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2017

FRC’s Financial Reporting Lab issues report on risk and viability reporting

28 Nov 2017

The Financial Reporting Council’s (FRC’s) Financial Reporting Lab (“the Lab”) has published a report on risk and viability reporting. The report seeks to understand the views of companies and investors participating in the project on the key attributes of principal risk and viability reporting, their value and use. The report also provides illustrative examples of the types reporting that investors favour in this area.

The report reflects the views of 25 representatives from companies and 27 members of the investment community. The Lab also carried out a survey of approximately 200 private investors.

The report indicates that “investors are unanimous that understanding those principal risks faced by a company is important both before making an investment and during the holding of that investment”. It highlights that, in response to an increased focus on risk management, there has been an improvement in the reporting of principal risks. This enhanced reporting and better engagement with companies has led to an increased understanding by investors as to how boards are identifying and managing risks to protect the sustainability of the company.

However, the report highlights that further improvements can be made to ensure that there is an appropriate balance in the disclosure; managing the conflict between providing succinct and useful information to investors whilst attempting to avoid disclosures that may give away competitive advantage.

Attributes of good principal risk disclosure include:

  • Reporting risks that are specific to the company that avoid jargon and are not boilerplate.
  • Highlighting the principal risk and how it is being managed by the company including how the risk links to the company’s ‘story’ and mitigating actions.
  • Linking principal risks to the business model and how they have changed year on year including potential impact.

The report finds that, since the introduction of the viability statement, most companies have placed greater focus on risk management at board level. It indicates that “performing stress testing and scenario analyses has improved decision making and helped companies determine their risk appetite”. However, it continues that “the value of this greater focus is often not reflected in the viability statement disclosures themselves” with investors looking for better explanation of the long-term prospects of the company. The Lab notes that “the current practice is often that viability statements are prepared as longer-term going concern statements with a focus on liquidity rather than as a means to communicate how the company will remain relevant and solvent in the long-term and be able to adapt to emerging risks”.

The report encourages companies to develop their viability statements in two-stages – firstly to assess prospects, and secondly to make their statement of viability. It indicates that investors are not looking for a viability statement which covers the period over which they assess their investments. They are actually encouraging companies to consider prospects over a longer-term relative to their specific business.

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New report published indicates the benefits to investors of Integrated Reporting

28 Nov 2017

A new report, published by the International Integrated Reporting Council (IIRC), highlights how the International Integrated Reporting Framework can help meet investor demands for better information.

The report, which draws on a range of recent academic research, highlights the positive benefits of adopting Integrated Reporting. According to the report, evidence suggests that Integrated Reporting leads to improved forecasts of future cash flows and valuations.

The report highlights “there is now evidence of significant links between adoption or better implementation of Integrated Reporting and improved outcomes in capital markets, whether demonstrated by stronger operational performance, higher and more accurate valuations or stock market performance”.

Concluding the report indicates that whilst Integrated Reporting is meeting the aims of investors through providing them with useful information, more needs to be done. It encourages more companies to adopt Integrated Reporting and support more widespread adoption.

The full report, Creating Value – Benefits to Investors, is available on the IIRC website.

Report on the October 2017 IFRS Advisory Council meeting

27 Nov 2017

The IFRS Advisory Council met in London on 17–18 October 2017. Significant topics on the agenda included (1) the effect of technology on the future of accounting and corporate reporting, (2) better communication, and (3) the Trustees’ reputation survey.

The discussion on the reputation survey was held in private session. On the other two significant topics, the report — prepared by the Chair of the IFRS Advisory Council, Joanna Perry — notes the following discussions:

  • The effect of technology on the future of accounting and corporate reporting — Members of the Council were convinced that massive changes in relation to technology will have an impact upon accounting, corporate reporting and the IFRS Foundation. However, they also thought that there was a clear, future role for some form of financial reporting and for some form of principle-based accounting standards and, therefore, for the IFRS Foundation. They noted that stakeholders will need to deal with unstructured data and with judgements being made in a real-time environment in the future and that the IFRS Foundation needs to consider early how to respond to the changes. Members considered that it would be useful to include further sessions on technology on the Council’s future agenda .
  • Better communication — Members commended the Board on the publication of the report Better Communication in Financial Reporting and provided various suggestions for both how the Board could promote the document and how Council members (and therefore others) could use the document.

Members also received updates from the Basel Committee on Banking Supervision, from the IASB Chairman, and on the Trustees’ activities.

The next meeting of the IFRS Advisory Council is scheduled for 27–28 February 2018, in London. The full report on the council’s April meeting is available on the IASB's website.

Closing Out 2017

27 Nov 2017

Welcome to our one-stop guide covering the issues relevant to the preparation of December 2017 annual reports.

