Illustrative financial statements
International Financial Reporting Standards
July 2008

About this publication
These illustrative financial statements have been produced by the KPMG International Financial Reporting Group
(part of KPMG IFRG Limited), and the views expressed herein are those of the KPMG International Financial
Reporting Group.
Content
The purpose of this publication is to assist you in preparing financial statements in accordance with International
Financial Reporting Standards (IFRSs). It illustrates one possible format for financial statements, based on a
fictitious multinational corporation; the corporation is not a first-time adopter of IFRSs (see Technical guide).
This publication reflects IFRSs in issue at 1 June 2008 that are required to be applied by an entity with an annual
period beginning on 1 January 2008 (“currently effective” requirements). IFRSs that are effective for annual
periods beginning after 1 January 2008 (“forthcoming” requirements) have not been adopted early in preparing
these illustrative financial statements.
When preparing financial statements in accordance with IFRSs, an entity should have regard to its local legal
and regulatory requirements. This publication does not consider any requirements of a particular jurisdiction. For
example, IFRSs do not require the presentation of separate financial statements for the parent entity, and this
publication includes only consolidated financial statements. However, in some jurisdictions parent entity financial
information also may be required.
This publication does not illustrate IFRS 4 Insurance Contracts, IAS 26 Accounting and Reporting by Retirement
Benefit Plans or IAS 34 Interim Financial Reporting.
This publication illustrates only the financial statements component of a financial report. However, typically a
financial report will include at least some additional commentary by management, either in accordance with
local laws and regulations or at the election of the entity (see Technical guide).
IFRSs and their interpretation change over time. Accordingly, these illustrative financial statements should not
be used as a substitute for referring to the standards and interpretations themselves.
References
The illustrative financial statements are contained on the odd-numbered pages of this publication. The even-
numbered pages contain explanatory comments and notes on the disclosure requirements of IFRSs. These

statements, including their content and structure. Other standards and interpretations deal with the recognition,
measurement and disclosure requirements related to specific transactions and events. IFRSs are not limited to
a particular legal framework. Therefore financial statements prepared under IFRSs often contain supplementary
information required by local statute or listing requirements, such as directors’ reports (see below).
Choice of accounting policies
The accounting policies disclosed in these illustrative financial statements reflect the facts and circumstances
of the fictitious corporation on which these financial statements are based. They should not be relied upon for a
complete understanding of the requirements of IFRSs and should not be used as a substitute for referring to the
standards and interpretations themselves. The accounting policy disclosures appropriate for an entity depend
on the facts and circumstances of that entity and may differ from the disclosures presented in these illustrative
financial statements. The recognition and measurement requirements of IFRSs are discussed in our publication
Insights into IFRS.
Reporting by directors
Generally local laws and regulations determine the extent of reporting by directors in addition to the
presentation of financial statements. IAS 1 encourages, but does not require, entities to present, outside the
financial statements, a financial review by management. The review should describe and explain the main
features of the entity’s financial performance and financial position, and the principal uncertainties it faces. Such
a report may include a review of:

the main factors and influences determining financial performance, including changes in the environment in
which the entity operates, the entity’s response to those changes and their effect, and the entity’s policy for
investment to maintain and enhance financial performance, including its dividend policy

the entity’s sources of funding and its targeted ratio of liabilities to equity

the entity’s resources not recognised on the balance sheet in accordance with IFRSs.
In October 2005 the International Accounting Standards Board (IASB) published Discussion Paper Management
Commentary, which considers the role of the IASB in developing principles for management commentary that
accompanies financial statements, and includes proposals for the main components of a standard. The project
on Management Commentary was added to the Board’s active agenda in December 2007. As part of the project

and Separate Financial Statements (2008) 197
VI Currently effective requirements 206
VII Forthcoming requirements 211
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Note Reference Explanatory note

1. IAS 1.27 The presentation and classification of items in the financial statements should be retained
from one period to the next unless the changes are required by a new standard or
interpretation, or it is apparent, following a significant change to an entity’s operations or a
review of its financial statements, that another presentation or classification would be more
appropriate. The entity also should consider the criteria for the selection and application of
accounting policies in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

