Examples from Illustrative financial statements for Small and Medium-sized Entities (SMEs) which have been tagged with XBRL. Example reflects full set of illustrative financial statements with the notes block as well as detail tagged.
XYZ Group: Consolidated statement of comprehensive income and retained earnings for the year ended 31 December 20X2
(Alternative 1 – illustrating the classification of expenses by function)
Profit before tax
Income tax expense
Profit for the year
Retained earnings at start of year
Retained earnings at end of year
Note: The format illustrated above aggregates expenses according to their function (cost of sales, distribution, administrative etc). As the only changes to XYZ Group’s equity during the year arose from profit or loss and payment of dividends, it has elected to present a single statement of comprehensive income and retained earnings instead of separate statements of comprehensive income and changes in equity.
XYZ Group: Consolidated statement of comprehensive income and retained earnings for the year ended 31 December 20X2
(Alternative 2 – illustrating the classification of expenses by nature)
Changes in inventories of finished goods and work in progress
Raw material and consumables used
Employee salaries and benefits
Depreciation and amortisation expense
Impairment of property, plant and equipment
Profit before tax
Income tax expense
Profit for the year
Retained earnings at start of year
Retained earnings at end of year
Note: The format illustrated above aggregates expenses according to their nature (raw materials and consumables, employee salaries and benefits, depreciation and amortisation, impairment etc). As the only changes to XYZ Group’s equity during the year arose from profit or loss and payment of dividends, it has elected to present a single statement of comprehensive income and retained earnings instead of separate statements of comprehensive income and changes in equity.
XYZ Group: Consolidated statement of financial position at 31 December 20X2
Current assets
Trade and other receivables
Non-current assets
Investment in associate
Property, plant and equipment
Deferred tax asset
LIABILITIES AND EQUITY
Current liabilities
Current tax liability
Provision for warranty obligations
Current portion of employee benefit obligations
XYZ Group: Consolidated statement of financial position at 31 December 20X2
Current portion of obligations under finance leases
Non-current liabilities
Long-term employee benefit obligations
Obligations under finance leases
Total liabilities and equity
Note: The IFRS for SMEs does not require a statement of financial position at the beginning of the earliest comparative period―hence the shading. It is presented here to aid understanding of the calculations underlying amounts in the statement of cash flows.
XYZ Group: Consolidated statement of cash flows for the year ended 31 December 20X2
Cash flows from operating activities
Profit for the year
Adjustments for non-cash income and expenses:
Non-cash finance costs (a)
Non-cash income tax expense (b)
Depreciation of property, plant and equipment
Amortisation of intangibles
Cash flow included in investing activities:
Gain on sale of equipment
Changes in operating assets and liabilities
Decrease (increase) in trade and other receivables
Decrease (increase) in inventories
Increase (decrease) in trade payables (c)
Increase in current and long-term employee benefit payable
Net cash from operating activities
Cash flows from investing activities
Proceeds from sale of equipment
Purchases of equipment
Net cash used in investing activities
Cash flows from financing activities
Payment of finance lease liabilities
Repayment of borrowings
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(a) Finance costs paid in cash
(b) Income taxes paid in cash
(c) Includes unrealised foreign exchange loss
XYZ Group: Accounting policies and explanatory notes to the financial statements for the year ended 31 December 20X2
1. General information
XYZ (Holdings) Limited (the Company) is a limited company incorporated in A Land . The address of its registered office and principal place of business is _________. XYZ Group consists of the Company and its wholly-owned subsidiary XYZ ( Trading) Limited . Their principal activities are the manufacture and sale of candles .
2. Basis of preparation and accounting policies
These consolidated financial statements have been prepared in accordance with the International Financial Reporting Standard for Small and Medium-sized Entities issued by the International Accounting Standards Board. They are presented in the currency units (CU) of A Land.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and its wholly-owned subsidiary. All intragroup transactions, balances, income and expenses are eliminated .
Investments in associates
Investments in associates are accounted for at cost less any accumulated impairment losses.
Dividend income from investments in associates is recognised when the Group’s right to receive payment has been established. It is included in other income.
Revenue from sales of goods is recognised when the goods are delivered and title has passed. Royalty revenue from licensing candle-making patents for use by others is recognised in accordance with the relevant licence agreements. Revenue is measured at the fair value of the consideration received or receivable, net of discounts and sales-related taxes collected on behalf of the government of A Land.
All borrowing costs are recognised in profit or loss in the period in which they are incurred.
