LOS L, M, and N require us to:
l. describe the financial statement presentation of and disclosures relating to property, plant, and equipment, and intangible assets
m. analyze and interpret financial statement disclosures regarding property, plant, and equipment and intangible assets;
n. compare the financial reporting of investment property with that of property, plant, and equipment.
1. Disclosures for Tangible Assets
1.1. Disclosure Requirements for IFRS
Under IFRS, the following disclosures are required to be made with respect to the tangible assets:
a. the measurement bases used (whether it is the cost base or the revaluation base),
b. the depreciation method used,
c. the useful life estimated (or the rate of depreciation applied),
d. the value of accumulated depreciation at the beginning of the accounting period and at the end,
e. any restriction or pledges to the property,
f. any contractual agreements to acquire the property, plant, and equipment, and
g. if the revaluation model is used, the following also need to be reported:
i. the date of revaluation,
ii. the details of fair value assessment,
iii. carrying amount, and
iv. the amount transferred in and out of revaluation surplus account.
1.2. Disclosure Requirements for GAAP
Under U.S. GAAP, the following disclosures are required to be made with respect to the tangible assets:
a. the depreciation expense for the period,
b. balances of major classes of depreciable assets
c. accumulated depreciation for major classes of assets, and
d. the depreciation method used for major classes of assets.
2. Disclosure Requirement for Intangible Assets
2.1. Disclosure for IFRS
Under IFRS, the following disclosures are required to be made with respect to the intangible assets:
a. For each class of asset with the finite life, a firm needs to report:
i. the useful life of the asset (or the amortization rate),
ii. the amortization method used,
iii. the gross carrying amount of the asset,
iv. the amount of balance in the accumulated amortization account in the beginning and the end,
v. where it is included in the income statement, and
vi. reconciliation of carrying value at the beginning and the end.
b. For the intangible assets with indefinite lives, the firm needs to report the following additionally:
i. the reason as to why the life is considered indefinite,
ii. any restriction or pledges to the property,
iii. any contractual agreements to acquire the intangible assets.
iv. if the revaluation model is used, the following also need to be reported:
# the date of revaluation,
# the details of fair value assessment,
# carrying amount, and
# the amount transferred in and out of the revaluation surplus account.
2.2. Disclosure for GAAP
Under U.S. GAAP, the following disclosures are required to be made with respect to the intangible assets:
a. gross carrying value in total and by the major class of asset,
b. accumulated amortization for each of the major classes of asset,
c. aggregate amortization for the period, and
d. expected amortization expense for the next five years.
3. Disclosure Requirements for Impairments
3.1. Disclosure Requirement for IFRS
Under IFRS following disclosures need to be made for the impairment of assets:
a. amount of loss on impairment and reversal of such loss during the year,
b. treatment of such losses and reversals on the financial statements,
c. main classes of assets affected by the impairments,
d. events and losses that led to these losses and reversals.
3.2. Disclosure Requirements for GAAP
Under U.S. GAAP following disclosures need to be made for the impairment of assets:
a. description of the impaired asset,
b. events and conditions that led to impairment,
c. method of determination of fair value,
d. amount of loss on impairment, and
e. place of recognition of such loss.
4. Other Disclosures
a. On the balance sheet, all the carrying values of all the assets are disclosed.
b. On the income statement, all the depreciation expenses need to be recorded. These expenses may or may not be reported as a separate line item.
i. Under IFRS, if all the expenses are grouped by nature, there would be a separate line item for the depreciation.
ii. However, if the expenses are grouped by function, depreciation may be reported as both cost of goods sold or as selling, general and administration expense.
c. Under the cash flow statement, we need to report:
i. Acquisition or disposal of asset under cash from investing.
ii. If the statement is prepared as per the indirect method, the depreciation or amortization is reflected as an adjustment to the net income.