What is supplementary information financial statements

Supplementary information is any information presented in addition to the financial statements that is not necessary to fairly present the financial statements. This information may be presented with the financials or in a separate document. It should be derived from, and directly related to, the underlying records used to prepare the financials.

The supplementary information should also relate to the same period covered by the financials. An example of supplementary information is an expanded table containing the details for any line item in the financials. Thus, a breakdown of the cost of goods sold could be presented, or a breakdown of the components of the fixed assets line item.

Fixed assets are recorded at cost or revalued amounts. They will not be revalued in the future. Foreign exchange gains or losses relating to the procurement of property, plant and equipment, under very restrictive conditions, can be capitalised as part of the asset. The residual value and the useful life of an asset and the depreciation method shall be reviewed at least at each financial year-end.

The Group capitalises borrowing costs incurred during the period that the asset is getting ready for its intended use. Relevant borrowing costs are capitalised if certain criteria in AS are met. Schedule XIV of the Companies Act and Banking Regulations prescribe minimum rates of depreciation and these are typically used as the basis for determining useful life. IAS 39 requires all financial instruments to be initially measured at their fair value, which is usually to be the transaction price.

In those cases where the initial fair value is based on a valuation model that uses inputs that are not observable in the market, the difference between the transaction price and the valuation model is not recognised immediately in the income statement but is amortised to the income statement until the inputs become observable, the transaction matures or is terminated. At the time of initial recognition, IAS 39 requires all financial assets to be classified as either:. At the time of initial recognition, IAS 39 requires all financial liabilities to be classified as either:.

A financial asset or financial liability, other than one held for trading, can be designated as being held at fair value through profit or loss if it meets the criteria set out below:. The designation of a financial instrument as held at fair value through profit or loss is irrevocable in respect of the financial instruments to which it relates.

Subsequent to initial recognition instruments cannot be classified into or out of this category. Changes in the fair value of available for sale financial assets resulting from movements in foreign currency exchange rates are included in the income statement as exchange differences.

Foreign currency exchange movements for available for sale equity securities is recognised in reserves. IAS 39 requires that all derivatives be recognised on balance sheet at fair value. Changes in the fair value of derivatives that are not hedges are reported in the income statement. Changes in the fair value of derivatives that are designated as hedges are either offset against the change in fair value of the hedged asset or liability through earnings or recognised directly in equity until the hedged item is recognised in earnings, depending on the nature of the hedge.

A derivative may only be classified as a hedge if an entity meets stringent qualifying criteria in respect of documentation and hedge effectiveness. IAS 39 requires the separation of derivatives embedded in a financial instrument if it is not deemed to be closely related to the economic characteristics of the underlying host instrument. Foreign exchange contracts held for trading or speculative purposes are carried at fair value, with gains and losses recognised in the income statement.

In the absence of specific guidance, equity options are carried at the lower of cost or market value. There is no specific guidance on hedge accounting since Accounting Standard 30 is not mandatory.

At each balance sheet date, an assessment is made as to whether there is any objective evidence of impairment. A financial asset is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment. If objective evidence of impairment exists, an assessment is made to determine what, if any, impairment loss should be recognised.

Individually assessed assets for which there is no objective evidence of impairment are collectively assessed for impairment. If objective evidence of impairment exists, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any previously recognised impairment is removed from equity and recognised in the income statement. Market recoveries leading to a reversal of an impairment provision for available-for-sale debt securities are recognised in the income statement.

Impairment losses for equity instruments classified as available-for-sale are not permitted to be reversed through profit or loss. Long-term investments are written down when there is a decline in fair value which is deemed to be other than temporary. Impairments may be reversed through the income statement in subsequent periods if the investment rises in value, or the reasons for the impairment no longer exist. A financial asset is de-recognised if substantially all the risks and rewards of ownership have been transferred.

If substantially all the risks and rewards have not been transferred, the asset will continue to be recognised to the extent of any continuing involvement. There is limited guidance on de-recognition of financial assets. Securitised financial assets can only be de-recognised if the originator has surrendered control over the assets. Control is not surrendered where the securitised assets are not beyond the reach of the creditors of the originator or where the transferee does not have the to pledge, sell, transfer or exchange the securitised asset for its own benefit, or where there is an option that entitles the originator to repurchase the financial assets transferred under a securitisation transaction from the transferee.

A financial instrument is classified as a liability where there is a contractual obligation to deliver either cash or another financial asset to the holder of that instrument, regardless of the manner in which the contractual obligation will be settled. Preference shares, that carry a mandatory coupon or are redeemable on a specific date or at the option of the shareholder are classified as financial liabilities and are presented in other borrowed funds. The dividends on these preference shares are recognised in the income statement as interest expense on an amortised cost basis using the effective interest method.

The amount recognised as a provision is the best estimate at the balance sheet date of the expenditure required to settle the obligation, discounted using a pre-tax market discount rate if the effect is material. Provisions are recognised and measured on a similar basis to IFRS, except that discounting is not permitted. The net pension surplus or deficit, representing the difference between plan assets and liabilities, is recognised on the balance sheet.

The discount rate to be used for determining defined benefit obligations is established by reference to market yields at the balance sheet date on high quality corporate bonds of a currency and term consistent with the currency and term of the post employment benefit obligations.

The liability for defined benefit plans is determined on a similar basis to IFRS. The discount rate to be used for determining defined benefit obligations is established by reference to market yields at the balance sheet date on government bonds.

Actuarial gains or losses are recognised immediately in the statement of income. In respect of termination benefits, the revised AS 15 , specifically contains a transitional provision providing that where expenditure on termination benefits is incurred on or before 31 March , the entities can choose to follow the accounting policy of deferring such expenditure over its pay-back period.

However, any expenditure deferred cannot be carried forward to accounting periods commencing on or after 1 April Therefore any expenditure deferred should be written off over the shorter of a the pay-back period or b the period from the date expenditure on termination benefits is incurred to 1 April The fair value of the employee services received in exchange for the grant of the options is recognised as an expense.

For equity-settled awards, the total amount to be expensed over the vesting period must be determined by reference to the fair value of the options granted determined using an option pricing model , excluding the impact of any non-market vesting conditions for example, profitability and growth targets.

Non-market vesting conditions must be included in assumptions about the number of options that are expected to become exercisable.

At each balance sheet date, the Group revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period.

Other information examples include :. The auditor can use an other-matter paragraph to disclaim an opinion regarding other information.

Sample language follows:. Our audit was conducted for the purpose of forming an opinion on the basic financial statements as a whole. The [ identify the other information ] is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it.

Required supplementary information RSI is information that a designated accounting standard-setter e. RSI is not part of the basic financial statements. However, the designated accounting standard-setter has determined that the information is an essential part of financial reporting.

See AU-C for more guidance about required supplementary information. Required supplementary information examples include:. Accounting principles generally accepted in the United States of America require that the [ identify the required supplementary information ] on page XX be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Financial Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context.

We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. You can see information about supplementary information wording for compilation or review reports here. Also, see my post about presenting supplementary information in compilation and preparation engagements.