This document provides an overview of International Financial Reporting Standards (IFRS) and their adoption globally. It discusses the key standards bodies that establish IFRS and notes that over 100 countries now require or allow the use of IFRS. It also summarizes some of the main IFRS standards such as IAS 1, IAS 8, IAS 12 and others.

1. International Financial Reporting Standards Summary of the Current Position

5. The Rewards in Ireland

6. Public Practice

7. Corporate Sector

8. Financial Services

9. The Legal Structure

10. Regulatory Structure ROI Government Irish Auditing and Accounting Supervisory Authority (IAASA) Prescribed bodies Recognised professional bodies (auditors) ACCA ICAI ICPAI CIMA IIPA CIPFA AIA ACCA ICAI ICPAI IIPA

11. Ian Drennan FCCA Chief Executive IAASA Functions: Regulate the profession Transparency directive Advise the Government Develop guidance

12. Listed companies Large private companies SME Micro Companies Current UK Proposal ROI Proposal IFRS UK GAAP FRSSE IFRS IFRS for SME FRSSE IFRS IFRS for SME

13. International Accounting Standards

14. - International Accounting Standards Different countries have different standards US Since 1933 SEC and FASB FASB independent and full time employees 140 rule based standards UK/ROI/NZ/ Australia Profession draft own rules Principal based Germany and France Legislation driven for tax Not true and fair necessarily IFRS needed Companies quoted on several exchanges comparison etc...

25. The Standards

31. IAS 1 Presentation of Financial statements

49. IAS 1 Revised

59. IAS 2 Inventories

67. IAS 7 Cash Flow Statements

69. operating activities investing activities acquisition and disposal of long-term assets and other investments financing activities alter the equity capital and borrowing structure interest and dividends received and paid may be classified as operating, investing, or financing cash flows, cash flows arising from taxes on income are normally classified as operating, the direct method of presentation is encouraged, but the indirect method is acceptable IAS 7 Cash Flow Statements

70. IAS 8 Accounting Policies, changes in Accounting Estimates and errors

76. IAS 10 Events after the Balance sheet Date

80. IAS 11 construction Contracts

86. IAS 11 construction Contracts

88. IAS 12 Income Taxes

91. What is deferred tax Years € Capital Allowances Depreciation Deferred tax balance Current taxation Total Taxation

92. 2006 Sales COS Profit Profit Add back Deduct Adjusted profit X tax % Tax payable Tax charge Profit after tax Profit after tax 2007 2008

93. 2006 Sales COS Profit Profit Add back Deduct Adjusted profit X tax % Tax payable Tax charge DT tax charge Profit after tax Profit after tax 2007 2008

94. 2006 Sales COS Profit Profit Add back Deduct Adjusted profit X tax % Tax payable Tax charge Profit after tax Profit after tax 2007 2008

99. Year 2006 2007 Tax Written Down Value XXX XXXX Net book value XXX XXXX Difference XXX XXXX @12.5% XXX XXXX Deferred taxation in balance sheet At the year end XXX XXXX The difference between 2006 and 2007 = P/L charge or credit

100. Finance Leases and deferred taxation Net book value of leased asset X Remaining lease interest to be charge X Accounting value X Remaining lease payments (X) Timing difference X Tax rate 12.5% Deferred taxation X Accounting value > remaining lease payment = liability Accounting value < remaining lease payment = asset

101. Example A Company buys a factory for €1m. It is eligible for tax allowances of 4% The factory is depreciated over 40 years Tax rate is 30% 4 years later: Cumulative tax allowances (4 X 40K)160 Cumulative depreciation (4 X 25K) (100) Difference 60 Deferred tax liability @30% in B/S 18

102. Example At the end of year 5 the property market collapses and the company writes down the factory to €600,000. Cumulative allowances (5 X 40K) 200 Cumulative depreciation 1m-600K (400) Difference (200) Deferred tax asset @30% in B/S ( 60)

103. Example The company continue to depreciate the building over its remaining useful life of 35 years (charge €17,143 pa). At the end of 10 years the property is NBV €514,285. It is now re-valued to €1,200,000 € 235,715 to P/L (reverse previous charge) € 450,000 to equity (revaluation)

104. 750 € 1.2m 600 875 1m 514 Years 0 5 10 40

105. Example Cumulative allowances (10 X 40K) 400 Cumulative depreciation ** (250) Difference (150) Deferred tax liability @30% ( 45) Capital gain 200X 20% (40) Total (85) ** based on historical cost not revaluation.

