Korea IFRS Manager cheat sheet

Fair presentation requires faithful representation of the effects of transactions in accordance with the definitions of assets, liabilities, income and expenses; departure from an IFRS is permitted only in the extremely rare case where compliance would be so misleading that it conflicts with the objective of financial statements, and full disclosure of the departure is required.

Going concern is assessed for at least 12 months from the end of the reporting period; material uncertainties are disclosed when they could cast significant doubt on the entity's ability to continue as a going concern.

A liability is classified as current when the entity expects to settle it within 12 months after the reporting period, has no unconditional right to defer settlement beyond 12 months, or holds it primarily for trading; all other liabilities are non-current.

IAS 1.30A: information demanded by a specific IFRS need not be disclosed if it is not material, but combining immaterial items can become material in aggregate.

Other comprehensive income is presented by nature and grouped into items that will be reclassified to profit or loss and items that will never be reclassified.

IAS 8: a voluntary change in accounting policy is made only if it results in information that is more relevant and no less reliable; the change is applied retrospectively unless impracticable for a specific period.

Changes in accounting estimates are applied prospectively from the date of change; material prior period errors are corrected retrospectively by restating comparatives and adjusting opening retained earnings.

IAS 10 adjusting events provide evidence of conditions that existed at the reporting date and require adjustment of the amounts recognised; non-adjusting events reflect conditions arising after the reporting date and require disclosure only when material.

Dividends declared after the reporting period are non-adjusting events; they are disclosed in the notes because they do not represent an obligation at the reporting date.

Five-step model: identify the contract with the customer, identify the performance obligations, determine the transaction price, allocate the transaction price, and recognise revenue when or as each performance obligation is satisfied.

A contract exists for IFRS 15 purposes only when the parties have approved it and are committed, rights and payment terms are identifiable, it has commercial substance, and collection of the consideration is probable.

Variable consideration is estimated using the expected value method or the most likely amount method, whichever better predicts the entitlement, and is constrained to the amount for which a significant reversal of cumulative revenue is not highly probable.

A significant financing component is adjusted using a discount rate determined at contract inception; the practical expedient permits ignoring it when the period between transfer of goods or services and payment is one year or less.

The transaction price is allocated on the basis of relative stand-alone selling prices; the residual approach is allowed only where the selling price is highly variable or uncertain.

Revenue is recognised over time when one criterion is met: the customer simultaneously receives and consumes the benefits, the entity's performance creates or enhances an asset the customer controls, or the asset has no alternative use and the entity has an enforceable right to payment for performance to date.

The principal controls the specified good or service before it is transferred and recognises gross revenue; an agent does not control the good or service and recognises only the commission or fee.

Incremental costs of obtaining a contract are capitalised if expected to be recovered, with a practical expedient when the amortisation period is one year or less; costs to fulfil are capitalised when they relate directly to a contract, generate resources and are expected to be recovered.

A licence granting a right to access the entity's intellectual property is a performance obligation satisfied over time; a licence granting a right to use is satisfied at the point in time the licence is transferred.

A lessee recognises a right-of-use asset measured at cost and a lease liability measured at the present value of the lease payments not paid at the commencement date.

The discount rate is the interest rate implicit in the lease if that rate can be readily determined; otherwise the lessee uses its incremental borrowing rate.

Lease payments included in the liability comprise fixed payments less incentives, variable payments depending on an index or rate, residual value guarantees, the exercise price of a purchase option the lessee is reasonably certain to exercise, and termination penalties where the term reflects termination.

Lease term = non-cancellable period + periods covered by extension options the lessee is reasonably certain to exercise + periods covered by termination options the lessee is reasonably certain not to exercise.

Recognition exemptions apply to short-term leases of 12 months or less at commencement with no purchase option, and to leases of low-value assets; payments are expensed on a straight-line or other systematic basis.

The right-of-use asset is depreciated over the lease term, or over the useful life where ownership transfers or the lessee is reasonably certain to exercise a purchase option.

The lessee remeasures the lease liability on a change in an index or rate, a change in a residual value guarantee, or a reassessment of the lease term or purchase option; the right-of-use asset is adjusted by the same amount.

A lessor classifies a lease as a finance lease when it transfers substantially all the risks and rewards incidental to ownership; the lessor recognises a net investment in the lease and finance income over the lease term.

Sale and leaseback: the entity first determines whether the transfer qualifies as a sale under IFRS 15; if it does, the seller-lessee recognises a right-of-use asset measured at the proportion of the previous carrying amount retained.

A financial asset is measured at amortised cost only if it is held within a business model whose objective is to hold assets to collect contractual cash flows and its contractual cash flows pass the SPPI test.

Fair value through other comprehensive income applies where the business model objective is achieved by both collecting cash flows and selling assets and the SPPI test is met; all other financial assets are measured at fair value through profit or loss.

Equity investments are measured at fair value through profit or loss unless the entity makes an irrevocable election at initial recognition to present fair value changes in OCI; no amount is recycled on disposal, but dividends are recognised in profit or loss.

Expected credit loss model: 12-month ECL at initial recognition, moving to lifetime ECL when credit risk has increased significantly since initial recognition; trade receivables normally use the simplified lifetime approach via a provision matrix.

ECL is a probability-weighted estimate of cash shortfalls, conventionally expressed as probability of default x loss given default x exposure at default, discounted at the effective interest rate and incorporating forward-looking information.

A financial liability is derecognised when the present value of the revised cash flows, including fees paid net of fees received and discounted at the original effective interest rate, differs by at least 10% from the original liability's cash flows.

IFRS 9 hedge accounting covers fair value hedges, cash flow hedges and hedges of a net investment in a foreign operation; effectiveness is assessed qualitatively and there is no 80-125% bright line.

