclosure of the nature and effect of changes in accounting policies: Entities are required to describe the nature and effect of initially applying the new standards. This will involve applying the transition disclosures in IFRS 7 Financial Instruments: Disclosures (as introduced by IFRS 9) and IFRS 15, as well as the general disclosure requirements in paragraph 28 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, when applicable. Disclosures may differ depending on the transition method chosen by the entity. For example, entities applying IFRS 15 under the full retrospective method are required to follow the disclosure requirements in IAS 8, whereas those applying the cumulative effect method are exempted from providing the disclosures required by paragraph 28(f) of IAS 8 but are required to provide the disclosures included in paragraph C8 of IFRS 15 instead. In addition, when entities choose not to restate comparative information they may need to separately disclose their significant accounting policies for previous periods presented. – Ongoing disclosures: Entities are required to provide new ‘business as usual’ disclosures that are included in IFRS 7 (as introduced by IFRS 9) and IFRS 15. For revenue from contracts with customers, these include disaggregation of revenue and information on contract balances, performance obligations, and significant judgements in the application of the standard. For financial instruments, these include information on investments in equity instruments designated at fair value through other comprehensive income, and new or expanded disclosures about credit risk and hedge accounting. Our publication Guides to annual financial statements – Illustrative disclosures illustrates one possible way of providing these disclosures. IFRS 16 Users and regulators have shown a growing interest in the possible impact of IFRS 16 Leases, which has been issued but is not effective until 1 January 2019. As a consequence, significant focus is expected on the pre-transition disclosures about the possible impact of IFRS 16 that are required under IAS 8. Regulators have communicated their expectation that, as the implementation of the new standard progresses, more information about its impact should become reasonably estimable and preparers will be able to provide progressively more entity-specific qualitative and quantitative information in their financial statements about the application of the new standard. Our publication Guides to annual financial statements – Illustrative disclosures illustrates one possible way of providing these disclosures. This publication contains copyright © material and trademarks of the IFRS Foundation®. All rights reserved. Reproduced by KPMG IFRG Limited with the permission of the IFRS Foundation. Reproduction and use rights are strictly limited. For more information about the IFRS Foundation and rights to use its material please visit www.ifrs.org 2 | Guide to annual financial statements – Disclosure checklist Explain the changes As preparers apply IFRS 15 and IFRS 9 in their 2018 annual financial statements, they should embrace the opportunity to think through how best to explain the changes and their effects. The quality and clarity of explanations of changes in accounting policies and their impacts are key. Investors and other stakeholders will be keenly interested in disclosures of key judgements and estimates. What else is new A number of other standards are also effective for the first time in 2018 (see Appendix I ‘New standards or amendments for 2018 and forthcoming in 2018? requirements’). These standards include transition requirements and some of them have new disclosures that are required in annual financial statements. These requirements and disclosures, if there are any, are included in this guide. Standards covered This guide is based on standards, amendments and interpretations (broadly referred to in this guide as ‘standards’) that have been issued by the International Accounting Standards Board (the Board) as at 15 August 2018. The main text in Sections 1–5 is based on the standards that are required to be applied by an entity with an annual reporting period beginning on 1 January 2018 (‘currently effective requirements’). This guide also contains the following. – Chapter 6 ‘Voluntary early adoption of IFRSs’: Identifies disclosure requirements based on standards that are effective for annual reporting periods beginning after 1 January 2018 (‘forthcoming requirements’) and that are available for voluntary early adoption. – Appendix II ‘Requirements relevant to insurers that apply the temporary exemption from IFRS 9’: Identifies disclosure requirements for financial instruments based on IFRS 7 and other relevant disclosure requirements before the amendments introduced by IFRS 9. This guide contains disclosure requirements only. It does not specify the scope of individual standards referred to or their recognition and measurement requirements. Nor does it cover IAS 26 Accounting and Reporting by Retirement Benefit Plans or IAS 34 Interim Financial Reporting. The disclosures required by IAS 34 are set out in our Guide to condensed interim financial statements – Disclosure checklist. In addition, IFRS and its interpretation change over time. Accordingly, this guide should not be used as a substitute for referring to the standards and other relevant interpretative guidance. Preparers should also consider applicable local legal and regulatory requirements. This guide does not consider the requirements of any particular jurisdiction. Need for judgement This guide is part of our suite of publications – Guides to financial statements – and specifically focuses on compliance with IFRS. The preparation and presentation of financial statements require the preparer to exercise judgement – e.g. in terms of the choice of accounting policies, the ordering of notes to the financial statements, how the disclosures should be tailored to reflect the reporting entity’s specific circumstances, and the relevance of disclosures considering the needs of users. This publication contains copyright © material and trademarks of the IFRS Foundation®. All rights reserved. Reproduced by KPMG IFRG Limited with the permission of the IFRS Foundation. Reproduction and use rights are strictly limited. For more information about the IFRS Foundation and rights to use its material please visit www.ifrs.org About this guide | 3 Materiality Specific guidance on materiality and its application to the financial statements is included in paragraphs 29–31 of IAS 1 Presentation of Financial Statements. In September 2017, the Board issued IFRS Practice Statement 2 Making Materiality Judgements, which also provides guidance on applying materiality in the preparation of financial statements. Materiality is relevant to the presentation and disclosure of the items in the financial statements.