help me please with this AF case http://www.airfranceklm.com/sites/default/files
ID: 340620 • Letter: H
Question
help me please with this AF case
http://www.airfranceklm.com/sites/default/files/communiques/consolidated_financial_statements_2015.pdf
Air France-KLM Case LO20-2@IFRS Air France-KLM (AF), a Franco-Dutch company, prepares its financial statements according to International Financial Reporting Standards. AF's financial statements and disclosure notes for the year ended December 31, 2015, are available in Connect. This material also is available under the Finance link at the company's website (www.airfranceklm-finance.com) Required: 1. Refer to AF's disclosure notes, in particular Note 2: Restatement of Accounts 2014. For the three changes in inil repoed in the noe, s F acnt for the changes pros Is this the same approach AF would follow if using U.S. GAAP? 2. For the change described in 2.1, which if any account balances required adjustment?Explanation / Answer
IAS 8 — Accounting Policies, Changes in Accounting Estimates and Errors requires retrospective application of changes in accounting policy.
Retrospective application means adjusting the opening balance of each affected component of equity for the earliest prior period presented and the other comparative amounts disclosed for each prior period presented as if the new accounting policy had always been applied. [IAS 8.22]
Therefore, AF should account for the changes retrospectively.
The answer would not be any different if US GAAP is followed as ASC 250, Accounting Changes and Error Corrections also presribe retrospective application of changes.
b) “Other income and expenses” and "External expenses" and "Salaries and related costs" will have an impact. Since it is just reclassification of income and expense, there will not be any impact on reserves or any other assets or liabilities at an overall level. the same can be seen in the note 2.1 too where the impact on "Income from current operations" is nil.
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