In our view, if an entity changes the classification or presentation of items in the financial
statements, and the change in presentation or classification is limited and does not result in a
change to either the results or total equity of the comparative period, then it is not necessary
to head up the comparative financial statements as “restated”. This issue is discussed in our
publication Insights into IFRS (2.8.70).
2. IAS 1.69, 72 Additional line items, headings and subtotals should be presented on the face of the balance
sheet when such presentation is relevant to an understanding of the entity’s financial
position. The judgement used should be based on an assessment of the nature and liquidity
of the assets, the function of assets within the entity, as well as the amounts, nature and
timing of liabilities. Additional line items may include, for example, “other assets” for the
inclusion of prepayments.
3. IAS 1.51, 52 In these illustrative financial statements we have presented current and non-current
assets, and current and non-current liabilities as separate classifications on the face of the
balance sheet. An entity may present its assets and liabilities broadly in order of liquidity if
such presentation provides reliable and more relevant information. Whichever method of
presentation is adopted, for each asset and liability line item that combines amounts expected
to be recovered or settled within (1) no more than 12 months after the reporting date and (2)

1
2008 2007

Assets
IAS 1.68(a) Property, plant and equipment 16 26,686 31,049
IAS 1.68(c) Intangible assets 17 5,922 4,661
IAS 1.68(f) Biological assets 18 7,014 8,716
IAS 1.68(h) Trade and other receivables 24 213 -
IAS 1.68(b) Investment property 19 2,070 1,050
IAS 1.68(e), 28.38 Investments in equity accounted investees 20 2,025 1,558
IAS 1.68(d) Other investments, including derivatives 21 3,631 3,525
IAS 1.68(n), 70 Deferred tax assets 22 138 1,376
IAS 1.51 Total non-current assets
3
47,699 51,935
IAS 1.68(g) Inventories 23 14,867 14,119
IAS 1.68(f) Biological assets 18 245 140
IAS 1.68(d) Other investments, including derivatives 21 662 1,032
IAS 1.68(m) Current tax assets 81 228
IAS 1.68(h) Trade and other receivables 24 13,694 17,999
Prepayments for current assets 330 1,200
IAS 1.68(i) Cash and cash equivalents 25 1,505 1,850
IFRS 5.38-40, Assets classified as held for sale
4
8 14,410 -
IAS 1.68A(a)
IAS 1.51 Total current assets
3
45,794 36,568
Total assets 6 93,493 88,503

Total liabilities 6 52,076 55,156
Total equity and liabilities 93,493 88,503
The notes on pages 17 to 173 are an integral part of these consolidated financial statements.
IFRS Illustrative Financial Statements 7
July 2008
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Note Reference Explanatory note

1. IAS 1.85, 86 No items of income or expense may be presented as “extraordinary”.The nature and amounts of
material items should be disclosed separately on the face of the income statement or in the notes.
In our view, it is preferable for separate presentation to be made on the face of the income
statement only when necessary for an understanding of the entity’s financial performance.
This issue is discussed in our publication Insights into IFRS (4.1.82).
2. IFRSs do not specify whether revenue can be presented only as a single line item on the face
of the financial statements, or whether an entity also may include the individual components
of revenue on the face of the financial statements, with a subtotal for revenue from
continuing operations.
3. IAS 1.88 This analysis of expenses is based on functions within the entity. The analysis of expenses also
may be presented based on the nature of expenses. Individually material items are classified in
accordance with their nature or function, consistent with the classification of items that are not
individually material. This issue is discussed in our publication Insights into IFRS (4.1.30).
4. IAS 32.41 When relevant in explaining its performance, an entity should present separately on the
face of the income statement any gain or loss arising from the remeasurement of a financial
liability that includes a right to the residual interest in the assets of an entity in exchange for
cash or another financial asset (e.g., puttable instruments).
In our view, finance income and finance expenses should not be presented on a net basis (e.g.,
net finance expenses). However, this does not preclude presentation of finance income followed
immediately by finance expenses and a subtotal (e.g., net finance expense) on the face of the
income statement. This issue is discussed in our publication Insights into IFRS (4.6.540.50).
5. IAS 28.38 An entity should present separately its share of any discontinued operations of its associates.