In an uncertain world, the reporting of risk is high on the agenda of investors and regulators. Whether it be risks arising from the ‘Brexit’ process, cyber-security or environmental issues, the FRC is expecting to see a clear description of the risks facing each company and the measures they are taking to address them. This focus extends into the financial statements themselves, where the FRC’s programme of thematic reviews includes an analysis of disclosures on the significant judgements made in applying a company’s accounting policies and the sources of estimation uncertainty that could result in a material adjustment within the next financial year.

The changes to IFRSs that must be applied for a December 2017 year-end are limited; most notably amendments to IAS 7 Statement of Cash Flows on the disclosure of changes in financing liabilities. This requirement can be met via a traditional ‘net debt reconciliation’ provided it is formatted correctly. Cash flow statements more generally remain an area of consistent regulatory scrutiny.

Perhaps more significantly, the EU Non-Financial Reporting (NFR) Directive has been enacted into UK law and is effective for December 2017 year-ends. The effects of these new requirements will be most pronounced for large, unlisted companies but listed companies will also need to provide more information on their policies in areas such as diversity and human rights and, for the first time, companies will need to provide information on bribery and corruption measures.

Looking ahead, December 2017 annual reports will be published after the date of initial application of both IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments. Given that, both the FRC and the European Securities and Markets Authority (ESMA) expect implementation analyses to be well advanced to see a ‘step change’ in the level of detail on the effects of those new standards compared to disclosures provided a year ago.

Our Closing Out 2017 publication covers all these topics and more, providing an invaluable guide to the issues affecting today’s corporate reporting.

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New and revised pronouncements as at 31 December 2017

27 Nov 2017

Our popular summary of new and revised financial reporting requirements, updated for financial reporting periods ending on 31 December 2017. This listing can be used to perform a quick check that new financial reporting requirements such as new and revised accounting standards and interpretations, and amendments to standards and interpretations, have been fully considered in the reporting close process.

The information below reflects developments to 29 March 2018 and will be updated through to March 2018 to reflect new and revised financial reporting requirements that need to be considered for financial reporting periods ending on 31 December 2017. For accounts approved after March 2018, please also refer to subsequent versions of this document for any new and revised IFRSs that have additionally been issued that might require disclosure in the accounts under IAS 8:30.

The information below is organised as follows:

Summary

The table below provides a summary of the pronouncements which will be mandatorily applied by entities for the first time at 31 December 2017, for various quarterly reporting periods. Where an EU entity chooses to prepare financial statements in accordance with IFRSs as issued by the IASB, as well as in compliance with IFRSs as adopted by the EU, that entity should comply with the earlier IASB effective date for those items. The table below provides a summary of these pronouncements, and which reporting periods they apply to:

Pronouncement IASB Effective date* EU effective date* EU Mandatory at 31 December 2017?
1st qtrs.** 2nd qtrs.*** 3rd qtrs.**** Full yrs*****
Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12) 1 January 2017 Effective for annual reporting periods beginning on or after 1 January 2017. Yes Yes Yes Yes
Disclosure Initiative (Amendments to IAS 7) 1 January 2017 Effective for annual reporting periods beginning on or after 1 January 2017. Yes Yes Yes Yes
Annual Improvements to IFRS Standards 2014–2016 Cycle – Amendments to IFRS 12~ 1 January 2017 Effective for annual reporting periods beginning on or after 1 January 2017. Yes Yes Yes Yes

* Generally annual reporting periods beginning on or after the date indicated, may only apply to first-time adopters in some limited cases (see below for full details).

** 1st quarter ending on 31 December 2017 (accounting period began on 1 October 2017).

*** 2nd quarter ending 31 December 2017 (accounting period began 1 July 2017).

**** 3rd quarter ending 31 December 2017 (accounting period began 1 April 2017).

***** 4th quarter ending 31 December 2017 (accounting period began 1 January 2017).

~ The amendments to IFRS 1 and IAS 28 are effective for annual periods beginning on or after 1 January 2018, the amendment to IFRS 12 for annual periods beginning on or after 1 January 2017.

More information about these pronouncements, and all new and revised pronouncements, is set out below.

