Illustrative financial statements: investment funds 2011

IFRS Illustrative financial statements: Investment funds December 2011 kpmg.com/ifrs Contents Financial statements Statement of financial position 3 Statement of comprehensive income 5 Statement of changes in net assets attributable to holders of redeemable shares 7 Statement of cash flows 9 Notes to the financial statements 11 Appendices I Example disclosures for entities that early adopt IFRS 9 Financial Instruments (October 2010) 79 II Example disclosures of segment reporting – multiple segment fund 91 III Example disclosures of open-ended fund with puttable instruments classified as equity 99 IV Example disclosures of schedule of investments – unaudited 109 V Example disclosures of exposure to market risk – Value-at-Risk analysis 113 Technical guide 116 Contact us 118 What’s new? Major changes from the December 2010 edition of Illustrative financial statements: Investment funds are highlighted by a double line border running down the left margin of the text within this document. The major change from the December 2010 edition is example disclosures for the early adoption of IFRS 9 Financial instruments issued in October 2010. About this publication These illustrative financial statements have been produced by the KPMG International Standards Group (part of KPMG IFRG Limited), and the views expressed herein are those of the KPMG International Standards Group. Content The purpose of this publication is to assist you in preparing annual financial statements of an investment fund in accordance with IFRSs. It illustrates one possible format of financial statements for fund-specific entities based on a fictitious tax-exempt open-ended single-fund investment company, which does not form part of a consolidated entity nor holds investments in any subsidiaries, associates or joint venture entities. The company’s redeemable shares are classified as financial liabilities and the management shares meet the definition of equity; the company is outside the scope of IFRS 8 Operating Segments. The company is not a first-time adopter of IFRSs (see Technical guide). Appendix I illustrates example disclosures for the early adoption of IFRS 9. Appendix II provides an example of disclosures for a fund within the scope of IFRS 8 with multiple reportable segments. Appendix III provides an example of disclosures for a fund whose puttable instruments are classified as equity. This publication reflects IFRSs in issue at 20 December 2011 that are required to be applied by an entity with an annual period beginning on 1 January 2011 (’currently effective’ requirements). IFRSs that are effective for annual periods beginning after 1 January 2011 (’forthcoming’ requirements) have not been adopted early in preparing these illustrative financial statements. However, example disclosures for the early adoption of IFRS 9 are included in Appendix I. This publication focuses on disclosure requirements that are specific to funds’ activities. For other disclosures that might be relevant, please refer to our publications Illustrative financial statements and Illustrative financial statements: Banks. This publication illustrates only the financial statements component of a financial report. However, typically a financial report will include at least some additional commentary by management, either in accordance with local laws and regulations or at the election of the fund (see Technical guide). When preparing financial statements in accordance with IFRSs, a fund should have regard to its local legal and regulatory requirements. This publication does not consider any requirements of a particular jurisdiction. In response to the Financial Stability Board report Enhancing Market and Institutional Resilience the IASB established an Expert Advisory Panel (the panel) to assist the IASB in reviewing best practices in the area of valuation techniques and formulating any necessary additional guidance on valuation methods for financial instruments and related disclosures when markets are no longer active. The panel issued its final report Measuring and disclosing the fair value of financial instruments in markets that are no longer active on 31 October 2008. Part 2 of the report contains guidance on disclosures. This publication does not illustrate these disclosures, unless they are also required by IFRS 7. For an illustrative example of disclosures in the panel’s report and explanatory notes see our publication Illustrative financial statements: Banks published in July 2011. IFRSs and their interpretation change over time. Accordingly, these illustrative financial statements should not be used as a substitute for referring to the standards and interpretations themselves. References The illustrative financial statements are contained on the odd-numbered pages of this publication. The even-numbered pages contain explanatory comments and notes on the disclosure requirements of IFRSs. The illustrative examples, together with the explanatory notes, however, are not intended to be seen as a complete and exhaustive summary of all disclosure requirements that are applicable under IFRSs. For an overview of all disclosure requirements that are applicable under IFRSs, see our publication Disclosure checklist. To the left of each item disclosed, a reference to the relevant currently effective standard is provided; generally the references relate only to disclosure requirements, except that note 3 highlights some accounting requirements in relation to significant accounting policies. These illustrative financial statements also contain references to our publication Insights into IFRS (8th Edition). © 2011 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved. 2 | Illustrative financial statements: Investment funds Explanatory note 1. IAS 