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New and revised pronouncements as at 31 March 2020

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31 Mar 2020

Our popular summary of new and revised financial reporting requirements, updated for financial reporting periods ending on 31 March 2020. 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 23 April 2020 and will be updated through to 30 June 2020 to reflect new and revised financial reporting requirements that need to be considered for financial reporting periods ending on 31 March 2020. For accounts approved after June 2020, 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

COVID-19 accounting considerations
Below is our usual analysis of new and amended standards, however, we are also aware that most, if not all, entities will have been impacted by the COVID-19 events. Please see our Need to know — Accounting considerations related to the Coronavirus 2019 Disease highlighting some of the key issues to be considered by the entities in preparing their financial statements and our UK Accounting Plus resource page on accounting considerations related to COVID-19.

The table below provides a summary of the pronouncements which will be mandatorily applied by entities for the first time at 31 March 2020, 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 March 2020?
1st qtrs.** 2nd qtrs.*** 3rd qtrs.**** Full yrs*****
IFRS 16 Leases 1 January 2019 1 January 2019 Already applied in prior period (January 2019) Yes Yes Yes
NEW OR REVISED INTERPRETATIONS
IFRIC 23 Uncertainty over Income Tax Treatments 1 January 2019 1 January 2019 Already applied in prior period (January 2019) Yes Yes Yes
Annual Improvements 2015-2017 Cycle 1 January 2019 1 January 2019 Already applied in prior period (January 2019) Yes Yes Yes
Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance Contracts' (Amendments to IFRS 4)
1 January 2018 1 January 2018 Optional ~ Optional ~ Optional ~ Optional ~
Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28) 1 January 2019 1 January 2019 Already applied in prior period (January 2019) Yes Yes Yes
Prepayment Features with Negative Compensation (Amendments to IFRS 9) 1 January 2019 1 January 2019 Already applied in prior period (January 2019) Yes Yes Yes
Plan Amendment, Curtailment or Settlement (Amendments to IAS 19) 1 January 2019 1 January 2019 Already applied in prior period (January 2019) Yes Yes Yes
Amendments to References to the Conceptual Framework in IFRS Standards 1 January 2020 1 January 2020 Yes No No No
Definition of Material (Amendments to IAS 1 and IAS 8) 1 January 2020 1 January 2020 Yes No No No
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7) 1 January 2020 1 January 2020 Yes No No No
Definition of a Business (Amendments to IFRS 3) 1 January 2020 1 January 2020 Yes No No No

* 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 March 2020 (accounting period began on 1 January 2020).

*** 2nd quarter ending 31 March 2020 (accounting period began 1 October 2019).

**** 3rd quarter ending 31 March 2020 (accounting period began 1 July 2019).

***** 4th quarter ending 31 March 2020 (accounting period began 1 April 2019).

~ The application of both approaches (overlay approach/ deferral approach) is optional and an entity is permitted to stop applying them before the new insurance contracts standard is applied.

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 March 2020 to:

1st qtrs 2nd qtrs 3rd qtrs Full yrs

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

Already applied in prior period (January 2019) Mandatory Mandatory Mandatory

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 March 2020 to:
1st qtrs. 2nd qtrs. 3rd qtrs 4 qtrs.

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).

 

Already applied in prior period (January 2019)

Mandatory

Mandatory

Mandatory

Amendments

New or revised pronouncement When effective Application at 31 December 2019 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, November 2017, December 2018, March 2019, May 2019 and December 2019.

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
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 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 are all effective for annual periods beginning on or after 1 January 2019.

Already applied in prior period (January 2019) Mandatory Mandatory Mandatory
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)
Annual periods beginning on or after 1 January 2019
Annual periods beginning on or after 1 January 2019

Annual periods beginning on or after 1 January 2019

Already applied in prior period (January 2019)

Mandatory

Mandatory

Mandatory

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.

Already applied in prior period (January 2019)

Mandatory

Mandatory

Mandatory

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.

Already applied in prior period (January 2019)

Mandatory

Mandatory

Mandatory

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

Mandatory

Optional

Optional

Optional

Definition of a Business (Amendments to IFRS 3)

The amendments in Definition of a Business (Amendments to IFRS 3) are changes to Appendix A Defined terms, the application guidance, and the illustrative examples of IFRS 3 only. They:

  • clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs;
  • narrow the definitions of a business and of outputs by focusing on goods and services provided to customers and by removing the reference to an ability to reduce costs;
  • add guidance and illustrative examples to help entities assess whether a substantive process has been acquired;
  • remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs; and
  • add an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business.

