International Financial Reporting Standards Foundation

Incorporated in the State of Delaware, USA, on 6 February 2001, the International Financial Reporting Standards Foundation (IFRS Foundation) is a not-for-profit charitable organisation with its primary operations based in London.

The governance of the IFRS Foundation rests primarily with its Trustees, who provide oversight of the IASB and its related bodies, the IFRS Interpretations Committee and the IFRS Advisory Council.

As a result of a constitutional change agreed in January 2009, a Monitoring Board comprised of public capital market authorities provides a formal link between the Trustees and public authorities.

In addition to their general oversight functions, the Trustees appoint the members of the IASB and related bodies, and are responsible for the financial and legal arrangements of the organisation. The IASB has the responsibility for setting accounting standards in accordance with its mandate and the due process set out in the IFRS Foundation's Constitution and the IASBs Due Process Handbook.

(a) Basis of preparation

(b) Contributions

(c) Publications and related revenue

(d) Inventories

(e) Depreciation

(f) Foreign currency translation

(g) Operating leases - office accommodation

(h) Financial assets

(i) Derivative financial assets and liabilities

(j) Provisions and contingencies

(k) Critical accounting estimates and judgements

(l) New standards and interpretations issued

(m) Reclassification of items in the financial statements

Since 2006, the Trustees have sought to establish national financing regimes, proportionate to a countrys relative GDP, that establish a levy on companies or provide an element of publicly supported financing. Currently, the majority of the IFRS Foundation's finances is based on such regimes, and this approach has been particularly successful in Asia-Oceania and Europe. However, voluntary systems remain in place in some jurisdictions; some countries contribute less than their fair share or not at all. The Trustees are actively working to achieve further contributions.

Through the national and other financing arrangements, the IFRS Foundation received funds of £20,562,000 in contributions (2010: £16,640,000).

Contributions received before 31 December 2011, amounting to £2,991,000 (2010:£ nil), which were specifically designated by the contributors for use by the IFRS Foundation in subsequent years, were recognised as current and non-current liabilities, depending upon the designation by the contributor. Contributions received after 31 December 2011, amounting to a total of £1,808,000 (2010: £1,150,000), specifically designated by the contributors for use by the IFRS Foundation in 2011, were recognised as revenues at the end of 2011 and included as contributions receivable.

Using the IFRS Foundation's website, the Trustees are informing interested parties of their progress on establishing broad-based funding regimes throughout the world.

5. Salaries, wages and benefits

The IFRS Foundation had an average of 125 employees (including IASB members and interns) during 2011 (2010: 119).

The Trustees Human Capital Committee is responsible for reviewing, bench-marking and making recommendations on salary and benefit levels. These recommendations are reviewed and approved annually by the Trustees as a whole. Effective April 2011, the Trustees approved annual remuneration levels resulting in the following gross salaries: £527,200 for the IASB Chair (2010: £490,600); £464,900 for the IASB Vice Chair (2010: £ nil), and; an average of £435,200 for other full-time members (2010: £426,600).

The Trustees are remunerated by annual and meeting fees and are reimbursed for the expenses of their travel on IFRS Foundation business; there were 20 Trustees in 2011 (2010: 21). In 2011 the fee for the Acting Co-Chairs and Vice Chairs of the Trustees was £100,000 (2010: £137,500 for the Chair of the Trustees). In 2010, the Chair waived fees of £37,500 and it was included as a contribution. The annual fee for the other Trustees was £12,500 (2010: £12,500). Trustees received an attendance fee of £1,000 (2010: £1,000/) for each formal meeting.

(a) Occupancy expenses

(b) Leasehold improvements, furniture and equipment

At the reporting date the IFRS Foundation had no capital commitments (2010: £ nil).

(c) Reinstatement provision

The IFRS Foundation has made a provision for reinstatement which covers the cost of reinstating the building when the lease expires in September 2018. The estimated amount and timing of any outflow are subject to options to extend the lease. The corresponding property asset is amortised over the period of the lease.

(d) Lease commitments

Lease commitments relate to operating leases for office space with lease terms expiring in September 2018 in London and 2022 in Tokyo, and with options to extend for a further 10 years in London. All operating lease contracts contain market review clauses. Payments on the leases, excluding service charges and property rates, are as follows:

The IFRS Foundation has entered a preliminary agreement for a 10 year lease of office space in Tokyo commencing October 2012. Since 2001 the IFRS Foundation has rented office space at 610 Fifth Avenue, New York, NY, USA. The only obligation incurred in this regard relates to payment of on-going rent and a provision of 90 days notice of termination.

10. Financial instruments

The IFRS Foundation receives contributions in a number of currencies but its expenditures are largely sterling based. This exposes the organisation to financial risks. The IFRS Foundation also faces risks associated with its use of financial instruments. This note describes the organisations objectives, policies and processes for managing those risks and the methods used to measure them.

There have been no substantive changes in the organisations exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods.

