RSM South Africa

The ever changing IFRS - What has changed and what is to come

In the world of the ever-changing International Financial Reporting Standards (IFRS), most of us find it difficult to keep up to date with the new standards, interpretations or amendments to current standards. It doesn’t take long before everything you know has changed or no longer applies.

In this article I am going to summarise the recent IFRS changes and new standards issued as well as summarise what is expected to be on the way in the years to come.

During the 2013 and 2014 reporting periods, a number of significant new and revised pronouncements had to be applied by many entities for the first time.

New and revised standards (these standards were all effective for year ends on or after 1 January 2013, except if specifically stated otherwise):

IFRS 10 – Consolidated Financial Statements

Requires a parent to present consolidated financial statements as those of a single economic entity, replacing the requirements previously contained in IAS 27 “Consolidated and Separate Financial Statements” and SIC 12 “ Consolidation – Special Purpose Entities”.

IFRS 11 – Joint Arrangements

Replaces IAS 31 “Interests in Joint Ventures”. Requires a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations and then account for those rights and obligations in accordance with the type of joint arrangement.

IFRS 12 – Disclosure of Interests in Other Entities

Requires the extensive disclosure of information that enables users of the financial statements to evaluate the nature of, and risks associated with, interests in other entities and the effects of those interests on its financial position, financial performance and cash flows.

IFRS 13 – Fair Value Measurement

Replaces the guidance on fair value measurement in existing standards with a single standard.

IAS 19 – Employee Benefits

An amended version of IAS 19 with revised requirements for pensions and other post-retirement benefits, termination benefits and other changes.

IAS 27 – Separate Financial Statements (2011)

Amended version of IAS 27 which now only deals with the requirement for separate financial statements, which have been carried largely unchanged from the IAS 27 “Consolidated and Separate Financial Statements”.

IAS 28 – Investments in Associates and Joint Ventures

This standard supersedes IAS 28 “Investment in Associates“ and prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investment in associates and joint ventures.

Amendments:

Presentation of items of Other Comprehensive Income (Amendments to IAS 1)

Amends IAS 1 to revise the way other comprehensive income is presented.

Disclosure – Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7)

Amends the disclosure requirement in IFRS 7 to require information about all recognised financial instruments that are set off in accordance with paragraph 42 of IAS 32.

Government Loans (Amendments to IFRS 1)

Amends IFRS 1 to address how a first-time adopter would account for a government loan with a below-market interest rate when transitioning to IFRS.

Annual improvements 2009 – 2011 cycle

Makes amendments to the following standards, IFRS 1, IAS 1, IAS 16, IAS 32 and IAS 34.

Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance

Amends IFRS 10, IFRS 11 and IFRS 12 to provide additional transition relief in by limiting the requirements to provide adjusted comparative information to only the preceding period

Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32)

Amends IAS 32 to clarify certain aspects because of diversity in application of the requirements on offsetting.

The effective date of this amendment was 1 January 2014.

Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)

Provides an investment entity as exception from the consolidation of particular subsidiaries and instead requires that an investment entity measure the investment in each eligible subsidiary at fair value through profit or loss in accordance with IFRS 9.

The effective date of this amendment was 1 January 2014.

Recoverable Amount Disclosure for Non-Financial Assets (Amendments to IAS 36)

Amends IAS 36 to reduce the circumstances in which the recoverable amount of assets or cash-generating units is required, and to introduce an explicit requirement to disclose the discount rate used in determining impairment (or reversals) where the recoverable amount is determined using a present value technique.

The effective date of this amendment was 1 January 2014.

Interpretations:

IFRIC 20 – Stripping Costs in the Production Phase of a Surface Mine

The effective date of this amendment was 1 January 2013.

IFRIC 21 – Levies

The effective date of this amendment was 1 January 2014.

The following is a summary of the major projects that we can expect in 2015.

Upcoming Standards:

Insurance Contracts

Re-deliberations in quarter 1 of 2015.

Leases

Target IFRS in quarter 3 or 4 of 2015.

Comprehensive review of IFRS for SME’s

Target amended IFRS’s in Quarter 1 or 2 of 2015.

Upcoming Exposure Drafts:

Conceptual Framework

Target exposure draft in quarter 1 or 2 of 2015.

CONCLUSION

As you can see, a lot has changed in the space of a couple of years, but that’s not all!  A few more standards have already changed but the effective dates are only between 2016 and 2018. For example IFRS 9 (Financial Instruments), IFRS 14 (Regulatory Deferral Accounts) and IFRS 15 (Revenue from Contracts with Customers)

The purpose of this article was only to list the changes – if you are uncertain about whether, or how, you will be affected please feel free to contact us.

Michael Steenkamp

Audit Partner, Johannesburg