112. IAS 14 Segmental Reporting

114. IAS 16 Property Plant and Equipment

122. IAS 16 Property Plant and Equipment Increase to equity Decrease to equity Balance to income

123. IAS 16 Property Plant and Equipment Revaluation down to income statement Revalue up to income statement Balance to equity

131. IAS 17 Leases

145. IAS 18 Revenue

149. IAS 18 Revenue Reliable estimate of outcome Revenue can be measured reliable Economic benefit will flow to entity Stage of completion can be measured reliably Costs of completion can be measured reliably

162. IAS 19 Employee Benefits

163. ‘ er Defined Contribution Pensions ‘ ee Pension Trust Pension Trust ‘ er ‘ ee Pension Pension Defined Benefit Pensions

164. Defined Benefit Pensions why the difficulties The cost to the employer Annuity rates very low Stock market underperforming Contribution rates increasing 15-47% of salary Cost of actuarial input Disclosures required: cost and business implications The standards give the wrong answer Snap shot position of long term arrangement IAS 19 corridor particularly bad Large deficits Large fluctuations in p/l charge Number of assumptions to be made IAS 19

165. DB schemes – overview of the maths Lump sum payable on retirement in 5 years of 1% of salary Salary 10,000, increasing by 7% p/a, discount rate 10% 1 2 3 4 5 Benefits prior years Benefits current year Total Opening obligation Interest Current Service Cost Closing obligations 0 131 131 131 131 262 0 0 89 89 89 9 98 196 262 131 393 393 131 524 524 131 655 196 20 108 324 324 33 119 476 476 48 131 655

168. IAS 19 IAS 19 Employee Benefits Objective Recognise a liability when an employee has earned benefits that will be paid in the future Recognise an expense when service of employee paid for with employee benefits

178. IAS 19 Post Employment Benefits- income statement Current Service cost Interest cost Expected return on plan assets Actuarial gains and losses where required Past service cost Curtailment and settlement cost Unrecognised actuarial gains and losses spread forward to the current year

180. IAS 19 Post Employment Benefits – the accounting 1 The Corridor – option 1 spread out over the average remaining working lives 10% of the (previous years) plan assets or plan liabilities are ignored and the balance above 10% is spread out over the average remaining working lives Deficit 100 Plan assets 300 Plan liabilities 400 10% is 30 10% is 40 Higher is 40 100 less 40 is 60. 60 divided by average remaining life (say 10 years) is 6. Deficit on the balance sheet is 6 ! See INM

181. IAS 19 Post Employment Benefits- the accounting 2 The Corridor – option 2 spread out over the average remaining working lives any systematic method that results in a faster recognition. Same basis applied to both gains and losses and it is applied consistently. When a deficit Dr to income statement for bit spread out Credit balance sheet Per last example Dr wages 6, Cr pension liability 6

182. IAS 19 Post Employment Benefits- the accounting 3 & 4 The Corridor – option 3 recognise - excess over 10% immediately Same basis applied to both gains and losses and it is applied consistently. Option 3 Dr wages (excess over 10%) Cr Balance sheet Option 4 Dr equity (excess over 10%) Cr Balance sheet

183. IAS 19 Post Employment Benefits- the accounting 5 & 6 Ignoring the corridor. (i.e. recognise 100% of the deficit) Same basis applied to both gains and losses and it is applied consistently. Option 5 is to Dr wages, Cr balance sheet Option 6 is to Dr equity , Cr balance sheet

184. IAS 19 Post Employment Benefits- the accounting 7 & 8 7. Ignoring the corridor but spreading the deficit over average working life 8. Ignoring the corridor but spreading the deficit over a shorter period than average working life.