Financial statement considerations in adopting new and revised pronouncements

Where new and revised pronouncements are applied for the first time, there can be consequential impacts on annual financial statements, including:

  • Updates to accounting policies. The terminology and substance of disclosed accounting policies may need to be updated to reflect new recognition, measurement and other requirements, e.g IAS 19 Employee Benefits may impact the measurement of certain employee benefits.
  • Impact of transitional provisions. IAS 8 Accounting Policies, Changes in Estimates and Errors contains a general requirement that changes in accounting policies are retrospectively applied, but this does not apply to the extent an individual pronouncement has specific transitional provisions.
  • Disclosures about changes in accounting policies. Where an entity changes its accounting policy as a result of the initial application of an IFRS and it has an effect on the current period or any prior period, IAS 8 requires the disclosure of a number of matters, e.g. the title of the IFRS, the nature of the change in accounting policy, a description of the transitional provisions, and the amount of the adjustment for each financial statement line item affected
  • Third statement of financial position. IAS 1 Presentation of Financial Statements requires the presentation of a third statement of financial position as at the beginning of the preceding period in addition to the minimum comparative financial statements in a number of situations, including if an entity applies an accounting policy retrospectively and the retrospective application has a material effect on the information in the statement of financial position at the beginning of the preceding period
  • Earnings per share (EPS). Where applicable to the entity, IAS 33 Earnings Per Share requires basic and diluted EPS to be adjusted for the impacts of adjustments result from changes in accounting policies accounted for retrospectively and IAS 8 requires the disclosure of the amount of any such adjustments.

Whilst disclosures associated with changes in accounting policies resulting from the initial application of new and revised pronouncements are less in interim financial reports under IAS 34 Interim Financial Reporting, some disclosures are required, e.g. description of the nature and effect of any change in accounting policies and methods of computation.

 

New or revised standards

The information below can be used to assist with the disclosure requirements under paragraph 30 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, which requires entities to disclose any new IFRSs that are in issue but not yet effective and which are likely to impact the entity

New or revised pronouncement When EU effective Application at 31 December 2017 to
1st qtrs 2nd qtrs 3rd qtrs Full yrs

IFRS 9 Financial Instruments (2009)

IFRS 9 introduces new requirements for classifying and measuring financial assets, as follows:

  • Debt instruments meeting both a 'business model' test and a 'cash flow characteristics' test are measured at amortised cost (the use of fair value is optional in some limited circumstances)
  • Investments in equity instruments can be designated as 'fair value through other comprehensive income' with only dividends being recognised in profit or loss
  • All other instruments (including all derivatives) are measured at fair value with changes recognised in the profit or loss
  • The concept of 'embedded derivatives' does not apply to financial assets within the scope of the Standard and the entire instrument must be classified and measured in accordance with the above guidelines.

* IFRS 9 (2014) was issued on 24 July 2014 and supersedes IFRS 9 (2009), but this version of the standard remains available for application if the relevant date of initial application is before 1 February 2015.

Issued: 12 November 2009 (article, newsletter)

No stated effective date (see notes in prior column). Optional Optional Optional Optional

IFRS 9 Financial Instruments (2010)

A revised version of IFRS 9 incorporating revised requirements for the classification and measurement of financial liabilities, and carrying over the existing derecognition requirements from IAS 39 Financial Instruments: Recognition and Measurement.

The revised financial liability provisions maintain the existing amortised cost measurement basis for most liabilities. New requirements apply where an entity chooses to measure a liability at fair value through profit or loss – in these cases, the portion of the change in fair value related to changes in the entity's own credit risk is presented in other comprehensive income rather than within profit or loss.

* IFRS 9 (2014) was issued on 24 July 2014 and supersedes IFRS 9 (2009), but this version of the standard remains available for application if the relevant date of initial application is before 1 February 2015.

Issued: 28 October 2010 (article, newsletter)

No stated effective date (see notes in prior column). Optional Optional Optional Optional

IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39) (2013)

A revised version of IFRS 9 which:

  • Introduces a new chapter to IFRS 9 on hedge accounting, putting in place a new hedge accounting model that is designed to be more closely aligned with how entities undertake risk management activities when hedging financial and non-financial risk exposures
  • Permits an entity to apply only the requirements introduced in IFRS 9 (2010) for the presentation of gains and losses on financial liabilities designated as at fair value through profit or loss without applying the other requirements of IFRS 9, meaning the portion of the change in fair value related to changes in the entity's own credit risk can be presented in other comprehensive income rather than within profit or loss
  • Removes the mandatory effective date of IFRS 9 (2013), IFRS 9 (2010) and IFRS 9 (2009), leaving the effective date open pending the finalisation of the impairment and classification and measurement requirements. Notwithstanding the removal of an effective date, each standard remains available for application.

* IFRS 9 (2014) was issued on 24 July 2014 and supersedes IFRS 9 (2009), but this version of the standard remains available for application if the relevant date of initial application is before 1 February 2015.

