Issue 63 - IFRS News in Brief


IFRS 4 amended to address temporary volatility in reported results on implementation of IFRS 9

The amendments published by the IASB on 12 September 2016 give all entities that issue insurance contracts the option to recognise in other comprehensive income, rather than profit or loss, the volatility that could arise when IFRS 9 Financial Instruments is applied before implementing the replacement insurance contracts Standard for IFRS 4 that is under drafting by the Board. Also, entities whose activities are predominantly connected with insurance are given an optional temporary exemption from applying IFRS 9 (until 2021), thus continuing to apply IAS 39 instead.

For more information:


The following is a summarised update on some of the main discussions or provisional decisions taken by the IC at its meeting on 6-7 September 2016.

For more detailed and comprehensive information on the IC’s discussions:

  • The forthcoming Interpretation Uncertainty over Income Tax Treatments should:
    • apply to income taxes within the scope of IAS 12
    • not explicitly address interest and penalties
    • assume that a taxation authority with the right to do so will (re-)examine amounts reported to it, and have full knowledge of all relevant information
    • retain the probable threshold for the recognition of the effect of uncertainty, and the measurement methods to reflect uncertainty as proposed in the draft Interpretation
    • focus in its Application Guidance on changes in facts and circumstances, and include examples of what might constitute such a change
    • clarify that a change in facts and circumstances is to be treated as a change in accounting estimate in accordance with IAS 8
    • clarify that a change in facts and circumstances that occurs after the reporting period is to be determined as an adjusting or non-adjusting event by applying IAS 10
  • The IC clarified that, applying IAS 12, a reporting entity does not recognise deferred taxes when acquiring a single-asset entity that is not a business; thus, no need to amend the current requirements.
  • The IC clarified how an operator accounts for a service concession arrangement in which the infrastructure is leased, applying in particular IFRIC 12 and other relevant Standards; thus, no need to amend the current requirements.


The following is a summarised update on the main provisional decisions taken by the IASB at its meeting on 20 and 22 September 2016. Other topics discussed include the forthcoming exposure draft amending IAS 8 for clarification of changes in accounting policies and in accounting estimates (rewording, transition, and due process).

For more detailed and comprehensive information on the IASB’s discussions:

Revised Conceptual Framework (final due 2017)

  • The exposure draft’s proposals relative to the reporting entity and its boundary concepts are broadly confirmed. In particular, a reporting entity should be described as an entity that chooses or is required to prepare general purpose financial statements, and its boundary should be clarified in situations when the reporting entity is not a legal entity.
  • The exposure draft’s proposed objective for the financial statements is confirmed: to provide information about an entity’s assets, liabilities, equity, income and expenses that is useful to users of financial statements in assessing the prospects for future net cash inflows to the entity and in assessing management’s stewardship of the entity’s resources.
  • There should be an explicit acknowledgement of an asymmetric treatment of gains (or assets) and losses (or liabilities).
  • As proposed in the exposure draft, the binary distinction between liabilities and equity should be maintained, with equity defined as the residual interest in the assets of the entity after deducting all its liabilities.

Financial Instruments with Characteristics of Equity (discussion paper (DP) due 2017)

  • Under the Gamma approach(1), derivatives on ‘own equity’ that are neither completely independent nor solely dependent on the residual amount would be classified as liabilities. The forthcoming DP will discuss various approaches to the separate presentation of such derivatives in the statement of financial position and the respective gains and losses in the statement of financial performance.
  • The forthcoming DP should include a discussion of potential disclosures on financial instruments with characteristics of equity (e.g. the priority of claims on liquidation, the potential dilution of ordinary shares, etc.)

Long-term interests in an associate or joint venture

The draft Interpretation to clarify the interaction between IFRS 9 and IAS 28 in accounting for long-term interests in an associate or a joint venture that, in substance, form part of the net investment, but to which the equity method is not applied will not be issued. The IFRS Interpretations Committee was proposing that impairment losses recognised on the net investment between the investment accounted for using the equity method and long-term interests should be allocated in the reverse order of seniority.


31 October 2016

ED/2016/1 - Definition of a Business and Accounting for Previously Held Interests (Proposed amendments to IFRS 3 and IFRS 11)


(1) The Board is developing a model (referred to as Gamma) which distinguishes claims between liabilities and equity based on the timing of transfer of the economic resources and on how the amount of the claim is determined: equity is an obligation to transfer economic resources only at liquidation, and for a residual amount;  a liability is an obligation to transfer economic resources at particular points in time other than at liquidation, or for a specified amount independent of the entity’s economic resources.



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