185. IAS 19 Post Employment Benefits- Past Service Cost Past service cost Enhancing benefits for both past and future service Already vested – recognise immediately To vest in the future - Recognise on a straight line basis over the average period to vesting

186. IAS 19 Post Employment Benefits- Past Service Cost Past service cost – exclude Differences between assumed and actual salary increases discretionary increases Reductions in benefits – negative past service cost – amortise over period to vesting

187. IAS 19 Plan assets - measurement Measure at fair value Where there is no market value use DCF Reimbursement When virtually certain that third party will discharge obligations Recognise asset as a separate asset In income statement net off expense and reimbursement

188. IAS 19 Settlements and curtailments Recognise gains or losses when they arise Including actuarial gains and losses and past service cost not recognised Presentation Offset of assets on one plan against a liability on another when Legal right of set off Will realist surplus and use to settle deficit simultaneously

189. IAS 19 Disclosure Accounting policy General description Each individual element of the cost separately and reconciled Actuarial assumptions Fund reconciliation Amount recognised in equity each element separately Amount recognised in profit and loss each element separately Sensitivity analysis of assumptions Other disclosures for termination benefits and other long term benefits Examples in your notes.

193. FRS 17 Opening balance of fund assets Contributions made Expected return Closing Assets Actual return less expected return Opening liabilities to pay pensions Current service cost Finance cost Closing liability Actuarial adjustments Past Service Cost Settlement and curtailment Benefits paid out Benefits paid out The pension trust balance sheet (Liabilities not recognised)

194. A simple example opening closing liability 1500 2000 Assets 1970 2950 470 950 Current service cost 70 Past service cost 25 Paid into the fund 60 Assets Liabilities Opening balance 1970 1500 Current Service Cost 70 Past Service Cost 25 Cash contributions 60 Interest unwinding 230 Return on assets expected 295 Actuarial gain / loss Actual less expected return Closing balance 2950 2000 Expected return on assets 295 Interest on liabilities 230 625 175

195. A simple example opening closing Assets Liabilities Opening balance 1970 1500 Current Service Cost 70 Past Service Cost 25 Cash contributions 60 Interest unwinding 230 Return on assets expected 295 Actuarial gain / loss 175 Actual less expected return 625 Closing balance 2950 2000 Dr Wages (70 + 25) 95 Dr interest expense 230 Cr interest income 295 Cr Bank 60 Dr Equity 175 Cr Equity 625 DR Pension in balance sheet 480

196. IAS 19 Irish Companies – Eircom Retrospective application of Corridor

197. IAS 19 Irish Companies – Eircom Mortality assumptions and sensitive assumptions

198. IAS 19 Irish Companies – INM Corridor and post retirement benefits

199. IAS 19 Irish Companies – CRH Different assumptions for different countries

200. Irish Assumptions Company Discount rate 2005/6 Eircom 4.75 Ind. News and Media 4.3 Bank of Ireland 4.85 CRH 4.25 DCC 4.35 Abbey 4.6 AIB 4.3 Anglo 4.3 Elan 4 FBD 4.25 ILP 4.25 Kerry 4.9 Greencore 4.2

201. FRS 17 The Discount Rate 4% discount rate Fund required Working life Age 65 Age 20 3% discount rate

202. Irish Assumptions Company Discount rate 2007/8 Eircom 4.75 Ind. News and Media 4.7 Bank of Ireland 4.95 CRH 5.5 DCC 4.7-4.8 AIB 5.5 Anglo 5.5 (end 2008 = 6%) Elan 5.4 FBD 5.5 ILP 5.5 Kerry 45.5-6.5 Greencore 5.4 United Drug 6.1 (end 2008)

203. Irish Deficits Company Deficit €M 2006 Eircom 773 Ind. News and Media 165.6 Bank of Ireland 896 CRH 324 DCC 19 Abbey 0.1 AIB 1227 Anglo Surplus 7.6m Elan 8.5 FBD 2 ILP 130 Kerry 170 Greencore 48