Continuing operations
IAS 1.81(a) Revenue
2
10 100,160 96,636
IAS 1.88, 92, 2.36(d) Cost of sales
3
(55,805) (56,186)
IAS 1.92 Gross profit 44,355 40,450
Other income 11 1,095 315
IAS 1.88, 92 Distribution expenses
3
(17,984) (18,012)
IAS 1.88, 92 Administrative expenses
3
(17,142) (15,269)
IAS 1.88, 92, 38.126 Research and development expenses
3
(1,109) (697)
IAS 1.88, 92 Other expenses
3
12 (460) -
IAS 1.83 Results from operating activities 6 8,755 6,787
IAS 1.83 Finance income 911 480
IAS 1.81(b) Finance expenses (1,760) (1,676)
IAS 1.83 Net finance expense
4
14 (849) (1,196)
IAS 1.81(c), 28.38 Share of profit of equity accounted investees (net of income tax)
5
20 467 587

The notes on pages 17 to 173 are an integral part of these consolidated financial statements.
9 IFRS Illustrative Financial Statements
July 2008
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Note Reference Explanatory note

1. IAS 1.8(c)(i), The statement also may show capital transactions with and distributions to owners and
97 minority interests, and a reconciliation between the balances of retained earnings, each class
of equity capital and share premium, and each reserve at the beginning and end of the period.
In such cases the statement is referred to as a statement of changes in equity.
IAS 1.96, 97, In these illustrative financial statements the above information is disclosed in the notes to the
101 consolidated financial statements (see note 26). A consolidated statement of changes in
equity is illustrated in Appendix I.
IAS 19.93B If an entity elects to recognise actuarial gains and losses directly in equity, then it should present a
statement of recognised income and expense; it may not present a statement of changes in equity.
2. IFRS 7.23(e) An entity also should disclose the change, if any, in the fair value of a cash flow hedge that
was removed from equity during the period and included in the initial cost or other carrying
amount of a non-financial asset or non-financial liability whose acquisition or incurrence was a
hedged highly probable forecast transaction.
3. IAS 12.61 Generally income tax (current and deferred) should be recognised directly in equity if it relates to
items that are credited or charged directly to equity. There is no explicit requirement to disclose
this tax separately on the face of the statement rather than in the notes. In this publication
income tax related to items in the recognised income and expense is disclosed separately.
4. IFRS 5.38 An entity should present separately any income or expense recognised directly in equity
relating to a non-current asset (or disposal group) classified as held for sale.
IAS 28.39 An entity should present separately its share of changes recognised directly in the equity
of an equity accounted investee. In our view, when a statement of changes in equity is
presented, it is preferable to present a separate line item for the entity’s share of changes in
equity of equity accounted investees, with each change included in the appropriate column.
When a statement of recognised income and expense is presented, we recommend using a

2
- (11)
IAS 1.96(b), Net change in fair value of available-for-sale financial assets 199 94
IFRS 7.20(a)(ii)
IFRS 7.20(a)(ii) Net change in fair value of available-for-sale financial assets
IAS 1.96(b) transferred to profit or loss (64) -
IAS 19.93B Defined benefit plan actuarial gains (losses) 29 72 (15)
IAS 12.81(a) Income tax on income and expense recognised directly
in equity
3
15 (104) (48)
IAS 1.96(b) Income and expense recognised directly in equity
4
708 419
IAS 1.96(a) Profit for the period 6,224 3,956
IAS 1.96(c) Total recognised income and expense for the period 26 6,932 4,375
Attributable to:
IAS 1.96(c) Equity holders of the Company 6,529 4,134
IAS 1.96(c) Minority interest 403 241
Total recognised income and expense for the period
5
6,932 4,375
The notes on pages 17 to 173 are an integral part of these consolidated financial statements.
11 IFRS Illustrative Financial Statements
July 2008
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Note Reference Explanatory note

1. IAS 7.18 In these illustrative financial statements we have presented cash flows from operating activities
using the indirect method, whereby profit or loss is adjusted for the effects of non-cash

paid as either operating or financing activities, and interest and dividends received as either
operating or investing activities. The presentation selected should be applied consistently. This
issue is discussed in our publication Insights into IFRS (2.3.50).
12 IFRS Illustrative Financial Statements
July 2008
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Reference Consolidated statement of cash flows
1, 2

IAS 1.8(d), 104 For the year ended 31 December
In thousands of euro Note 2008 2007

