International Accounting Standards Illustrative Fund Financial ...

International Accounting Standards
Illustrative Fund Financial Statements

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Other publications on IAS
The following publications on International Accounting Standards and corporate governance practices have been
published by PricewaterhouseCoopers and are available from your nearest PricewaterhouseCoopers office:
International Accounting Standards – A Pocket Guide
International Accounting Standards – Disclosure Checklist – 2001
International Accounting Standards – Illustrative Corporate Financial Statements – 2001
International Accounting Standards – Illustrative Bank Financial Statements – 2001
International Accounting Standards – Understanding IAS 29
International Accounting Standards – Understanding IAS 39
International Accounting – Similarities & Differences – IAS, US GAAP and UK GAAP
The Board Agenda – Good Practices for Meeting Market Expectations
and on wider aspects of international reporting:
Audit Committees – Good Practices for Meeting Market Expectations
Reporting Progress – Good Practices for Meeting Market Expectations
World Watch (newsletter) – Governance and Corporate Reporting
The Board Agenda – Good Practices for Meeting Market Expectations
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International Accounting Standards
Illustrative Fund Financial Statements
Year ended 31 December 2001
This publication by PricewaterhouseCoopers provides two illustrative set of financial statements, prepared
in accordance with International Accounting Standards, for an open ended fund and secondly for a closed
ended fund. These financial statements include the disclosures required by International Accounting
Standards and Interpretations published up to and including March 2001. The example disclosures in these
illustrative financial statements should not be considered to be the only acceptable form of presentation.
The form and content of the Company’s financial statements are the responsibility of the fund manager, and
other forms of presentation which are equally acceptable may be preferred and adopted, provided they
include the specific disclosures prescribed in International Accounting Standards.
These illustrative financial statements are not a substitute for reading the Standards themselves or for
professional judgement as to fairness of presentation. They do not cover all possible disclosures required
by International Accounting Standards nor do they take account of any specific legal framework.
Depending on the circumstances, further specific information may be required in order to ensure fair
presentation under International Accounting Standards and we recommend that reference is made to our
separate publication ‘International Accounting Standards – Disclosure Checklist 2001’. Additional
accounting policies and disclosures may be required in order to comply with local laws, accounting
standards and stock exchange regulations.
Format of IAS illustrative financial statements
The references in the left margin of the financial statements represent the paragraph of the Standards in
which the disclosure requirements appear – for example, ‘39p8’ indicates IAS 39 paragraph 8. The
designation ‘DV’ means ‘Disclosure voluntary’ and indicates that the relevant IAS encourages, but does not
require the disclosure. Additional notes and explanations are shown italics. The financial statements also
include disclosures that are general practice in the industry.
Structure of publication
Page
Operating and financial review – general
2
Open ended fund
General information
4
Index to the illustrative open ended fund financial statements
5
Income statement
6
Balance sheet
7
Statement of changes in shareholders’ equity
8
Cash flow statement
9
Notes to the financial statements
10
Report of the auditors
22
Closed ended fund
General information
23
Index to the illustrative closed ended fund financial statements
24
Income statement
25
Balance sheet
26
Statement of changes in shareholders’ equity
27
Cash flow statement
28
Notes to the financial statements
29
Report of the auditors
37
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International Accounting Standards – Illustrative Fund Financial Statements
ABC Fund – Year ended 31 December 2001
Operating and financial review – general
International Accounting Standards do not address the requirements for information to be
included in a directors’ report or financial commentary. Generally such requirements are
DV,1p8
determined by local laws and regulations. IAS 1 encourages, but does not require,
DV,1p9
companies to present, outside the financial statements, a financial review by management
which describes and explains the main features of the enterprise’s financial performance
and financial position and the principal uncertainties it faces.
In 1998 the International Organisation of Securities Commissions issued "International
Disclosure Standards for Cross-Border Offerings and Initial Listings for Foreign Issuers",
comprising recommended disclosure standards including an operating and financial review
and discussion of future prospects. IOSCO standards for prospectuses are not mandatory –
but they will increasingly be incorporated in national stock exchange requirements both for
prospectuses and annual reports. The text of IOSCO’s Standard on Operating and Financial
Reviews and Prospects is reproduced below :
‘‘Discuss the company’s financial condition, changes in financial and market conditions
and results of operations for each year and interim period for which financial statements are
required, including the causes of material changes from year to year in financial statement
line items, to the extent necessary for an understanding of the company’s business as a
whole. Information provided also shall relate to all separate segments of the company.