204. Irish Deficits 2008: 9m surplus Company Deficit €M 2007/8 Eircom 773 Ind. News and Media 126 Bank of Ireland 587 CRH 62 DCC 16 AIB 253 Anglo Surplus 29m Elan Surplus 12.4 FBD 6.2 ILP 76 Kerry 105K Greencore 14

205. Anglo Irish Bank 2008

206. Life expectations Company male Female Bank of Ireland (60) 24.5 (84.5) 27.5 (87.5) DCC (65) 20.9 (85.9) 23.9 (88.9) AIB (63) 21.7 (84.7) 24.6 (87.6) AIB UK (63) 23.1 (86.1) 26.0 (89) Anglo (60) 24.9 (84.9) 27.9 (87.9) FBD (65) 21.4 (86.4) 26.4 (91.4) ILP (65) 22.1 (87.1) 25.0 (90) Kerry (65) 17-19 (82) 20-22 (85) Greencore (65) 19-21 (84) 22-24 (87)

207. Irish Assumptions Company Salary Eircom 3.5 Ind. News and Media 3.6 Bank of Ireland 3.09 CRH 4 DCC 3.75 Abbey 2 AIB 4 Anglo 4 Elan 3.3 FBD 4 ILP 3.75 Kerry 3.25 Greencore 3.75

208. Irish Assumptions Company Equities Eircom 7.5 Ind. News and Media n/a Bank of Ireland 7.8 CRH 7.5 DCC 7.4 Abbey 7.2 AIB 7.3 Anglo 6.6 Elan 7 FBD 7 ILP n/a Kerry n/a Greencore 7.8

210. IAS 20 Accounting for Government Grants and Disclosure of Government Assistance

212. IAS 20 Accounting for Government Grants and Disclosure of Government Assistance Grant of a non monitory asset (e.g. land) Asset at FV and grant also recorded Or Asset at net of grant amount

213. IAS 20 Accounting for Government Grants and Disclosure of Government Assistance Revenue grants Write off as expense incurred In “other income” or net to expense Capital grants Capitalise and amortise or Record asset at net amount

214. IAS 20 Accounting for Government Grants and Disclosure of Government Assistance Disclosure Accounting policy adopted for grants, including method of balance sheet presentation Nature and extent of grants recognised in the financial statements Unfulfilled conditions and contingencies attaching to recognised grants Government grants do not include government assistance whose value cannot be reasonably measured, such as marketing advice. Disclosure of the benefits is required

215. IAS 21 Foreign Exchange

216. Applies to: Individual transactions Consolidations Translations to a presentation currency Definitions: Functional currency Presentation currency IAS 21 Foreign Exchange

220. Foreign operations Goodwill is a FX asset Use FRS 23 prospectively On disposal recycle FX gains and losses On first application set FX to zero IAS 21 Foreign Exchange

221. IAS 23 Borrowing Costs As amended March 2007 and applicable for accounting periods ended on or after 1 January 2009

222. Borrowing costs: Interest, amortisation of discount or premium Arrangement costs Not imputed equity costs No preference dividend unless debt per IAS 32 IAS 23 Borrowing Costs

223. Qualifying asset Takes a substantial amount of time to bring into use Property, plant and equipment Investment property under construction “ made to order” inventories IAS 23 Borrowing Costs

224. Benchmark treatment Expense in period when incurred Allowable alternative Capitalise with qualifying asset Apply consistently Separate borrowings – actual interest incurred Pooled debt – weighted average Suspend capitalisation during a delay IAS 23 Borrowing Costs

225. Exclusions Assets valued at fair value Inventories – option to capitalise Apply prospectively No retrospective re-statement IAS 23 Borrowing Costs As amended

226. IAS 24 Related Party Disclosure

227. IAS 24 Related Party Disclosure Draw attention to possible P/L or balance sheet affect of related party transactions Related party Control Exercise significant control Exercise joint control

228. IAS 24 Related Party Disclosure Related party directly or indirectly controls under common control significant influence Joint control Associated or joint ventures' key management (including parent) close family member of above Pension plan of entity

229. IAS 24 Related Party Disclosure Fellow profit orientated state controlled entities must also disclose Exclusions simply because of common key management or directors two venturers with joint control of a JV Providers of finance, trade unions, Government single customer with significant transactions and economic dependence.