Cash flows from operating activities
Profit for the period
3
6,224 3,956
Adjustments for:
Depreciation 4,910 5,102
Amortisation of intangible assets 17 780 795
(Reversal of) impairment losses on property, plant and equipment 16 (393) 1,123
Impairment losses on intangible assets 17 16 285
Impairment losses on assets classified as held for sale 8 25 -
Change in fair value of biological assets 18 (650) (50)
Net increase in biological assets due to births (deaths) 18 (11) (15)
Change in fair value of investment property 19 (120) (100)
Net finance expense 14 849 1,196
Share of profit of equity accounted investees (467) (587)
Gain on sale of property, plant and equipment 11 (26) (100)
Gain on sale of discontinued operation, net of income tax 7 (516) -
Equity-settled share-based payment transactions 30 755 250

IAS 7.16(a) Acquisition of investment property 19 (200) -
IAS 7.21 Plantations and acquisitions of non-current biological assets 18 (305) (437)
IAS 7.16(a) Acquisition of other investments (320) (2,411)
IAS 7.21 Development expenditure 17 (1,272) (515)
IAS 7.10 Net cash used in investing activities (6,839) (3,945)
The notes on pages 17 to 173 are an integral part of these consolidated financial statements.
13 IFRS Illustrative Financial Statements
July 2008
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Note Reference Explanatory note

1. See explanatory note 4 under cash flows from investing activities in the consolidated
statement of cash flows.
14 IFRS Illustrative Financial Statements
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Reference Consolidated statement of cash flows (continued)

IAS 1.8(d), 104 For the year ended 31 December
In thousands of euro Note 2007

Cash flows from financing activities
IAS 7.17(a) Proceeds from issue of share capital 26 -
IAS 7.17(c) Proceeds from issue of convertible notes 28 -
IAS 7.17(c) Proceeds from issue of redeemable preference shares 28 -
IAS 7.21
IAS 7.21
IAS 7.21
IAS 7.17(b)
IAS 7.17(d)

1. IAS 1.11 The notes to the financial statements should include narrative descriptions or break-downs of
amounts disclosed on the face of the primary statements. They also include information about
items that do not qualify for recognition in the financial statements.
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IFRS Illustrative Financial Statements 17

July 2008
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Notes to the consolidated financial statements
1

Page
1. Reporting entity 19
2. Basis of preparation 19

3. Significant accounting policies 21
4. Determination of fair values 55
5. Financial risk management 59

6. Segment reporting 67

7. Discontinued operation 73

8. Non-current assets held for sale 75
9. Acquisitions of subsidiary and
minority interests 75

10. Revenue 79

11. Other income 79

38. Related parties 163
39. Group entities 167
40. Service concession arrangement 169
41. Subsequent events 171
Note Reference Explanatory note
1. IAS 1.49 When the entity’s reporting date changes and annual financial statements are presented for
a period longer or shorter than one year, an entity should disclose the reason for the change
and the fact that comparative amounts presented are not entirely comparable.
In this and other cases an entity may wish to present pro-forma information that is not
required by IFRSs, for example pro-forma comparative financial statements prepared as if the
change in reporting date were effective for all periods presented. The presentation of pro-
forma information is discussed in our publication Insights into IFRS (2.1.80).
2. If financial statements are prepared on the basis of national accounting standards that are
modified or adapted from IFRSs, and made publicly available by publicly traded companies,
then the International Organization of Securities Commissions (IOSCO) has recommended
including the following minimum disclosures:

a clear and unambiguous statement of the reporting framework on which the accounting
policies are based

a clear statement of the entity’s accounting policies on all material accounting areas

an explanation of where the respective accounting standards can be found

a statement explaining that the financial statements are in compliance with IFRSs as
issued by the International Accounting Standards Board (IASB), if this is the case

a statement explaining in what regard the standards and the reporting framework used
differ from IFRSs as issued by the IASB, if this is the case.
3. In these illustrative financial statements we have assumed that the Group did not early adopt

IAS 21.54 If there is a change in the functional currency of either the entity or a significant foreign
operation, then the entity should disclose that fact together with the reason for the change.
18 IFRS Illustrative Financial Statements
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19 IFRS Illustrative Financial Statements
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Reference Notes to the consolidated financial statements
1