Principal financial instruments

The principal financial instruments used by the IFRS Foundation, from which financial instrument risk arises, are as follows:

• Bonds
• Derivative instruments - forward currency contracts
• Trade and other receivables
• Cash and cash equivalents
• Trade and other payables.

(a) Finance income and finance costs

(b) Cash and cash equivalents

Liquidity risk associated with cash and bond holdings

The IFRS Foundation manages its working capital to ensure sufficient cash resources are maintained to meet short-term liabilities. The IFRS Foundation has no bank borrowings.

Cash holdings: Management seeks to keep an amount in cash equal to or exceeding the upcoming quarter's expenditure. Cash is held either on current or on short-term deposits at floating rates of interest determined by the relevant bank's prevailing base rate. Part of the cash at bank is held in euro and US dollar accounts.

(c) Bonds

Bond holdings: The Trustees have invested surplus funds of the IFRS Foundation in sterling-denominated, fixed rate notes of the UK government and international organisations with an AAA rating.

The IFRS Foundation manages and receives information on its investments in bonds on a fair value basis. Information is provided on that basis to the Trustees and key management personnel. Bonds are carried at fair value through profit or loss, based on quoted prices in active markets (described as level 1 by IFRS 7).

The maturity and fair value of the bonds are as follows:

Bonds provide a yield in the range of 0.4% to 2.2% per year.

(d) Trade and other receivables

In addition to its financing programme, the IFRS Foundation supplements its funding through publications and related activities. For publications and subscriptions sales the IFRS Foundation does not offer credit. For licensing and royalty arrangements some credit risk arises. However the organisation works largely with major publishers and accounting bodies, with whom it has long-standing relationships, and therefore the IFRS Foundation does not credit check these customers before it enters into business with them.

The IFRS Foundation has no significant exposure to large or key customers: it has only one customer that exceeds 3 per cent of the IFRS Foundation's revenues, amounting to £323,000 or 6 per cent.

Where past due accounts are still unpaid six months or more after invoice date and the IFRS Foundation considers the amount impaired it provides for the amount as a bad debt provision in the financial statements. At 31 December 2011 the amount provided for was £19,000 (2010:£13,000).

(e) Currency risk

The IFRS Foundation's expenses arise largely in sterling, whereas the organisation receives funding and future financing commitments in US dollars and euros. The Trustees have implemented a strategy to mitigate the foreign exchange fluctuations and timing risks connected with the various funding regimes. The IFRS Foundation generally forward sells approximately 90 per cent of its net US dollar contributions and 50 per cent of its net euro contributions to fix a sterling equivalent. Foreign currency is sold forward on a two year rolling basis.

Details of these forward contracts are set out in the table below.

The ranges of rates for the US dollar are 1.5635 1.6175 (2010: 1.5819 1.6348). The ranges of rates for the euro are 1.1493 1.1530.

The fair values of these contracts, based on quoted prices in active markets (described as level 1 by IFRS 7), are reported in the Statement of Financial Position.

All non-current forward contracts expire in 2013 (2010: expire in 2012).

(f) Foreign Currency Sensitivity

The following table shows the sensitivity of the reported results to a potential 10 per cent fluctuation in year-end exchange rates.

The IFRS Foundation holds sufficient US dollar funds in anticipation of US dollar liabilities. Over the year the US dollar exchange rate reached a high of 1.65 to sterling, whilst the low point was 1.53 to sterling.

The following table shows the sensitivity of the reported results to a potential 10 per cent fluctuation in year-end exchange rates.

For US tax purposes, the IFRS Foundation is classified as a not-for-profit, tax-exempt organisation.

In 2006 the IFRS Foundation reached an agreement with the UK authorities regarding the status of taxation on its publications and related revenues. For 2011 the taxation expense is calculated on this basis, and is estimated to be £nil (2010: £13,000). On the basis of activity for 2011 and from previous years, at the end of 2011 the IFRS Foundation is carrying forward a loss for UK tax purposes of £2,728,000 (2010: £1,742,000). Consistent with IAS 12 Income Taxes, the IFRS Foundation does not recognise this loss as a deferred tax asset, because of the uncertainty of being able to utilise these losses in the future.

Inventory of books amount to £249,000 (2010: £293,000).

In May 2011 the IFRS Foundation began a review by the UK tax authority (HMRC) of records for inward bound expatriate staff and general compliance with employment tax i.e. income tax and national insurance obligations. As a result, discussions are progressing and a final liability has not been assessed by the HMRC. The HMRC requested and the IFRS Foundation agreed to make a £24,000 dedicated payment on account, on a without prejudice basis, pending final resolution and settlement. An estimated total cost of £460,000 has been provided and the net liability of £436,000 is included in accrued expenses.

These financial statements were approved by the Trustees of the IFRS Foundation on 13 April 2012 and authorised for issue on 13 April 2012, and at that date there were no significant events after the reporting period.