IAS1 : PRESENTATION OF FINANCIAL STATEMENTS
STRUCTURE AND CONTENT >
Sources of estimation uncertainty
An entity shall disclose information about [one] the assumptions it makes about the future, and other [two] major sources of estimation uncertainty at the end of the reporting [three] period, that have a significant risk of resulting [four] in a material adjustment to the carrying amounts of assets and liabilities [five] within the next financial year. In respect of those [six] assets and liabilities, the notes shall include details [seven] of:
(a) their nature, and
(b) their carrying [eight] amount as at the end of the reporting period.
Determining the carrying amounts [nine] of some assets and liabilities requires estimation of the effects [ten] of uncertain future events on those assets and liabilities [one] at the end of the reporting period. For example, in the absence of recently [two] observed market prices, future-oriented estimates are [three] necessary to measure the recoverable amount of classes of property, [four] plant and equipment, the effect of technological obsolescence on inventories, [five] provisions subject to the future outcome of litigation in progress, [six] and long-term employee benefit liabilities such as pension [seven] obligations. These estimates involve assumptions about [eight] such items as the risk adjustment to cash flows [nine] or discount rates, future changes in salaries and future [ten] changes in prices affecting other costs.
The assumptions [one] and other sources of estimation uncertainty disclosed in accordance [two] with paragraph 125 relate to the estimates that [three] require managementís most difficult, subjective or complex [four] judgements. As the number of variables and assumptions affecting the possible [five] future resolution of the uncertainties increases, those judgements [six] become more subjective and complex, and the potential for a consequential [seven] material adjustment to the carrying amounts of assets and liabilities [eight] normally increases accordingly.
The disclosures in paragraph 125 [nine] are not required for assets and liabilities with [ten] a significant risk that their carrying amounts [one] might change materially within the next financial [two] year if, at the end of the reporting period, they [three] are measured at fair value based on recently [four] observed market prices. Such fair values [five] might change materially within the next financial [six] year but these changes would not arise [seven] from assumptions or other sources of estimation uncertainty at the end [eight] of the reporting period.
An entity presents the disclosures in paragraph [nine] 125 in a manner that helps users of financial [ten] statements to understand the judgements that management makes [one] about the future and about other sources of estimation [two] uncertainty. The nature and extent of the information provided vary [three] according to the nature of the assumption and other circumstances. Examples [four] of the types of disclosures an entity makes are:
(a) the nature [five] of the assumption or other estimation uncertainty;
(b) the sensitivity of carrying [six] amounts to the methods, assumptions and estimates underlying their [seven] calculation, including the reasons for the sensitivity;
(c) the expected resolution [eight] of an uncertainty and the range of reasonably possible outcomes within [nine] the next financial year in respect of the carrying amounts [ten] of the assets and liabilities affected; and
(d) an explanation of changes [one] made to past assumptions concerning those assets [two] and liabilities, if the uncertainty remains unresolved.
This Standard does [three] not require an entity to disclose budget information [four] or forecasts in making the disclosures in paragraph 125.
Sometimes it [five] is impracticable to disclose the extent of the possible effects [six] of an assumption or another source of estimation uncertainty at the end [seven] of the reporting period. In such cases, the entity discloses [eight] that it is reasonably possible, on the basis [nine] of existing knowledge, that outcomes within the next [ten] financial year that are different from the assumption [one] could require a material adjustment to the carrying amount [two] of the asset or liability affected. In all cases, the entity [three] discloses the nature and carrying amount of the specific asset [four] or liability (or class of assets or liabilities) affected [five] by the assumption.
The disclosures in paragraph 122 of particular judgements [six] that management made in the process of applying the entityís [seven] accounting policies do not relate to the disclosures [eight] of sources of estimation uncertainty in paragraph 125.
Other IFRSs [nine] require the disclosure of some of the assumptions that would [ten] otherwise be required in accordance with paragraph [one] 125. For example, IAS 37 requires disclosure, [two] in specified circumstances, of major assumptions concerning future [three] events affecting classes of provisions. IFRS 7 [four] requires disclosure of significant assumptions the entity uses [five] in estimating the fair values of financial assets and financial [six] liabilities that are carried at fair value. [seven] IAS 16 requires disclosure of significant assumptions [eight] that the entity uses in estimating the fair values [nine] of revalued items of property, plant and equipment.
Thus it appears, in what various ways Nature has taught man her first great lesson of love and union.
Nor did she give the same talents either in kind or in degree to all, evidently meaning that the inequality of her gifts should be ultimately equalized by a reciprocal interchange of good offices and mutual assistance.
Thus, in different countries, she has caused different commodities to be produced, that expediency itself might introduce commercial intercourse.
The Complaint of Peace