Issued: 19 November 2013 (article, newsletter)

No stated effective date (see notes in prior column). Optional Optional Optional Optional

IFRS 9 Financial Instruments (2014)

A finalised version of IFRS 9 which contains accounting requirements for financial instruments, replacing IAS 39 Financial Instruments: Recognition and Measurement. The standard contains requirements in the following areas:

  • Classification and measurement. Financial assets are classified by reference to the business model within which they are held and their contractual cash flow characteristics. The 2014 version of IFRS 9 introduces a 'fair value through other comprehensive income' category for certain debt instruments. Financial liabilities are classified in a similar manner to under IAS 39, however there are differences in the requirements applying to the measurement of an entity's own credit risk.
  • Impairment. The 2014 version of IFRS 9 introduces an 'expected credit loss' model for the measurement of the impairment of financial assets, so it is no longer necessary for a credit event to have occurred before a credit loss is recognised
  • Hedge accounting. Introduces a new hedge accounting model that is designed to be more closely aligned with how entities undertake risk management activities when hedging financial and non-financial risk exposures
  • Derecognition. The requirements for the derecognition of financial assets and liabilities are carried forward from IAS 39.

Note: Depending on the chosen approach to applying IFRS 9, the transition can involve one or more than one date of initial application for different requirements.

Note: IFRS 9 (2014) supersedes IFRS 9 (2009), IFRS 9 (2010) and IFRS 9 (2013), but these standards remain available for application if the relevant date of initial application is before 1 February 2015.

Issued: 25 July 2014 (Summary of IFRS 9,article, newsletter)

Effective for annual period beginning on or after 1 January 2018. Optional Optional Optional Optional

IFRS 15 Revenue from Contracts with Customers

IFRS 15 provides a single, principles based five-step model to be applied to all contracts with customers.

The five steps in the model are as follows:

  • Identify the contract with the customer
  • Identify the performance obligations in the contract
  • Determine the transaction price
  • Allocate the transaction price to the performance obligations in the contracts
  • Recognise revenue when (or as) the entity satisfies a performance obligation.

Guidance is provided on topics such as the point in which revenue is recognised, accounting for variable consideration, costs of fulfilling and obtaining a contract and various related matters. New disclosures about revenue are also introduced.

Issued: 28 May 2014 (Summary of IFRS 15, article, newsletter, revenue resources)

Applicable to an entity's first annual IFRS financial statements for a period beginning on or after 1 January 2018. See related news article. Optional Optional Optional Optional

IFRS 16 Leases

IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17.
Issued: 13 January 2016 (Summary of IFRS 16, article, IFRS 16 resources)
Applicable to annual reporting periods beginning on or after 1 January 2019

IFRS 17 Insurance Contracts

IFRS 17 requires insurance liabilities to be measured at a current fulfillment value and provides a more uniform measurement and presentation approach for all insurance contracts. These requirements are designed to achieve the goal of a consistent, principle-based accounting for insurance contracts. IFRS 17 supersedes IFRS 4 Insurance Contracts as of 1 January 2021.

Issued: 18 May 2017 (Summary of IFRS 17, Article, Newsletter).

Applicable to annual reporting periods beginning on or after 1 January 2021

Not yet endorsed for use in the EU.

 

New or revised interpretations

New or revised interpretation When effective Application at 31 December 2017:
1st qtrs.: 2ns qtrs.: 3rd qtrs: 4th qtrs:

IFRIC 22 Foreign Currency Transactions and Advance Consideration

The interpretation addresses foreign currency transactions or parts of transactions where:

  • there is consideration that is denominated or priced in a foreign currency;
  • the entity recognises a prepayment asset or a deferred income liability in respect of that consideration, in advance of the recognition of the related asset, expense or income; and
  • the prepayment asset or deferred income liability is non-monetary.

The Interpretations Committee came to the following conclusion:

  • The date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability.
  • If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt.

Issued: 8 December 2016 (article)

Effective for annual reporting periods beginning on or after 1 January 2018. Earlier application is permitted. Optional Optional Optional Optional

IFRIC 23 Uncertainty over Income Tax Treatments

The interpretation sets out how to determine taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates when there is uncertainty over income tax treatments under IAS 12 Income Taxes.

The Interpretation requires an entity to:

  • determine whether uncertain tax positions are assessed separately or as a group; and
  • assess whether it is probable that a tax authority will accept an uncertain tax treatment used, or proposed to be used, by an entity in its income tax filings:
    • If yes, the entity should determine its accounting tax position consistently
      with the tax treatment used or planned to be used in its income tax filings.
    • If no, the entity should reflect the effect of uncertainty in determining its accounting tax position.

Issued: 7 June 2017 (article)

Effective date: annual periods beginning on or after 1 January 2019. Entities can apply the Interpretation either on a fully retrospective or modified retrospective approach (where comparatives are not permitted or required to be restated).

Not yet endorsed for use in the EU.

Amendments

New or revised pronouncement When effective Application at 31 December 2017 to
1st qtrs 2nd qtrs 3rd qtrs Full yrs

Editorial Corrections (various)

The IASB periodically issues Editorial Corrections and changes to IFRSs and other pronouncements. Since the beginning of calendar 2012, such corrections have been made in February 2012, July 2012, March 2013, September 2013, November 2013 and March 2014, September 2014, December 2014, March 2015, April 2015, September 2015, December 2015, March 2016, May 2016, September 2016, December 2016, September 2017 and November 2017.

