FREP Examination Areas of Emphasis 2012

The German FREP (Financial Reporting Enforcement Panel) has published its areas of emphasis for examinations in 2012.

Orginal document: http://www.frep.info/docs/press_releases/2011/20111020_pruefungsschwerpunkte_2012_en.pdf

1. Accounting for financial instruments affected by the sovereign debt crisis – IAS 39, IFRS 7, section 315 (1) HGB (German Commercial Code)

  • Reasonableness of determination of fair value, in particular the assessment as to whether an active market exists
  • Transparent and appropriate disclosures in (consolidated) notes and (group) management report
  • Supporting documentation

2. Report on opportunities and risks in (group) management report – sections 289 (1) sentence 4, 315 (1) sentence 5 HGB

  • Impact of agreed upon financial covenants (GAS 5.10 and GAS 15.62)
  • Complete and accurate presentation of significant risks in accordance with GAS 5.10
  • Quantification of risks in accordance with GAS 5.20
  • Presentation of significant factors impacting future development (GAS 15.83 et seq.)

3. Impairments of assets including goodwill - IAS 36

  • Reasonableness of valuation assumptions made in determining recoverable amount including discount rate (IAS 36.25 et seq. and IAS 36.30 et seq.), allocation (identification) of cash-generating units (IAS 36.80) and supporting documentation
  • Discussion of key assumptions in accordance with IAS 36.134d and 134e and disclosures on sensitivities in accordance with IAS 36.134f

4. Business combinations - IFRS 3, IAS 27

  • Evidence that the acquiree constitutes a business as discussed in IFRS 3.3, IFRS 3 Appendix A
  • Purchase price allocation, e.g.
    • Identification and measurement of operating leases and intangible assets (IFRS 3 Appendix B28-B40)
    • Note disclosures required by IFRS 3 Appendix B64-B66
  • Bargain purchases (IFRS 3.34-36)
  • Contingent consideration and subsequent adjustments to the purchase price (IFRS 3.58)
  • Business combination achieved in stages (IFRS 3.41 et seq.)
  • Loss of control (IAS 27.32 et seq.)

5. Measurement of investment properties accounted for at fair value – IAS 40

  • Discussion of valuation method and underlying assumptions (IAS 40.75d)
  • Reasonableness of valuation assumptions used in the calculation of fair value (IAS 40.40 and IAS 40.46c)
  • Supporting documentation