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IFRS

IFRS

Guide to annual financial statements Illustrative disclosures for investment funds

December 2015

kpmg.com/ifrs

www.kpmg.com/ifrs

ContentsAbout this guide 2

References and abbreviations 3

Independent auditors report 4

Financial statements 6

Financial highlights 7

Statement of financial position 8

Statement of comprehensive income 9

Statement of changes in net assets attributable to holders of redeemableshares 10

Statement of cash flows 11

Notes to the financial statements 12

Appendices

I Example disclosures for an investment fund that is an investment entity and measures its subsidiaries at fair value through profit or loss 58

II Example disclosures for segment reporting Multiple-segment fund 67

III Example disclosures of open-ended fund with puttable instruments classified as equity 71

IV Example disclosure of schedule of investments Unaudited 76

V Example disclosures of exposure to market risk Value-at-risk analysis 78

Keeping you informed 80

Contacts 82

Acknowledgements 83

NotesBasis of preparation 121. Reporting entity 122. Basis of accounting 123. Functional and presentation currency 124. Use of judgements and estimates 12

Financial risk review and fair value 135. Financial risk review 136. Fair values of financial instruments 27

Performance for the year 347. Interest income 348. Net gain from financial instruments at fair value

through profit or loss 35

Income taxes 369. Withholding tax expense 36

Assets, liabilities and equity 3710. Classification of financial assets and financial

liabilities 3711. Financial assets and financial liabilities at fair value

through profit or loss 3812. Balances due from/to brokers 3913. Equity 4014. Net assets attributable to holders of redeemable

shares 41

Other information 4315. Transfers of financial assets 4316. Involvement with unconsolidated structured

entities 4417. Related parties and other key contracts 4518. Subsequent events 4519. Financial risk management 46

Accounting policies 5120. Basis of measurement 5121. Significant accounting policies 5222. Standards and interpretations issued but not yet

effective 57

2015 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.

2 | Guide to annual financial statements Illustrative disclosures for investment funds

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ION About this guide

This guide has 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.

It helps entities to prepare financial statements for investment funds or similar financial institutions in accordance with IFRS. This guide illustrates one possible format for financial statements based on a fictitious tax-exempt open-ended single-fund investment company (the Fund), which does not form part of a consolidated entity or hold investments in any subsidiaries, associates or joint venture entities. Appendix I illustrates example disclosures for an investment fund that is an investment entity and measures its subsidiaries at fair value through profit or loss (FVTPL). In this guide, the investment funds redeemable shares are classified as financial liabilities and the management shares meet the definition of equity; the investment fund is outside the scope of IFRS 8 Operating Segments (for example disclosures for a multiple-segment fund that falls in the scope of IFRS 8, seeAppendixII).

Our hypothetical investment fund has been applying IFRS for some time i.e. it is not a first-time adopter of IFRS. For more information on adopting IFRS for the first time, see Chapter 6.1 in the 12th Edition 2015/16 of our publication Insights into IFRS.

Standards coveredThis guide reflects standards and interpretations that have been issued by the IASB as at 15 December 2015 and that are required to be applied by an entity with an annual reporting period beginning on 1 January 2015 (currently effective requirements). The early adoption of standards that are effective for annual reporting periods beginning after 1 January 2015 (forthcoming requirements) has not been illustrated, except for the early adoption of Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28), which is illustrated in Appendix I.

This guide focuses on investment fund-specific issues, and therefore does not illustrate disclosures of a more general nature or disclosures relevant to activities that are not usually carried out by an investment fund e.g. impairment, hedge accounting, employee benefits etc. For guidance on these areas, see our publication Guide to annual financial statements Illustrative disclosures (September 2015).

Whats new in 2015? Our IFRS: New standards Are you ready? provides a summary of newly effective and forthcoming standards. The Fund has no transactions that would be affected by these new amendments; therefore, these requirements are not illustrated in this guide.

Need for judgementThis guide is part of our suite of publications Guides to financial statements and specifically focuses on compliance with IFRS. Although it is not exhaustive, this guide illustrates the disclosures required by IFRS for one hypothetical investment fund; for ease of illustration, the disclosures here are generally presented without regard to materiality.

This guide should not be used as a boiler plate template. The preparation of an entitys own financial statements requires judgement, in terms of the choice of accounting policies, how the disclosures should be tailored to reflect the entitys specific circumstances, and the materiality of disclosures in the context of the organisation.

Applying the concept of materiality to disclosuresAn entity needs to consider the concept of materiality when preparing the notes to its financial statements; it is not appropriate simply to apply the disclosure requirements in a standard without considering materiality. An entity does not need to provide a specific disclosure under IFRS if the information resulting from that disclosure is not material. Also, an entity has to take care not to reduce the understandability of its financial statements by obscuring material information with immaterial information or by aggregating material items that have different natures and functions.

For example, a standard may provide specific disclosures for a material item in the financial statements, but even if the item is material, this does not mean that all of the disclosures specified in that standard will be material for that item. An entity applies the materiality concept on a disclosure-by-disclosure basis.

Step-up in the quality of financial statementsInvestors continue to ask for a step-up in the quality of business reporting so entities should be careful not to become buried in compliance to the exclusion of relevance. In preparing its financial statements, an entity needs to keep in mind its wider responsibilities for reporting this information in the most meaningful way. For more information, see our Better Business Reporting website.

INTRODUCTION