Note: For details of these editorial corrections, see our IASB editorial corrections page.

As minor editorial corrections, these changes are effectively immediately applicable under IFRS See comment in previous column
Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)

Amends IAS 12 Income Taxes to clarify the following aspects:

  • Unrealised losses on debt instruments measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardless of whether the debt instrument's holder expects to recover the carrying amount of the debt instrument by sale or by use.
  • The carrying amount of an asset does not limit the estimation of probable future taxable profits.
  • Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary differences.
  • An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law restricts the utilisation of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type.
Issued: 19 January 2016 (article)
Effective for annual periods beginning on or after 1 January 2017 Mandatory Mandatory Mandatory Mandatory
Disclosure Initiative (Amendments to IAS 7)
Amends IAS 7 Statement of Cash Flows to clarify that entities shall provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities.
Issued: 29 January 2016 (article, publication)
Effective for annual periods beginning on or after 1 January 2017 Mandatory Mandatory Mandatory Mandatory
Clarifications to IFRS 15 'Revenue from Contracts with Customers'
Amends IFRS 15 in three areas:
  • Identification of performance obligations – changes clarify the application of the concept of 'distinct‘ in this context.
  • Whether an entity is acting as principal or agent – changes clarify the application of the principal of ‘control’ in making this determination.
  • Licensing – changes assist in determining whether an entity’s activities ‘significantly affect’ intellectual property during the period for which it has been licensed to a customer.
The amendments also provide some transition relief for modified contracts and completed contracts.
Issued: 12 April 2016 (article, newsletter)
Effective for annual periods beginning on or after 1 January 2018 Optional Optional Optional Optional
Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2)
Amends IFRS 2 to clarify the classification and measurement of share-based payment transactions with respect to:
  • the accounting for cash-settled share-based payment transactions that include a performance condition;
  • the classification of share-based payment transactions with net settlement features; and
  • the accounting for modifications of share-based payment transactions from cash-settled to equity-settled.

Issued: 20 June 2016 (article, newsletter)

Effective for annual periods beginning on or after 1 January 2018. Earlier application is permitted. Optional Optional Optional Optional
Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance Contracts' (Amendments to IFRS 4)
Amends IFRS 4 Insurance Contracts provide two options for entities that issue insurance contracts within the scope of IFRS 4:
  • an option that permits entities to reclassify, from profit or loss to other comprehensive income, some of the income or expenses arising from designated financial assets; this is the so-called overlay approach;
  • an optional temporary exemption from applying IFRS 9 for entities whose predominant activity is issuing contracts within the scope of IFRS 4; this is the so-called deferral approach.
The application of both approaches is optional and an entity is permitted to stop applying them before the new insurance contracts standard is applied.
Issued: 12 September 2016 (article, newsletter)

Overlay approach to be applied when IFRS 9 is first applied. Deferral approach effective for annual periods beginning on or after 1 January 2018 and only available for three years after that date.

 

Optional

Optional

Optional

Optional

Annual Improvements 2014-2016 Cycle
Makes amendments to the following standards:
  • IFRS 1 - Deletes the short-term exemptions in paragraphs E3–E7 of IFRS 1, because they have now served their intended purpose
  • IFRS 12 - Clarifies the scope of the standard by specifying that the disclosure requirements in the standard, except for those in paragraphs B10–B16, apply to an entity’s interests listed in paragraph 5 that are classified as held for sale, as held for distribution or as discontinued operations in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
  • IAS 28 - Clarifies that the election to measure at fair value through profit or loss an investment in an associate or a joint venture that is held by an entity that is a venture capital organisation, or other qualifying entity, is available for each investment in an associate or joint venture on an investment-by-investment basis, upon initial recognition

Issued: 8 December 2016 (article)

The amendments to IFRS 1 and IAS 28 are effective for annual periods beginning on or after 1 January 2018, the amendment to IFRS 12 for annual periods beginning on or after 1 January 2017

Mandatory for IFRS 12; optional for IFRS 1 and IAS 28 Mandatory for IFRS 12; optional for IFRS 1 and IAS 28 Mandatory for IFRS 12; optional for IFRS 1 and IAS 28 Mandatory for IFRS 12; optional for IFRS 1 and IAS 28
Annual Improvements 2015-2017 Cycle
Makes amendments to the following standards:
  • IFRS 3 Business Combinations and IFRS 11 Joint Arrangements - The amendments to IFRS 3 clarify that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business. The amendments to IFRS 11 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business.

