(IFRS) for Small and Medium-sized Entities (SMEs)

IFRS FOR SMES – JULY 2009Performance2.23 Performance is the relationship of the income and expenses of an entity during areporting period. This IFRS permits entities to present performance in a singlefinancial statement (a statement of comprehensive income) or in two financialstatements (an income statement and a statement of comprehensive income).Total comprehensive income and profit or loss are frequently used as measures ofperformance or as the basis for other measures, such as return on investment orearnings per share. Income and expenses are defined as follows:(a)(b)Income is increases in economic benefits during the reporting period inthe form of inflows or enhancements of assets or decreases of liabilitiesthat result in increases in equity, other than those relating to contributionsfrom equity investors.Expenses are decreases in economic benefits during the reporting period inthe form of outflows or depletions of assets or incurrences of liabilities thatresult in decreases in equity, other than those relating to distributions toequity investors.2.24 The recognition of income and expenses results directly from the recognition andmeasurement of assets and liabilities. Criteria for the recognition of income andexpenses are discussed in paragraphs 2.27–2.32.Income2.25 The definition of income encompasses both revenue and gains.(a)(b)Revenue is income that arises in the course of the ordinary activities of anentity and is referred to by a variety of names including sales, fees, interest,dividends, royalties and rent.Gains are other items that meet the definition of income but are notrevenue. When gains are recognised in the statement of comprehensiveincome, they are usually displayed separately because knowledge of them isuseful for making economic decisions.Expenses2.26 The definition of expenses encompasses losses as well as those expenses that arisein the course of the ordinary activities of the entity.(a)(b)Expenses that arise in the course of the ordinary activities of the entityinclude, for example, cost of sales, wages and depreciation. They usuallytake the form of an outflow or depletion of assets such as cash and cashequivalents, inventory, or property, plant and equipment.Losses are other items that meet the definition of expenses and may arisein the course of the ordinary activities of the entity. When losses arerecognised in the statement of comprehensive income, they are usuallypresented separately because knowledge of them is useful for makingeconomic decisions.16 © IASCF