IFRS 7 requires disclosure of the significance of financial instruments for the entity's financial position and performance, the nature and extent of credit, liquidity and market risk exposures, and quantitative sensitivity analysis for market risk.

IFRS 10 control requires power over the relevant activities of the investee, exposure or rights to variable returns from involvement, and the ability to use that power to affect the amount of those returns.

IFRS 3 acquisition method: identify the acquirer, determine the acquisition date, recognise and measure the identifiable assets acquired and liabilities assumed at acquisition-date fair value, and recognise goodwill or a gain from a bargain purchase.

Goodwill = consideration transferred + amount of non-controlling interest + fair value of any previously held equity interest - fair value of the net identifiable assets acquired.

Non-controlling interest is measured either at fair value (full goodwill method) or at the proportionate share of the acquiree's identifiable net assets; the choice is made separately for each business combination.

Acquisition-related costs are expensed as incurred; contingent consideration is measured at fair value at the acquisition date and classified as a liability or as equity, with subsequent changes treated according to that classification.

Measurement period adjustments are applied retrospectively within 12 months of the acquisition date when they reflect new information about facts and circumstances that existed at the acquisition date.

A gain from a bargain purchase is recognised in profit or loss only after the acquirer reassesses whether it has correctly identified and measured all assets acquired and liabilities assumed.

IAS 28: significant influence is presumed when an investor holds 20% or more of the voting power unless that presumption can be clearly rebutted; the equity method recognises the investor's share of the associate's profit or loss and OCI.

Under the equity method, goodwill relating to the associate is included in the carrying amount of the investment and is not amortised or tested for impairment separately.

IAS 16: an item of property, plant and equipment is initially measured at cost, including the purchase price, directly attributable costs of bringing the asset to the location and condition for intended use, and initial estimates of dismantling and restoration obligations.

Subsequent measurement uses either the cost model or the revaluation model, and the revaluation model must be applied to an entire class of property, plant and equipment.

A revaluation increase is recognised in OCI and accumulated in equity as a revaluation surplus; a revaluation decrease is recognised in profit or loss unless it reverses a previous surplus recognised for the same asset.

IAS 38: research expenditure is expensed as incurred, while development expenditure is capitalised only when all six criteria are met, including technical feasibility, intention to complete, probable future economic benefits, adequate resources and reliable measurement.

Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance may not be recognised as intangible assets.

Intangible assets with a finite useful life are amortised over that life; intangible assets with an indefinite useful life and goodwill are not amortised but are tested for impairment at least annually.

IAS 36: an impairment loss is the excess of carrying amount over recoverable amount, where recoverable amount is the higher of fair value less costs of disposal and value in use.

A reversal of an impairment loss is recognised for assets other than goodwill, limited to the carrying amount that would have been determined had no impairment loss been recognised in prior years.

IAS 40: under the fair value model, investment property is remeasured at fair value at each reporting date with changes recognised in profit or loss, and the property is not depreciated.

A provision is recognised only when a present obligation exists as a result of a past event, an outflow of resources embodying economic benefits is probable, and a reliable estimate of the amount can be made.

The provision amount is the best estimate of the expenditure required to settle the obligation at the reporting date, discounted when the effect of the time value of money is material.

Contingent liabilities are not recognised but are disclosed unless the possibility of an outflow is remote; contingent assets are not recognised and are disclosed only when an inflow of economic benefits is probable.

An onerous contract provision is measured at the lower of the unavoidable cost of fulfilling the contract and the compensation or penalty arising from failure to fulfil it.

IAS 19: the defined benefit obligation is measured using the projected unit credit method; current service cost, past service cost and net interest on the net defined benefit liability are recognised in profit or loss, while remeasurements are recognised in OCI.

Net defined benefit liability = present value of the defined benefit obligation - fair value of plan assets; net interest is calculated by applying the discount rate to that net amount.

Past service cost and gains or losses on curtailment or settlement are recognised at the earlier of the date of the plan amendment or curtailment and the date the entity recognises related restructuring costs or termination benefits.

IFRS 2 equity-settled awards are measured at the grant-date fair value of the equity instruments granted and recognised over the vesting period with a corresponding credit to equity, with no subsequent remeasurement.

Cash-settled share-based payment transactions are measured at the fair value of the liability at each reporting date and at settlement date, with changes recognised in profit or loss; service and non-market performance conditions affect the number of awards expected to vest, while market conditions are reflected in grant-date fair value.

Deferred tax is recognised on temporary differences between the carrying amount of an asset or liability and its tax base, using the liability method on a non-discounted basis.

A deferred tax liability is not recognised on the initial recognition of goodwill or on the initial recognition of an asset or liability in a transaction that is not a business combination and that affects neither accounting profit nor taxable profit.

A deferred tax asset is recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary difference or unused tax loss can be utilised.

Deferred tax is measured at the tax rates expected to apply when the asset is realised or the liability settled, based on rates enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities are offset only when the entity has a legally enforceable right to offset current tax assets against current tax liabilities and they relate to income taxes levied by the same taxation authority on the same taxable entity.

IAS 12 amendments require deferred tax to be recognised on leases and decommissioning obligations, narrowing the initial recognition exemption so that it does not apply to transactions giving rise to equal taxable and deductible temporary differences.

IFRS 13 fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, in the principal market or, failing that, the most advantageous market.

Fair value hierarchy: Level 1 inputs are quoted prices in active markets for identical assets or liabilities, Level 2 inputs are observable inputs other than quoted prices included in Level 1, and Level 3 inputs are unobservable inputs.

A non-financial asset is measured at fair value on the basis of its highest and best use, considering what is physically possible, legally permissible and financially feasible for a market participant.