  • IAS 12 Income Taxes - The amendments clarify that the requirements in the former paragraph 52B (to recognise the income tax consequences of dividends where the transactions or events that generated distributable profits are recognised) apply to all income tax consequences of dividends by moving the paragraph away from paragraph 52A that only deals with situations where there are different tax rates for distributed and undistributed profits.
  • IAS 23 Borrowing Costs - The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings.

The amendments published today are all effective for annual periods beginning on or after 1 January 2019.  Not yet endorsed for use in the EU.

'Transfers of Investment Property (Amendments to IAS 40)'
The amendments to IAS 40 Investment Property:
  • Amends paragraph 57 to state that an entity shall transfer a property to, or from, investment property when, and only when, there is evidence of a change in use. A change of use occurs if property meets, or ceases to meet, the definition of investment property. A change in management’s intentions for the use of a property by itself does not constitute evidence of a change in use.
  • The list of examples of evidence in paragraph 57(a) – (d) is now presented as a non-exhaustive list of examples instead of the previous exhaustive list.

Issued: 8 December 2016 (article)

The amendments are effective for periods beginning on or after 1 January 2018. Earlier application is permitted. An entity applies the amendments to changes in use that occur on or after the beginning of the annual reporting period in which the entity first applies the amendments. Retrospective application is also permitted if that is possible without the use of hindsight.

Optional

Optional

Optional

Optional

Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28)
The amendments clarify that an entity applies IFRS 9 Financial Instruments to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied.
The amendments in Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28) are:
  • Paragraph 14A has been added to clarify that an entity applies IFRS 9 including its impairment requirements, to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied.
  • Paragraph 41 has been deleted because the Board felt that it merely reiterated requirements in IFRS 9 and had created confusion about the accounting for long-term interests.
Issued:12 October 2017 (article)

The amendments are effective for periods beginning on or after 1 January 2019. Earlier application is permitted. This will enable entities to apply the amendments together with IFRS 9 if they wish so but leaves other entities the additional implementation time they had asked for.

The amendments are to be applied retrospectively but they provide transition requirements similar to those in IFRS 9 for entities that apply the amendments after they first apply IFRS 9. They also include relief from restating prior periods for entities electing, in accordance with IFRS 4 Insurance Contracts, to apply the temporary exemption from IFRS 9. Full retrospective application is permitted if that is possible without the use of hindsight.

Not yet endorsed for use in the EU.

Prepayment Features with Negative Compensation (Amendments to IFRS 9)
The amendments address concerns about how IFRS 9 Financial Instruments classifies particular prepayable financial assets. In addition, the IASB has clarified an aspect of the accounting for financial liabilities following a modification.
The amendments are:

Changes regarding symmetric prepayment options

Under the current IFRS 9 requirements, the SPPI condition is not met if the lender has to make a settlement payment in the event of termination by the borrower (also referred to as early repayment gain).

Prepayment Features with Negative Compensation amends the existing requirements in IFRS 9 regarding termination rights in order to allow measurement at amortised cost (or, depending on the business model, at fair value through other comprehensive income) even in the case of negative compensation payments.

Under the amendments, the sign of the prepayment amount is not relevant, i. e. depending on the interest rate prevailing at the time of termination, a payment may also be made in favour of the contracting party effecting the early repayment. The calculation of this compensation payment must be the same for both the case of an early repayment penalty and the case of a early repayment gain.

Clarification regarding the modification of financial liabilities

The final amendments also contain (in the Basis for Conclusions) a clarification regarding the accounting for a modification or exchange of a financial liability measured at amortised cost that does not result in the derecognition of the financial liability. The IASB clarifies that an entity recognises any adjustment to the amortised cost of the financial liability arising from a modification or exchange in profit or loss at the date of the modification or exchange. A retrospective change of the accounting treatment may therefore become necessary if in the past the effective interest rate was adjusted and not the amortised cost amount.
Issued: 12 October 2017 (article)

 

The amendments are to be applied retrospectively for fiscal years beginning on or after 1 January 2019, i. e. one year after the first application of IFRS 9 in its current version. Early application is permitted so entities can apply the amendments together with IFRS 9 if they wish so. Additional transitional requirements and corresponding disclosure requirements must be observed when applying the amendments for the first time.

Optional

Optional

Optional

Optional

Plan Amendment, Curtailment or Settlement (Amendments to IAS 19)
The amendments in Plan Amendment, Curtailment or Settlement (Amendments to IAS 19) are:
  • If a plan amendment, curtailment or settlement occurs, it is now mandatory that the current service cost and the net interest for the period after the remeasurement are determined using the assumptions used for the remeasurement.
  • In addition, amendments have been included to clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling.

Issued: 7 February 2018 (article)

Annual periods beginning on or after 1 January 2019.  Not yet endorsed for use in the EU.

