PUBLICATIONS AND ANNOUNCEMENTS
Release of the final standard on leases
On 13 January 2016, the IASB issued the long-awaited IFRS 16 Leases, to supersede IAS 17 and its interpretations, effective for annual periods beginning on or after 1 January 2019 (earlier application permitted if IFRS 15 is also applied). The biggest change introduced by IFRS 16 is that almost all leases will be brought onto lessees’ balance sheets under a single model (except leases of less than 12 months and leases of low-value assets), eliminating the distinction between operating and finance leases. Lessor accounting however remains largely unchanged and the distinction between operating and finance leases is retained.
IAS 12 amended for the recognition of deferred tax assets for unrealised losses
The amendments published by the IASB on 19 January 2016 (effective from 1 January 2017 with early application permitted) clarify the accounting for deferred tax assets related to unrealised losses on debt instruments measured at fair value, to address diversity in practice.
IAS 7 amended under the Disclosure Initiative
The amendments published by the IASB on 29 January 2016 (effective from 1 January 2017 with early application permitted) require entities to provide information that enable users of financial statements to evaluate changes in liabilities arising from their financing activities.
IFRS INTERPRETATIONS COMMITTEE LATEST DECISIONS SUMMARY
The following is a summarised update on some of the main discussions or provisional decisions taken by the IFRS Interpretations Committee (IC) at its meeting on 12 January 2016.
For more detailed and comprehensive information on the IC’s discussions: http://media.ifrs.org/2016/IFRIC/January/January-IFRIC-Update-2016.html
Topics retained on the IC’s agenda with no decisions taken
- The liability for an issued prepaid card with specific features (no expiry date, not refundable, redeemable only for goods or services at selected merchants, not issued as part of a customer loyalty programme, no back-end fees, etc.) would be in the scope of IAS 39 / IFRS 9 as a financial liability (IC’s September 2015 meeting); however, an analysis of the interaction between different Standards that may apply to the accounting for such prepaid cards (e.g. IFRS 15) will be considered in forthcoming meetings.
Clarifications to topics not taken on the IC’s agenda
- Payments made by an operator to a grantor in a service concession arrangement: depending on the nature of the contractual payments and the rights associated with them, different requirements and Standards might apply; however, the issue of service concession arrangements that include variable payments would be linked to the broader issue of variable payments for asset purchases.
- Various issues that would be better considered as part of a possible research project on IFRS 5:
- The amount of impairment to be recognised for a disposal group would not be restricted by the fair value less costs of disposal or value in use (as per IAS 36.105) of the non-current assets that are within the measurement requirements of IFRS 5.
- Intragroup transactions between continuing and discontinued operations would be eliminated in accordance with IFRS 10, with additional disclosures where needed under IFRS 5 (based on specific facts and circumstances).
- Would particular types of planned loss of control events (due to dilution of the shares held by the entity, call options held by a non-controlling shareholder, modification of a shareholders’ agreement, etc.) result in a held-for-sale classification?
- Would IFRS 5 apply to a disposal group that consists mainly, or entirely, of financial instruments?
- Others: amount of the impairment loss of a disposal group, reversal of an impairment loss relating to goodwill in a disposal group, presentation issues.
- Transition from IAS 39 to IFRS 9: confirmation of the IC’s discussions on hedging in September 2015:
- A hedging relationship could not be treated as continuing on transition, if the entity changes the hedged item from an entire non-financial item (as per IAS 39) to a component of the non-financial item (as per IFRS 9) in order to align the hedge with its risk management objective.
- Hedge designations of an entire non-financial item under IAS 39 could continue on transition to IFRS 9 as long as they meet the qualifying criteria in IFRS 9.
- Previously held interests in the assets and liabilities of a joint operation that does not constitute a business would not be remeasured to fair value when the acquisition of an additional interest results in the investor acquiring control or joint control.
- Deferred taxes that result from exchange rate changes on the tax bases of non-current assets would be recognised through profit or loss and presented with other deferred taxes (not with foreign exchange gains or losses).
- Separation of an embedded interest rate floor from a floating rate host contract in a negative interest rate environment should follow the same guidance as in a positive interest rate environment under IAS 39 / IFRS 9.
INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) LATEST DECISIONS SUMMARY
The following is a summarised update on the main provisional decisions taken by the IASB at its meeting on 19-20 January 2016. Other discussions of the Board included the Discount Rates research project, and the Unit of Account project for measuring quoted investments in subsidiaries, joint ventures and associates at fair value.
For more detailed and comprehensive information on the Board’s discussions: http://media.ifrs.org/2016/IASB/January/IASB-January-Update_Monthly.html
Revenue from Contracts with Customers (final amendments to IFRS 15 due Q1/2016)
An entity would be required to apply the forthcoming clarifying amendments to IFRS 15 retrospectively, with no special transition provisions for a first-time adopter, effective for annual periods beginning on or after 1 January 2018 (early application permitted).
Insurance Contracts (new IFRS due H2/2016)
- A loss for onerous contracts would have to be recognised only when the contractual service margin (CSM) is negative for a group of contracts that comprises contracts with, at inception, similar expected profitability and cash flows expected to respond in similar ways to key drivers of risk in terms of amount and timing.
- The stated objective for the allocation of the CSM would be to recognise the CSM for an individual contract, or groups of homogeneous contracts, in profit and loss over the coverage period of the contract in a way that best reflects the service to be provided by the contract. Grouping would be allowed if this objective is met.
- There would be no exception to the level of aggregation for determining onerous contracts or the allocation of the CSM when regulation affects the pricing of contracts.
- To determine the effect of discretion in participating contracts under the general model, an entity would have to specify at the inception of the contract how it viewed its discretion under the contract, and to use that specification to distinguish between the effect of changes in market variables and changes in discretion.
UPCOMING COMMENT DEADLINES
8 February 2016
ED/2015/11 - Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (Proposed amendments to IFRS 4)
17 February 2016
ED/2015/10 - Annual Improvements to IFRSs 2014–2016 Cycle
26 February 2016
ED/2015/8 - IFRS Practice Statement: Application of Materiality to Financial Statements
18 March 2016
ED/2015/9 - Transfers of Investment Property (Proposed amendment to IAS 40)
RSM INTERNATIONAL COMMENT LETTERS
On 15 January 2016, RSM International submitted two letters of comments to the IFRS Interpretations Committee respectively on:
- DI/2015/1 Uncertainty over Income Tax Treatments http://www.ifrs.org/Current-Projects/IASB-Projects/IAS-12-Measurement-income-tax-uncertain-tax-position/Draft-Interpretation-October-2015/Pages/Comment-letters.aspx
- DI/2015/2 Foreign Currency Transactions and Advance Consideration http://www.ifrs.org/Current-Projects/IASB-Projects/date-of-transaction-identifying-applicable-exchange-rate-revenue-recognition/Draft-Interpretation-October-2015/Pages/Comment-letters.aspx