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and their corresponding tax bases (known as temporary differences). Deferred tax liabilities are generally recognised for all temporary differences that will result in taxable amounts in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled (taxable temporary differences). Deferred tax assets are generally recognised for all temporary differences that will result in amounts that are deductible in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled (deductible temporary differences)—but only to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and is adjusted to reflect the current assessment of future taxable profits. Any adjustments are recognised in profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the taxable profit (tax loss) of the periods in which it expects the deferred tax asset to be realised or the deferred tax liability to be settled, on the basis of tax rates that have been enacted or substantively enacted by the end of the reporting period.
Property, plant and equipment
Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.
Depreciation is charged so as to allocate the cost of assets less their residual values over their estimated useful lives , using the straight-line method . The following annual rates are used for the depreciation of property, plant and equipment:
Fixtures and equipment
If there is an indication that there has been a significant change in depreciation rate, useful life or residual value of an asset, the depreciation of that asset is revised prospectively to reflect the new expectations.
Intangible assets are purchased computer software that is stated at cost less accumulated depreciation and any accumulated impairment losses. It is amortised over its estimated life of five years using the straight-line method. If there is an indication that there has been a significant change in amortisation rate, useful life or residual value of an intangible asset, the amortisation is revised prospectively to reflect the new expectations.
Impairment of assets
At each reporting date, property, plant and equipment, intangible assets and investments in associates are reviewed to determine whether there is any indication that those assets have suffered an impairment loss. If there is an indication of possible impairment, the recoverable amount of any affected asset (or group of related assets) is estimated and compared with its carrying amount. If estimated recoverable amount is lower, the carrying amount is reduced to its estimated recoverable amount and an impairment loss is recognised immediately in profit or loss.
Similarly, at each reporting date, inventories are assessed for impairment by comparing the carrying amount of each item of inventory (or group of similar items) with its selling price less costs to complete and sell. If an item of inventory (or group of similar items) is impaired, its carrying amount is reduced to selling price less costs to complete and sell, and an impairment loss is recognised immediately in profit or loss.
If an impairment loss subsequently reverses, the carrying amount of the asset (or group of related assets) is increased to the revised estimate of its recoverable amount (selling price less costs to complete and sell, in the case of inventories), but not in excess of the amount that would have been determined had no impairment loss been recognised for the asset (group of related assets) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the leased asset to the Group. All other leases are classified as operating leases.
Rights to assets held under finance leases are recognised as assets of the Group at the fair value of the leased property (or, if lower, the present value of minimum lease payments) at the inception of the lease. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are deducted in measuring profit or loss. Assets held under finance leases are included in property, plant and equipment, and depreciated and assessed for impairment losses in the same way as owned assets.
Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease.
Inventories are stated at the lower of cost and selling price less costs to complete and sell. Cost is calculated using the first-in, first-out (FIFO) method.
Trade and other receivables
Most sales are made on the basis of normal credit terms and the receivables do not bear interest. Where credit is extended beyond normal credit terms, receivables are measured at amortised cost using the effective interest method. At the end of each reporting period, the carrying amounts of trade and other receivables are reviewed to determine whether there is any objective evidence that the amounts are not recoverable. If so, an impairment loss is recognised immediately in profit or loss.
Trade payables are obligations on the basis of normal credit terms and do not bear interest. Trade payables denominated in a foreign currency are translated into CU using the exchange rate at the reporting date. Foreign exchange gains or losses are included in other income or other expenses.
Bank loans and overdrafts
Interest expense is recognised on the basis of the effective interest method and is included in finance costs.
Employee benefits―long-service payment
The liability for employee benefit obligations relates to government-mandated long-service payments. All full-time staff, excluding directors, are covered by the programme. A payment is made of 5 per cent of salary (as determined for the twelve months before the payment) at the end of each of five years of employment. The payment is made as part of the December payroll in the fifth year. The Group does not fund this obligation in advance.
The Group’s cost and obligation to make long-service payments to employees are recognised during the employees’ periods of service. The cost and obligation are measured using the projected unit credit method, assuming a 4 per cent average annual salary increase, with employee turnover based on the Group’s recent experience, discounted using the current market yield for high quality corporate bonds.
Provision for warranty obligations
All goods sold by the Group are warranted to be free of manufacturing defects for a period of one year. Goods are repaired or replaced at the Group’s option. When revenue is recognised, a provision is made for the estimated cost of the warranty obligation.
3. Key sources of estimation uncertainty
In determining the liability for long-service payments (explained in note 19), management must make an estimate of salary increases over the following five years, the discount rate for the next five years to use in the present value calculation, and the number of employees expected to leave before they receive the benefits.
4. Restriction on payment of dividend
Under the terms of the bank loan and bank overdraft agreements, dividends cannot be paid to the extent that they would reduce the balance of retained earnings below the sum of the outstanding balance of the bank loan and the bank overdraft.