Amendments to References to the Conceptual Framework in IFRS Standards

 
Together with the revised Conceptual Framework published in March 2018, the IASB has also issued Amendments to References to the Conceptual Framework in IFRS Standards. The document contains amendments to IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, and SIC-32. Not all amendments, however update those pronouncements with regard to references to and quotes from the framework so that they refer to the revised Conceptual Framework. Some pronouncements are only updated to indicate which version of the framework they are referencing to (the IASC framework adopted by the IASB in 2001, the IASB framework of 2010, or the new revised framework of 2018) or to indicate that definitions in the standard have not been updated with the new definitions developed in the revised Conceptual Framework.

Issued: 29 March 2018 (article)

 
Annual periods beginning on or after 1 January 2020
Not yet endorsed for use in the EU.

 

New UK GAAP application for reporting periods ending 31 December 2017

27 Nov 2017

The table below reflects new and revised new UK GAAP financial reporting requirements that need to be considered for financial reporting periods ending on 31 December 2017

As the new UK GAAP regime has now been in place for two years, preparation of either parent company or subsidiary accounts under either FRS 101 or FRS 102 should now have become a more routine exercise.  The FRC has made several changes to FRS 102 as part of its first triennial review of the Standard to deal with issues highlighted in its implementation.  The amendments were published in December 2017.

The table below reflects new and revised new UK GAAP financial reporting requirements that need to be considered for financial reporting periods ending on 31 December 2017. For those reporters who want to understand new UK GAAP application for earlier periods please select one of the following: 

Pronouncement Effective date Application for quarters ending 31 December 2017?
1st qtrs.* 2nd qtrs.** 3rd qtrs.*** Full yrs****
FRS 100
Amendments to FRS 102 (first triennial review) Effective 1 January 2019.  Early application is permitted provided that all the amendments to FRS 101 as a result of the triennial review are applied at the same time. Optional Optional Optional Optional
FRS 101
The amendments are available from when an entity applying FRS 101 first applies IFRS 15. However the change in company law to permit the equity method in individual financial statements is effective from 1 January 2016 (or from 1 January 2015 if it is adopted early). Optional (see note 1)/Choice permitted by change in company law optional Optional (see note 1)/Choice permitted by change in company law optional Optional (see note 1)/Choice permitted by change in company law optional Optional (see note 1)/Choice permitted by change in company law optional
The amendments are available from when an entity applying FRS 101 first applies IFRS 16. NA - The amendments are available from when an entity applying FRS 101 first applies IFRS 16. Note 2 NA - The amendments are available from when an entity applying FRS 101 first applies IFRS 16.NA - The amendments are available from when an entity applying FRS 101 first applies IFRS 16. Note 2 NA - The amendments are available from when an entity applying FRS 101 first applies IFRS 16.NA - The amendments are available from when an entity applying FRS 101 first applies IFRS 16. Note 2 NA - The amendments are available from when an entity applying FRS 101 first applies IFRS 16.NA - The amendments are available from when an entity applying FRS 101 first applies IFRS 16. Note 2
Amendments to FRS 102 (first triennial review)

Effective for accounting periods beginning on or after 1 January 2019.  Early application is permitted provided that all the amendments to FRS 101 as a result of the triennial review are applied at the same time

 

Optional Optional Optional Optional
FRS 102
These amendments apply for accounting periods beginning on or after 1 January 2017. Early application is permitted with immediate effect provided this is disclosed. Mandatory Mandatory Mandatory Mandatory
Amendments to FRS 102 - Directors' loans Effective immediately with retrospective application available Optional (see note 3) Optional (see note 3) Optional (see note 3) Optional (see note 3)
Amendments to FRS 102 (first triennial review) The effective date for most of the amendments to FRS 102 is for accounting periods beginning on or after 1 January 2019, with early application permitted provided all amendments are applied at the same time. The only exceptions to this are the amendments relating to directors’ loans and the tax effects of gift aid payments, for which early application is permitted separately. Limited transitional provisions are also available. The amendments to disclosure requirements under Section 1A for small entities in the Republic of Ireland are effective for accounting periods beginning on or after 1 January 2017.  However, early application is permitted for companies in the Republic of Ireland that apply the Companies (Accounting) Act 2017 is applied from the same date.

Optional (most amendments).

Section 1A disclosure requirements for ROI small entities - mandatory

Optional (most amendments).

Section 1A disclosure requirements for ROI small entities - mandatory

Optional (most amendments).

Section 1A disclosure requirements for ROI small entities - mandatory

Optional (most amendments).