Provide the information specified below as well as such other information that is necessary
for an investor’s understanding of the company’s financial condition, changes in financial
condition and results of operation.
A. Operating Results Provide information regarding significant factors, including unusual
or infrequent events or new developments, materially affecting the company’s income
from operations, indicating the extent to which income was so affected. Describe any
other significant component of revenue or expenses necessary to understand the
company’s results of operations.
1. To the extent that the financial statements disclose material changes in net sales or
revenues, provide a narrative discussion of the extent to which such changes are
attributable to changes in prices or to changes in the volume or amount of products
being sold or to the introduction of new products or services.
2. Describe the impact of inflation, if material. If the currency in which financial
statements are presented is of a country that has experienced hyperinflation, the
existence of such inflation, a five year history of the annual rate of inflation and a
discussion of the impact of hyperinflation on the company’s business shall be disclosed.
3. Provide information regarding the impact of foreign currency fluctuations on the
company, if material, and the extent to which foreign currency net investments are
hedged by currency borrowings and other hedging instruments.
4. Provide information regarding any governmental economic, fiscal, monetary or political
policies or factors that have materially affected, or could materially affect, directly or
indirectly, the company’s operations or investments by host country shareholders.
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International Accounting Standards – Illustrative Fund Financial Statements
ABC Fund – Year ended 31 December 2001
Operating and financial review – general (continued)
B. Liquidity and Capital Resources. The following information shall be provided:
1. Information regarding the company’s liquidity (both short and long term), including:
(a) a description of the internal and external sources of liquidity and a brief discussion
of any material unused sources of liquidity. Include a statement by the company that,
in its opinion, the working capital is sufficient for the company’s present requirements,
or, if not, how it proposes to provide the additional working capital needed.
(b) an evaluation of the sources and amounts of the company’s cash flows, including
the nature and extent of any legal or economic restrictions on the ability of the
company to receive or pay cash dividends, loans or advances and the impact such
restrictions have had or are expected to have on the ability of the company to meet
its cash obligations.
(c) information on the level of borrowings at the end of the period under review, the
seasonality of borrowing requirements and the maturity profile of borrowings and
committed borrowing facilities, with a description of any restrictions on their use.
2. Information regarding the type of financial instruments used, currency and interest rate
structure. The discussion also should include information on the currencies in which
cash and cash equivalents are held, and the use of financial instruments for hedging
purposes.
D. Trend Information. The company should identify the most significant recent trends in
underlying investments, economic growth of territories in which it invests inflation and
bid prices since the latest financial year. The company should also discuss, for at least
the current financial year, any known trends, uncertainties, demands, or events that are
reasonably likely to have a material effect on the company’s performance, or that would
cause reported financial information not necessarily to be indicative of future operating
results or financial condition.
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International Accounting Standards – Illustrative Open Ended Fund Financial Statements
ABC Fund – Year ended 31 December 2001
General information
1p102(b)
ABC Fund (‘‘the Fund’’) is an open ended investment company registered with limited
liability in [name of territory under jurisdiction] on [date] under the provisions of the [name
of the relevant legislation in the territory under jurisdiction]
1p102(a)
The Fund’s shares are listed on the [name of city] stock exchange. The address of the Fund’s
registered office is as follows: [address of registered office]
1p102(d)
The Fund has no employees.
10p16
The Fund’s financial statements were authorised for issue on [the date] by [the name of the
body that gave the authorisation].
1p102(b)
The principal activity of the Fund is investment holding with an objective to achieve capital
growth by providing exposure to the S&P 500 share index whilst providing protection
against capital losses for a proportion of capital invested in the Fund.