Issued: 22 October 2018 (article/newsletter)


Business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2020

Mandatory

Optional

Optional

Optional

Definition of Material (Amendments to IAS 1 and IAS 8)

The amendments in Definition of Material (Amendments to IAS 1 and IAS 8) clarify the definition of ‘material’ and align the definition used in the Conceptual Framework and the standards.

Issued: 31 October 2018 (article)

 

Annual reporting periods beginning on or after 1 January 2020

Mandatory

Optional

Optional

Optional

Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)

The amendments in Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7) clarify that entities would continue to apply certain hedge accounting requirements assuming that the interest rate benchmark on which the hedged cash flows and cash flows from the hedging instrument are based will not be altered as a result of interest rate benchmark reform.

Issued: 26 September 2019 (article)

Annual reporting periods beginning on or after 1 January 2020

Mandatory

Optional

Optional

Optional

Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)

The amendments aim to promote consistency in applying the requirements by helping companies determine whether, in the statement of financial position, debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current

Issued: 23 January 2020 (article)

Annual reporting periods beginning on or after 1 January 2022
Not yet endorsed for use in the EU.

 

 

 

 

Property, Plant and Equipment — Proceeds before Intended Use (Amendments to IAS 16)

The amendments amend IAS 16 to prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling such items, and the cost of producing those items, in profit or loss.

Issued: 14 May 2020 (article, newsletter)

Annual reporting periods beginning on or after 1 January 2022
Not yet endorsed for use in the EU.

Annual Improvements 2018-2020 Cycle

Makes amendments to the following standards:

  • IFRS 1 First-time Adoption of International Financial Reporting Standards - Subsidiary as a first-time adopter. The amendment permits a subsidiary that applies paragraph D16(a) of IFRS 1 to measure cumulative translation differences using the amounts reported by its parent, based on the parent’s date of transition to IFRSs.
  • IFRS 9 Financial Instruments - Fees in the ‘10 per cent’ test for derecognition of financial liabilities. The amendment clarifies which fees an entity includes when it applies the ‘10 per cent’ test in paragraph B3.3.6 of IFRS 9 in assessing whether to derecognise a financial liability. An entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other’s behalf.
  • IFRS 16 Leases - Lease incentives. The amendment to Illustrative Example 13 accompanying IFRS 16 removes from the example the illustration of the reimbursement of leasehold improvements by the lessor in order to resolve any potential confusion regarding the treatment of lease incentives that might arise because of how lease incentives are illustrated in that example.
  • IAS 41 Agriculture - Taxation in fair value measurements. The amendment removes the requirement in paragraph 22 of IAS 41 for entities to exclude taxation cash flows when measuring the fair value of a biological asset using a present value technique. This will ensure consistency with the requirements in IFRS 13.

Issued: 14 May 2020 (article, newsletter)

The amendments to IFRS 1, IFRS 9, and IAS 41 are all effective for annual periods beginning on or after 1 January 2022. Early application is permitted. The amendment to IFRS 16 only regards an illustrative example, so no effective date is stated.


Not yet endorsed for use in the EU.

Reference to the Conceptual Framework (Amendments to IFRS 3)

The changes:

  • update IFRS 3 so that it refers to the 2018 Conceptual Framework instead of the 1989 Framework;
  • add to IFRS 3 a requirement that, for transactions and other events within the scope of IAS 37 or IFRIC 21, an acquirer applies IAS 37 or IFRIC 21 (instead of the Conceptual Framework) to identify the liabilities it has assumed in a business combination; and
  • add to IFRS 3 an explicit statement that an acquirer does not recognise contingent assets acquired in a business combination.

Issued: 14 May 2020 (article, newsletter)

The amendments published today are effective for annual periods beginning on or after 1 January 2022. Early application is permitted if an entity also applies all other updated references (published together with the updated Conceptual Framework) at the same time or earlier

Not yet endorsed for use in the EU

Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37)

The changes specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract).

Issued: 14 MAy 2020 (article, newsletter)

Annual reporting periods beginning on or after 1 January 2022
Not yet endorsed for use in the EU.

 

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.