Section 1A disclosure requirements for ROI small entities - mandatory

FRS 103
Amendments to FRS 102 (first triennial review) Effective for accounting periods beginning on or after 1 January 2019. Early application is permitted provided that all the amendments to FRS 103 as a result of the triennial review are applied at the same time. Optional Optional Optional Optional
FRS 104
Amendments to FRS 102 (first triennial review) Effective for accounting periods beginning on or after 1 January 2019.  Early application is permitted if an entity also applies the Triennial review 2017 amendments to FRS 101 or FRS 102 for an accounting period beginning before 1 January 2019. Optional Optional Optional Optional
FRS 105
Amendments to FRS 102 (first triennial review)
The changes to disclosure requirements in FRS 105 for micro entities in the UK are applicable for accounting periods beginning on or after 1 January 2017; all other amendments to FRS 105 as a result of the triennial review are applicable for accounting periods beginning on or after 1 January 2019. Early application for UK micro-companies is permitted provided that all the amendments to FRS 105 are applied at the same time.
 
With respect to the Republic of Ireland, the changes to incorporate FRS 105 are applicable to accounting periods beginning on or after 1 January 2017.  Earlier application is permitted for companies in the Republic of Ireland that apply the Companies (Accounting) Act 2017 is applied from the same date.  All other amendments to FRS 105 as a result of the triennial review are applicable for accounting periods beginning on or after 1 January 2019. Early application of the other amendments is permitted provided that all of these other amendments are applied at the same time.

UK disclosure requirements - mandatory/other amendments - optional

ROI changes to incorporate FRS 105 - mandatory/other amendments - optional

UK disclosure requirements - mandatory/other amendments - optional

ROI changes to incorporate FRS 105 - mandatory/other amendments - optional

UK disclosure requirements - mandatory/other amendments - optional

ROI changes to incorporate FRS 105 - mandatory/other amendments - optional

UK disclosure requirements - mandatory/other amendments - optional

ROI changes to incorporate FRS 105 - mandatory/other amendments - optional

* 1st quarter ending on 31 December 2017 (accounting period began on 1 October 2017).

** 2nd quarter ending 31 December 2017 (accounting period began 1 July 2017).

*** 3rd quarter ending 31 December 2017 (accounting period began 1 April 2017).

**** 4th quarter ending 31 December 2017 (accounting period began 1 January 2017).

Note 1 - IFRS 15 is applicable to an entity's first annual IFRS financial statements for a period beginning on or after 1 January 2018. 

Note 2 - IFRS 16 is applicable to an entity's first annual IFRS financial statements for a period beginning on or after 1 January 2019. 

Note 3 - Effective immediately with retrospective application available; it shall not be applied directly, or by analogy, to any other transaction, event or condition. As it is an interim measure, this amendment will be deleted as part of the finalisation of FRED 67. It will then be replaced with permanent requirements based on the proposals in FRED 67 after considering the outcome of the consultation process.  These amemdments were published as part of the triennial review of FRS 102 in December 2017.

Fourth IASB Research Forum - papers and case studies

24 Nov 2017

The International Accounting Standards Board (IASB) will host its fourth Research Forum on 28 and 29 November 2017 in Brussels. The papers to be presented and case studies to be discussed are available on the IASB website.

The first day will see the presentation of five academic papers, followed by a response of an academic and an IASB representative, again followed by a discussion with the audience. The papers are the following (all links to the IASB website):

On the second day, IASB staff will present case studies for discussion by the audience. The case studies will be (all links to the IASB website):

Agenda for the November 2017 ITCG meeting

24 Nov 2017

The agenda is available for the next meeting of the IFRS Taxonomy Consultative Group (ITCG), which will be held by conference call on 30 November 2017.

The agenda is summarised below:

Thursday 30 November 2017 (12:00-13:00)

  • ITCG technical review of Inline XBRL Illustrative Examples
  • Overview of upcoming IFRS Taxonomy content updates
  • A preparer's guide to using the IFRS Taxonomy
  • Technical review of the IFRS Taxonomy

Agenda papers for this meeting are available on the IASB website.

AAOIFI issues final standard on impairment and credit losses

24 Nov 2017

The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) is an Islamic international autonomous non-for-profit corporate body that prepares accounting, auditing, governance, ethics and Sharia'a standards for Islamic financial institutions and the industry. The newest standard published by the AAOIFI deals with impairment and credit losses covering current and expected losses.

The new standard FAS 30 Impairment, Credit Losses and Onerous Commitments is not converged with the corresponding requirements in IFRS 9 Financial Instruments as it was concluded that "the impairment and credit losses approaches taken by the generally accepted accounting principles recently set by various accounting standard setters and regulatory standard setters, as well as, the regulators, cannot be applicable on Islamic finance transactions in a similar manner".

The standard is effective from the financial periods beginning on or after 1 January 2020. Earlier adoption is permitted.

The issued standard can be accessed exclusively by subscribers, however, free subscription is available through the AAOIFI website. Please see the press release on the AAOIFI website for more information.

Correction list for hyphenation

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