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International Accounting Standards – Illustrative Open Ended Fund Financial Statements
ABC Fund – Year ended 31 December 2001
Index to the illustrative open ended fund financial statements
Page
Income statement
6
Balance sheet
7
Statement of changes in shareholders’ equity
8
Cash flow statement
9
Notes to the financial statements
1 Accounting policies
10
A
Basis of preparation
B
Foreign currency translation
C
Derivatives financial instruments
D
Offsetting financial instruments
E
Interest income
F
Sales and repurchase arrangements
G
Available-for-sale and trading securities
H
Cash and cash equivalents
I
Taxation and deferred tax
J
Share capital
K
Dividends payable
L
Net asset value per share and earnings per share
M
Expenses
2 Use of financial instruments
13
3 Interest income
17
4 Net gain on available-for-sale and trading securities excluding interest income
17
5 Related parties
17
6 Taxation and deferred taxation
18
7 Net assets value per share and earnings per share
18
8 Margin accounts
18
9 Due from/to brokers
18
10 Derivative financial instruments
19
11 Available-for-sale securities
20
12 Trading securities and other repurchase arrangements
20
13 Accrued expenses
20
14 Share capital
21
15 Dividends payable
21
16 Post balance sheet events
21
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International Accounting Standards – Illustrative Open Ended Fund Financial Statements
ABC Fund – Year ended 31 December 2001
Income statement
1p75,77
(all amounts in USD thousands)
Notes
Year ended 31 December
2001
2000
1p75
Revenue
39p170(c)
Interest income
3
46,651
48,816
Dividend income
11,881
18,163
Net gain on available-for-sale and trading securities
4
47,941
224,892
Total investment income
106,473
291,871
1p77
Expenditure
Management fee
5
12,594
14,043
Custodian fee
5
3,401
3,741
Auditors fee
24
23
Directors fees
5
87
83
39p170(c)
Interest expense
550
600
Other operating expenses
2,057
4,239
Operating expenditure
18,713
22,729
1p75(f)
Profit from ordinary activities before tax
87,760
269,142
1p75(e)
Tax
6
(3,564)
(5,449)
1p75(I)
Net profit on ordinary activities
84,196
263,693
33p47
Earnings per share
7
3.87
8.34
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International Accounting Standards – Illustrative Open Ended Fund Financial Statements
ABC Fund – Year ended 31 December 2001
Balance sheet
(all amounts in USD thousands)
Notes
As at 31 December
1p66,67
2001
2000
1p53
1p66
ASSETS
Cash and bank balances
285,040
324,565
Margin accounts
8
125,924
221,577
Due from brokers
9
56,056
83,655
Derivative financial instruments
10
219,267
265,700
Available-for-sale securities
11
519,656
816,587
Trading securities
12
34,690
30,990
Interest receivable
4,789
5,273
Total assets
1,245,422
1,748,347
1p66
LIABILITIES
Due to brokers
9
75,719
17,944
Derivative financial instruments
10
108,317
87,750
Due under repurchase arrangements
12
21,939
22,041
Accrued expenses
13
1,085
2,189
Total liabilities
207,060
129,924
Total assets less liabilities
1,038,362
1,618,423
1p66(m)
ISSUED CAPITAL AND RESERVES
Share capital
14
962
1,556
Share premium
14
238,801
231,151
Retained earnings
798,599
1,385,716
Total shareholders’ funds
1,038,362
1,618,423
Adjusted net asset value per share
7
54.54
52.31
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International Accounting Standards – Illustrative Open Ended Fund Financial Statements
ABC Fund – Year ended 31 December 2001
Statement of changes in shareholders’ equity
1p86
(all amounts inUSD thousands)
Notes
Share
Share
Retained
Capital
Premium
Earnings
Total
1p86(e-f)
Balance at 1 January 2000
14
1,453
69,132
1,221,924
1,292,509
1p86(a)
Net profit on ordinary activities
–
–
263,693
263,693
1p86(d)
Redemption of shares
14
(75)
(4,602)
(61,100)
(65,777)
1p86(d)
Dividends paid
15
–
–
(38,801)
(38,801)
1p86(d)
Issue of shares
14
178
166,621
–
166,799
Balance at 31 December 2000
14
1,556
231,151
1,385,716
1,618,423
Balance at 1 January 2001
– as previously stated
1,556
231,151
1,385,716
1,618,423
39p172(d)
Effect of adopting IAS 39
7
–
–
9,850
9,850
Balance at 1 January 2001 as restated
1,556
231,151
1,395,566
1,628,273
1p86(a)
Net profit on ordinary activities
–
–
84,196
84,196
1p86(d)
Redemption of shares
14
(636)
(39,025)
(644,908)
(684,569)
1p86(d)
Dividends paid
15
–
–
(36,255)
(36,255)
1p86(d)
Issue of shares
14
42
46,675
–
46,717
Balance at 31 December 2001
962
238,801
798,599
1,038,362
[In the prior year all available-for-sale securities were considered as current investments that by their
nature were readily realisable and were intended to be held for not more than one year. Therefore, all
gains and losses on available-for-sale securities prior to adoption of IAS 39 were taken to income
statement. However, if ABC Fund had considered available-for-sale securities as long-term investments
then ABC Fund would have a revaluation reserve on the balance sheet due to the revaluation of such
investment securities. Such a revaluation reserve would need to be transferred to retained earnings on
the date when IAS 39 is initially adopted, in accordance with the transitional rules of IAS 39.]
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