230. IAS 24 Related Party Disclosure Related party Transactions Transfer of resources No price need be charged to be related (e.g. free rent from a director)

231. IAS 24 Related Party Disclosure Disclosure Name of parent organisation Ultimate controlling party Key Management compensation Total Short term employee benefits post retirement benefits Other benefits

232. IAS 24 Related Party Disclosure Key Management Persons responsible for planning, controlling and directing the entity Includes all directors Other related party transactions Nature of the relationship outstanding balances Amount of the transaction etc… … in total for each category of related party

234. IAS 26 Accounting and Reporting by Retirement Benefit Plans

235. IAS 26 applies to the financial statements of retirement benefit plans. The financial statements of a defined benefit plan contain either: a statement that shows: the net assets available for benefits; the actuarial present value of promised retirement benefits, distinguishing between vested and non-vested benefits; and the resulting excess or deficit; or IAS 26 Accounting and Reporting by Retirement Benefit Plans

236. IAS 26 applies to the financial statements of retirement benefit plans. a statement of net assets available for benefits including either: a note disclosing the actuarial present value of promised retirement benefits, distinguishing between vested and non-vested benefits; or a reference to this information in an accompanying actuarial report. Retirement benefit plan investments are carried at fair value IAS 26 Accounting and Reporting by Retirement Benefit Plans

237. IAS 27 Consolidated and Separate Financial Statements

238. preparation and presentation of consolidated Group Accounts and to accounting for investments in subsidiaries, jointly controlled entities, and associates. IAS 27 Consolidated and Separate Financial Statements

239. Requires consolidated accounts where parent controls subsidiary. Some exemptions Parent is wholly owned sub or partially owned and minority agree parent debt or equity not traded Not planning to list ultimate or intermediary parent produces consolidated accounts for “Public use” IAS 27 Consolidated and Separate Financial Statements

240. Consolidation Similar to UK GAAP except Separately value intangible assets Do not amortise goodwill Impair test goodwill annually Do amortise intangible assets IAS 27 Consolidated and Separate Financial Statements

241. IFRS differences Ryanair Acquires Aer Lingus UK IFRS Paid 1000 1000 Got Net assets at fair value (500) (500) Landing slots (300) Brand (100) Customer list (100) Residual goodwill 500 Nil

242. Separate financial statements Investment in JV’s and subsidiaries Use IAS 39, or Value at cost IAS 27 Consolidated and Separate Financial Statements

243. IAS 28 Investment in Associates

244. Associate Significant influence but not control 20%+ Significant influence assumed Representation on board Accounting - separate financial statements Cost or IAS 39 (fair value) IAS 28 Investment in Associates

245. Accounting - group financial statements Cost + group share of post acquisition profit (Some exceptions) IAS 28 Investment in Associates

246. IAS 29 Financial Reporting in Hyper Inflation Economies

249. IAS 30 Disclosures in Financial Statements of Banks and Similar Financial Institutions

251. IAS 31 Interests in Joint Ventures

257. IAS 32 and 39 Financial Instruments: Disclosure and Presentation and Measurement

258. IAS 32 and 39 Financial Instruments: Disclosure and Presentation and Measurement 32 & 39 FV and “de-recognition” Hedges EU standard FRS 25/26 Hedges Applying IFRS and you have a choice of either of these Applying UK you must use this EU now adopted this

259. Financial Instruments Financial instrument: A contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

260. Financial Instruments Examples of Financial Instruments Cash Demand and time deposits Commercial paper Accounts, notes, and loans receivable and payable Debt and equity securities. These are financial instruments from the perspectives of both the holder and the issuer, includes investments in subsidiaries, associates, and joint ventures Asset backed securities such as collateralised mortgage obligations, repurchase agreements, and securitised packages of receivables Derivatives, including options, rights, warrants, futures contracts, forward contracts, and swaps.

261. Financial Instruments Examples of derivatives Forwards Interest Rate Swaps Forward Rate Agreements Futures Options Caps and Floors.

