Introducing Tina Ampure – have you got all of her records?

This Latin songstress could be described as something like Shakira meets Rita Ora meets Julio Iglesias. Could be described, that is, if she existed as an actual pop star rather than an accounting mnemonic.

In any case, if you are producing financial statements, you do need to have all of her records. That is, you need to record and disclose the various aspects referred to in each syllable of her name.

TI – Timing
NA – Nature
AM – Amount
PU – Purpose
RE – Reason

These five considerations come up again and again when it comes to putting the narrative blurb into the notes and disclosures of items in the Financial Statements prepared under IFRS, especially any where judgments have been used or estimation uncertainty exists. Her name is a mini checklist for each note which describes circumstance. Often you need to state the range of possible uncertainty, or what would happen if something else happens, but still this tends to be around these basic five aspects.

Location, location and location may be all that is important in real estate development, but this is not a separate consideration here.  The When, What, How much, Why and How come are the more apposite of Mr Kipling’s exceedingly good serving men who taught him all he knew in that Elephant’s Child poem rather than Who and Where. Those two kind of get the day off. How on the other hand has to work bouchées doubles, appearing both as the quantum “How Much” and the reason “How Come”.

People may wonder why it is that IFRS standards talk about both Reason and Purpose. Are these two not synonyms of each other? Almost, I would say, but not quite. When I have a purpose, it is a forward looking intention, focused on what I hope to get out of an action, or transaction. When I have a reason, it refers to something that happened that caused the necessity that is being addressed. So for sure both purpose and reason talk about the motivation for a treatment or a transaction in the Entity, but one is a forward-looking aspect of the motivation and the other is backward-looking.

And of course, when we look forward and discuss the purpose of a thing, it behooves us, as managers and auditors also, to consider whether this motivation, this thing which the Entity has promised itself (usually referred to as a Future Economic Benefit (or FEB, as we don’t expect anything to come of it until at least next February) – is it still actual? Is it still just as likely to happen or has something happened since this was mooted that has occasioned the matter to “go south” as the Americans say, or “go pear shaped” as the British say? If so, we are likely to need to revise the value of the item and, at the very least, describe all those circumstances.

So Tina Ampure is just a very small mini-checklist of all these aspects, which it may help you to bear in mind while drafting notes and disclosures or running a check on them. Not only is this abugida-style acronym helpful in IFRS reporting, but also you may get mileage out of Tina in non-financial corporate reporting also.

So, make sure you get all her records…

While I am about it, I will mention some other important points about notes to the financial statements.

• They do form part of the financial statements, and therefore you will commonly see at the bottom of primary statements the utterance that “the notes to the accounts for part of these financial statements”
• An overriding point other than the Timing, Nature etc, is that they contain enough information to enable understanding of accounts by the people using them to make decisions, and understand them in a way which will help them make appropriate decisions in the area that appertains to them. Likewise, cluttering disclosures with unnecessary information is counter-productive and is therefore frowned upon.  I have yet to see someone go to prison for making too many disclosures, but you are unlikely to win in the annual gala of best financial statements in your country, put it that way.
• IFRS mandates proper cross referencing of these notes to the financial statements, and also recommends the order be first a statements that IFRS are used (with any exceptions), then a note of significant accounting policies, next the run through of explanations to the line items in the primary statements FOLLOWING THE ORDER of presentation in those statements. Finally all the other disclosures which don’t relate to single line items, eg post balance-sheet events, etc.

If in doubt, try to read the set of notes “in the shoes of” the various class of user of financial statements which the Entity has. Not forgetting, of course, the Competition and the Tax Office.