1.55, 58 IAS 1.57 2. IAS 1.60, 61 3. IFRS 7.8 Additional line items, headings and subtotals are presented separately in the statement of financial position when such presentation is relevant to an understanding of the entity’s financial position. The judgement used is based on an assessment of the nature and liquidity of the assets, the function of assets within the entity, as well as the amounts, nature and timing of liabilities. Additional line items may include, e.g. prepayments. IAS 1 does not prescribe the order or format in which an entity presents items. Additional line items are included when the size, nature or function of an item or aggregation of similar items is such that separate presentation is relevant to an understanding of the entity’s financial position and the descriptions used, and the ordering of items or aggregation of similar items may be amended according to the nature of the entity and its transactions to provide information that is relevant to an understanding of an entity’s financial position. In these illustrative financial statements we have presented assets and liabilities broadly in order of liquidity. An entity also may present its assets and liabilities using a current/non-current classification if such presentation provides reliable and more relevant information. For each asset and liability line item that combines amounts expected to be recovered or settled within (1) no more than 12 months after the end of the reporting period, and (2) more than 12 months after the end of the reporting period, an entity discloses in the notes the amount expected to be recovered or settled after more than 12 months. The carrying amounts of each of the categories of financial assets and financial liabilities are required to be disclosed in either the statement of financial position or the notes. In these illustrative financial statements this information is presented in the notes. 4. It has been assumed for the purpose of these illustrative financial statements that management shares issued by the Fund meet the definition of equity. Determination of whether an instrument meets the definition of equity can be complex and is further discussed in our publication Insights into IFRS (7.3.50 – 310). 5. IAS 32 IE32 6. IAS 39.48A, AG72 In these illustrative financial statements presentation of the statement of financial position follows the Example 7 in IAS 32. In accordance with IAS 39 the best measure of fair value of a financial asset and financial liability is a quoted price in an active market. The quoted price for an asset held is usually the current bid price and for a liability held is the asking price. On the other hand, in accordance with the Fund’s prospectus, the redemption amounts of the redeemable shares are calculated using the mid-market prices of the Fund’s underlying investments/securities sold short. Owing to the differences in the measurement bases of the Fund’s underlying investments/ securities sold short and the redemption amounts of the redeemable shares, a mismatch results in the statement of financial position giving rise to a presentation issue. In our view, one solution may be to present the net assets attributable to holders of redeemable shares in a two-line format. The first line would be the amount of the net assets attributable to holders of redeemable shares measured in accordance with the prospectus, which reflects the actual redemption amount at which the redeemable shares would be redeemed at the reporting date, and the next line would include an adjustment for the difference between this and the amount recognised in the statement of financial position. This reflects the fact that for a fund with no equity all recognised income and expense is attributed to holders of redeemable shares, which also means that if all the shares are redeemed, then a dilution levy of such amount would be required. This issue is discussed in our publication Insights into IFRS (7.6.220.60 – 75). The treatment in a fund with no equity is applied in these illustrative financial statements to a fund with minimal equity as equity holders are entitled to a minimal fixed monetary amount on liquidation and the remaining net assets are attributed to holders of redeemable shares. © 2011 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved. Illustrative financial statements: Investment funds | 3 Statement of financial position1, 2, 3, 4, 5 IAS 1.10(a), 113 31 December 31 December In thousands of euro Note 2011 2010 IAS 1.54(i) IAS 1.54(d) IAS 1.54(d) IAS 1.54(h) IAS 1.54(d) IAS 1.54(d), 39.37(a) IAS 1.54(m) IAS 1.54(m) IAS 1.54(k) IAS 1.54(m) IAS 1.6, 54(m), 32.IE32 Assets Cash and cash equivalents Balances due from brokers Receivables from reverse repurchase agreements Other receivables Non-pledged financial assets at fair value through profit or loss Pledged financial assets at fair value through profit or loss Total assets Equity5 Share capital Total equity Liabilities Balances due to brokers Payables under repurchase agreements Other payables Financial liabilities at fair value through profit or loss Total liabilities (excluding net assets attributable to holders of redeemable shares) Net assets attributable to holders of redeemable shares6 51 71 10 4,619 3,121 11 4,744 3,990 29 46 12 26,931 24,471 12 2,691 2,346 39,065 34,045 13 10 10 10 10 10 143 275 11 2,563 2,234 103 101 12 3,621 1,446 6,430 4,056 14 32,625 29,979 Represented by: Net assets attributable to holders of redeemable shares (valued in accordance with prospectus)6 Adjustment from mid-market prices to bid/ask-market prices6 32,647 29,996 14 (22) (17) 32,625 29,979 The notes on pages 11 to 77 are an integral part of these financial statements. © 2011 KPMG IFRG Limited, a UK company, limited by guarantee. 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