262. Financial asset Financial Liability / Equity Held for trading – FV through I/C Available for Sale – FV + recycle Loans and receivables – Amortised cost Held to maturity – Amortised Cost FV – I/S Amortised cost Derecognise – when transferred when extinguished Hedges Designated and effective Fair value or cash flow hedges Macro hedges

266. Financial Instruments - Assets Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments that an entity intends and is able to hold to maturity and measured at amortised cost (if sold then this category can not be used for 2 years)

267. Financial Instruments - Liabilities 2 Types valued at fair value through the profit and loss Designated. A financial liability that is designated by the entity as a liability at fair value through profit or loss upon initial recognition. Held for trading. A financial liability classified as held for trading, such as an obligation for securities borrowed in a short sale, which have to be returned in the future. Other at amortised cost using the effective interest method

269. Financial Instruments – De-recognition Liabilities A financial liability should be removed from the balance sheet when, and only when, it is extinguished, that is, when the obligation specified in the contract is either discharged, cancelled, or expired.

271. Hedge Accounting Effectiveness requirement 80% to 125% effective Categories: A fair value hedge is a hedge of the exposure to changes in fair value of a recognised asset or liability or a previously unrecognised firm commitment to buy or sell an asset at a fixed price or an identified portion of such an asset, liability or firm commitment, that is attributable to a particular risk and could affect profit or loss. A cash flow hedge is a hedge of the exposure to variability in cash flows that (i) is attributable to a particular risk associated with a recognised asset or liability (such as all or some future interest payments on variable rate debt) or a highly probable forecast transaction and (ii) could affect profit or loss.

272. Fair Value Accounting - Investments Fair value revalue to market value at year end and difference to I/S Available for sale revalue to market value at year end and difference to equity, recycle gain or loss to I/S when sold Held to Maturity Amortised cost

273. Fair Value Accounting 2001: Cost 100 2001 year end MV 200 2002 year end MV 300 2003 sold 400 Fair value 2001 2002 2003 Balance sheet amt. 200 300 Nil I/S 100 100 100

274. Fair Value Accounting 2001: Cost 100 2001 year end MV 200 2002 year end MV 300 2003 sold 400 Available for sale 2001 2002 2003 Balance sheet amt. 200 300 Nil I/S 300 Equity 100 100 (200)

275. Fair Value V’s Cost Accounting € 1000, 3 year bond paying 15% at the end of 3 years Fair value HTM 2000 2001 2002 Balance sheet amt. 1,050 1,100 1,150 I/S 50 50 50 Cost model 2000 2001 2002 Balance sheet amt. 1,000 1,000 1,150 I/S Nil Nil 150

276. IAS 33 Earnings per share

283. IAS 34 Interim Reporting

287. IAS 36 Impairment of Assets

296. IAS 37 Provisions, Contingent Liabilities and Contingent Assets

298. IAS 37 Provisions, Contingent Liabilities and Contingent Assets

301. IAS 38 Intangible Assets

309. IAS 40 Investment Property

312. IAS 41 Agriculture

315. IFRS 1 – First time adoption of IFRS

317. IFRS 1 -International Accounting Standards Identify the first IFRS accounts, prepare an opening balance sheet and select and apply accounting policies 2007 2008 2009 Balance sheet Calc. restate IFRS Profit and loss account restate IFRS Old GAAP IFRS 2007 2008 2009 Profit

319. IFRS 1 -International Accounting Standards Consider the exemptions from retrospective Application. You may apply all, some or none of the exemptions Business combinations - no need to restate Deemed cost for fixed assets Translation differences set to zero Defined benefit pensions corridor Compound financial instruments need not be split Subsidiary may use IFRS 1 later then parent Designation of financial instruments Share based payment transactions Insurance contracts

322. IFRS 2 Share Based Payment

324. IFRS 2 Share Based Payment Issues: Share options being used to pay for goods and services Already in diluted earnings per share Complex valuation methods If the options are not taken up the charge does not reverse What do you do with the spare credit “other reserves” The discontinuation of share option schemes Start ups and R&D cost sharing arrangements Easy Jet £4.3m additional expense