IAS 1.8(e) 1. Reporting entity
IAS 1.126(a), (b) [Name] (the “Company”) is a company domiciled in [country]. The address of the Company’s
IAS 1.46(a)-(c) registered office is [address]. The consolidated financial statements of the Company as at and
for the year ended 31 December 2008
1
comprise the Company and its subsidiaries (together
referred to as the “Group” and individually as “Group entities”) and the Group’s interest in
associates and jointly controlled entities. The Group primarily is involved in the manufacture of
paper and paper-related products, and in the cultivation of trees and the sale of wood (see note 6).
IAS 1.103(a) 2. Basis of preparation
2
(a) Statement of compliance
3
IAS 1.14 The consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRSs).
4
IAS 10.17 The consolidated financial statements were authorised for issue by the Board of Directors on [date].
5
(b) Basis of measurement
6

consolidated financial statements is included in the following notes:
●
Note 9 – business combination
●
Note 10 – commission revenue
●
Note 17 – measurement of the recoverable amounts of cash-generating units containing
goodwill
●
Note 19 – valuation of investment property
●
Note 22 – utilisation of tax losses
●
Note 28 – accounting for an arrangement containing a lease
●
Note 29 – measurement of defined benefit obligations
●
Note 30 – measurement of share-based payments
●
Notes 32 and 37 – provisions and contingencies
●
Note 34 – valuation of financial instruments
●
Note 35 – lease classification.
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Note Reference Explanatory note

1. IAS 1.108(b) The accounting policies should describe each specific accounting policy that is relevant to an
understanding of the financial statements.
2. Accounting policies in these illustrative financial statements reflect facts and circumstances

into IFRS (3.5.760).
20 IFRS Illustrative Financial Statements
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21 IFRS Illustrative Financial Statements
July 2008
Reference Notes to the consolidated financial statements
IAS 1.103(a), 3. Significant accounting policies
1, 2
108(a) The accounting policies set out below have been applied consistently to all periods presented in
these consolidated financial statements, and have been applied consistently by Group entities.
3
IAS 1.38 Certain comparative amounts have been reclassified to conform with the current year’s
presentation (see note 16). In addition, the comparative income statement has been re-
presented as if an operation discontinued during the current period had been discontinued
from the start of the comparative period (see note 7).
(a) Basis of consolidation
(i) Subsidiaries
4
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power
to govern the financial and operating policies of an entity so as to obtain benefits from its
activities.
5
In assessing control, potential voting rights that currently are exercisable are taken
into account. The financial statements of subsidiaries are included in the consolidated financial
statements from the date that control commences until the date that control ceases. The
accounting policies of subsidiaries have been changed when necessary to align them with the
policies adopted by the Group.
(ii) Special purpose entities
The Group has established a number of special purpose entities (SPEs) for trading and

equity accounted investees, after adjustments to align the accounting policies with those of the
Group, from the date that significant influence or joint control commences until the date that
significant influence or joint control ceases. When the Group’s share of losses exceeds its interest
in an equity accounted investee, the carrying amount of that interest (including any long-term
investments) is reduced to nil and the recognition of further losses is discontinued except to the
extent that the Group has an obligation or has made payments on behalf of the investee.
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Note Reference Explanatory note

1. IFRSs do not specify the line item against which unrealised gains and losses resulting
from transactions with equity accounted investees should be eliminated (e.g., against the
investment). In our view, an entity should disclose the accounting policy adopted. This issue is
discussed in our publication Insights into IFRS (3.5.360.60).
22 IFRS Illustrative Financial Statements
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23 IFRS Illustrative Financial Statements
July 2008
Reference Notes to the consolidated financial statements
3. Significant accounting policies (continued)
(a) Basis of consolidation (continued)
(v) Jointly controlled operations
A jointly controlled operation is a joint venture carried on by each venturer using its own assets in
pursuit of the joint operations. The consolidated financial statements include the assets that the
Group controls and the liabilities that it incurs in the course of pursuing the joint operation, and the
expenses that the Group incurs and its share of the income that it earns from the joint operation.
(vi) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from
intra-group transactions, are eliminated in preparing the consolidated financial statements.
Unrealised gains arising from transactions with equity accounted investees are eliminated

Foreign currency differences are recognised directly in equity. Since 1 January 2004, the
Group’s date of transition to IFRSs, such differences have been recognised in the foreign
currency translation reserve (FCTR). When a foreign operation is disposed of, in part or in full,
the relevant amount in the FCTR is transferred to profit or loss.
Foreign exchange gains and losses arising from a monetary item receivable from or payable
to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable
future, are considered to form part of a net investment in a foreign operation and are
recognised directly in equity in the FCTR.
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