325. IFRS 2 Share Based Payment Ryanair €0.5m expense Vodafone £52m expense Boots £1.1m expense Easy Jet £4.3m expense CRH €13.9m Elan €15.1m (17% of wages) Kingspan €1.8m IBM $1,035m (13% of income) 10% profit hit in the US 50% profit hit in US tech. sector 3% profit hit in Europe

326. IFRS 2 Share Based Payment Management issues: Calculate the impact on the income statement Assess the sensitivity of the charge to the key assumptions Identify staff to calculate and prepare disclosures Determine data needed Review funding and hedging of plans Review the future of share plans

327. Example An entity grants 100 options to each of its 500 employees. Each is conditional on the employee working for the entity over the next three years. Assume the fair value is £15. Based on weighted average probability, 20% of employees will leave during the three year period and thus forfeit their rights. The total fair value of options granted = 500 x 100 options x £15 x 80% = £600,000. The entity also estimates that the departures will occur evenly over three years. Application Scenario 1 If everything turns out as expected Cumulative Expense Year 1 50,000 options x 80% x £15 x 1/3r year 200,000 200,000 Year 2 50,000 options x 80% x £15 x 2/3 years 400,000 200,000 Year 3 50,000 options x 80% x £15 x 3/3 years 600,000 200,000 Total over three 600,000 IFRS 2 Share Based Payment

328. Scenario 2 During year 1 20 employees leave then the entity revises its estimate of total departures from 20% to 15%. During year 2 22 employees leave then the entity revises its estimate of total departures from 15% to 12% During year 3 15 employees leave thus 57 in total forfeited their rights leaving 443 x 100 options vested. Cumulative Expense Year 1 50,000 options x 85% x £15 x 1/3 year 212,500 212,500 Year 2 50,000 options x 88% x £15 x 2/3 years 440,000 227,500 Year 3 44,300 options x £15 x 3/3 years 664,500 224,500 Total over three years 664,500 IFRS 2 Share Based Payment

329. Cash Settled Share Based Payment Transactions An entity grants 100 cash share appreciation rights (SARs) as long as an employee stays 3 years. During year 1, 35 employees leave. The entity estimates that a further 60 will leave during years 2 and 3. During year 2, 40 employees leave and the entity estimates a further 25 will leave during year 3. During year 3, 22 employees leave and at the end of year 3, 150 employees exercise their SARs, another 140 exercise at the end of year 4 and the remaining 113 at the end of year 5. Fair value Intrinsic value Year 1 £14.40 2 £15.50 3 £18.20 £15.00 4 £21.40 £20.00 5 £25.00 IFRS 2 Share Based Payment

330. Cash Settled Share Based Payment Transactions Application Year 1 Expense for services received and consumed, and the year end liability Cumulative Expense (500 - 95 employees x 100 SARs x £14.40 x 1/3 194,400 194,400 Year 2 (500 - 100 employees x 100 SARs x £15.50 x 2/3 413,333 218,933 Year 3 (500 - 97 left – 150 exercised x 100 SARs x £18.20 x 3/3 460,460 150 exercised x 100 exercised x £15 225,000 685,460 272,127 Year 4 150 exercised x 100 SARs x £15 225,000 140 exercised x 100 SARS x £20 280,000 ( 500 - 97 left - 290 exercised x 100 SARs x £21.40 241,820 746,820 61,360 Year 5 150 exercised x 100 SARs x £15 225,000 140 exercised x 100 SARs x £20 280,000 113 exercised x 100 SARs x £25 282,500 787,500 40,680 Total charged over the five years 787,500 IFRS 2 Share Based Payment

332. IFRS 3 Business Combinations

336. IFRS 3 Business Combinations Revised

337. Amendments Buy 100% of company for 1000 Sell 10% for 200 a year later Cost of 10% 100 Sales value 200 IFRS 3 Business Combinations Revised Gain on sale 100 To equity 100

349. IFRS 4 Insurance Contracts

351. IFRS 5 Non Current assets Held for Sale and Discontinued Operations

354. IFRS 6 Exploration for and Evaluation of Mineral Resources