RSM South Africa

IFRS News in Brief - Issue 85

PUBLICATIONS AND ANNOUNCEMENTS

The educational modules to support the IFRS for SMEs Standard are now available at https://www.ifrs.org/supporting-implementation/supporting-materials-for-the-ifrs-for-smes/modules/

The module includes the following:

  • requirements—the full text of the section of the IFRS for SMEs Standard reproduced with added notes and examples which are designed to explain and illustrate the requirements.
  • significant estimates and other judgements—a discussion of the significant estimates and other judgements likely to be made in accounting for transactions and events when applying the section of the IFRS for SMEs Standard.
  • comparison with full IFRS Standards—a summary of the main differences between the section of the IFRS for SMEs Standard and the corresponding Standard from full IFRS Standards.
  • test your knowledge—multiple-choice questions, with answers, designed to test knowledge of the requirements of the IFRS for SMEs Standard.
  • apply your knowledge —case studies, with solutions, designed to develop the skills needed to account for transactions and events in accordance with the IFRS for SMEs Standard.

IFRS INTERPRETATIONS COMMITTEE (IC) LATEST DECISIONS SUMMARY

The following is a summarized update on the main discussions taken by the IC at its meeting on 11 and 12 September 2018.

For more detailed and comprehensive information on the IC’s discussions see:  https://www.ifrs.org/news-and-events/updates/ifric-updates/september-2018/

Committee’s tentative agenda decisions:    

The Committee tentatively decided not to add the following to its standard-setting agenda because the Committee concluded that the principles and requirements in IFRS provides an adequate basis for the following matters. The Committee encourages interested parties to submit their responses on the open for comment page (https://www.ifrs.org/projects/open-for-comment/) by 19 November 2018.

  • Assessment of promising goods or services by a stock exchange that provides a listing services to customers (IFRS 15 Revenue from Contracts with Customers)
  • Recognition of liabilities by a joint operator in relation to its interest in a joint operation (IFRS 11 Joint Arrangements)
  • Applying the requirements of IAS 27 to an Investment in a subsidiary accounted for at cost involving the following fact patterns (IAS 27 Separate Financial Statements)
    • Partial disposal
    • Step acquisition
  • Deposits relating to taxes other than income tax that are outside of the scope of IAS 12 Income Taxes (IAS 37 Provisions, Contingent Liabilities and Contingent Assets)
  • Application of the highly probable requirements in a cash flow hedge relationship (IFRS 9 Financial Instruments and IAS 39 Financial Instruments : Recognition and measurement)

Committee’s agenda decisions:    

The committee decided not to add the following matters to its standard-setting agenda because the committee concluded that principals and requirements in IFRS provide an adequate basis.

  • Borrowing costs eligible for capitalization (IAS 23 Borrowing Costs)
  • Ceasing capitalizing borrowing costs on land expenditures (IAS 23 Borrowing Costs)
  • Determination of the exchange rate when there is a long-term lack of exchangeability (IAS 21 The Effects of Changes in Foreign Exchange Rates). In addition to publishing the agenda decision above, at its June 2018 meeting the Committee decided to research possible narrow-scope standard-setting aimed at addressing the exchange rate a reporting entity uses when the spot exchange rate (as defined in IAS 21) is not observable. The Committee will discuss this matter at a future meeting.
  • Classification of a particular type of dual currency bond with a par amount denominated in one currency and fixed interest coupon payments denominated in another currency (IFRS 9 Financial Instruments). The committee decided not to add the matter to its standard-setting agenda because it noted that the financial instrument described in the request is not common and it has not obtained evidence that the matter has widespread effect.

Other matters:

The Committee considered how the holding of cryptocurrencies and Initial Coin Offerings may be accounted for by applying current IFRS Standards.  In addition, it provided advice to the Board about:

  • the usefulness of information provided by existing IFRS in relation to holdings of cryptocurrencies and possible standard-setting activities the Board could undertake.
  • the staff’s analysis of feedback on, and next steps for, the Exposure Draft Accounting Policies and Accounting Estimates (Proposed amendments to IAS 8).

INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) LATEST DECISIONS SUMMARY

The following is a summarized update of the main discussions and tentative decisions taken by the IASB at its meeting on 19-20 September.  

For more details and comprehensive information on the IASB’s discussion see: https://www.ifrs.org/news-and-events/updates/iasb-updates/september-2018/

Costs Considered in Assessing Whether a Contract is Onerous

The Board plans to issue an exposure draft in the last quarter of 2018. No Board members indicated they intend to dissent from the proposed amendments to IAS 37. The Board tentatively decided that the comment period for the proposed amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets should be at least 120 days.

Primary Financial Statements

The Board tentatively decided that with regards to:

1. A ‘PROFIT BEFORE FINANCE INCOME/EXPENSES AND INCOME TAX’ SUBTOTAL

  • Entities are not required to present the subtotal if their main business activity is to provide financing to customers and if they separately present financing income.
  • Entities that do not include such a subtotal shall include in the ‘business profit from consolidated entities’ subtotal:
    • interest income on cash and cash equivalents calculated using the effective interest method;
    • other income from cash and cash equivalents and financing activities; and
    • expenses from financing activities.
  • Entities with insurance finance income or expenses should include it in the ‘business profit from consolidated entities’ subtotal.

2. A ‘PROFIT BEFORE INCOME/EXPENSES FROM INVESTMENTS, FINANCE INCOME/EXPENSES AND INCOME TAX’ SUBTOTAL

  • Entities are not required to present the subtotal if, in the course of their main business activity, they invest in assets that generate a return individually and largely independently from other resources held by the entity.
  • Entities that do not include such a subtotal shall include income/expenses from investments made in the course of their main business activity within the ‘business profit from consolidated entities’ and below that subtotal present all other income/expenses from investments.

3. ENTITIES WHOSE MAIN BUSINESS ACTIVITIES COMPRISE INVESTING AND PROVIDING FINANCING TO CUSTOMERS

  • Entities are not required to present a ‘profit before finance income/expenses and income tax’ subtotal.
  • Entities are not required to present a ‘profit before income/expenses from investments, finance income/expenses and income tax’ subtotal.
  • Entities shall proceed with the inclusions required for entities that do not present either subtotal above.

4.THE PRESENTATION OF THE SHARE OF PROFIT FROM INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

Entities are required to separately present the share of profit and loss from integral and non-integral associates and joint ventures below the ‘business profits from consolidated entities’ subtotal.

5. UNUSUAL OR INFREQUENT ITEMS

           It will require entities to:

  • to separately disclose information about unusual or infrequent items regardless of whether an entity chooses to disclose a management performance measure, and
  • to separately disclose unusual or infrequent items in the notes to the financial statements and require that those items be attributed to line items in the statement(s) of financial performance.

In addition, the Board tentatively decided to develop principle-based guidance to help entities identify unusual or infrequent items.

6. PRESENTATION OF THE RESULTS OF INTEGRAL AND NON-INTEGRAL ASSOCIATES AND JOINT VENTURES IN THE STATEMENT(S) OF FINANCIAL PERFORMANCE

In the previous meetings, the Board tentatively decided to require separate presentation of :

  • the share of the profit or loss of ‘integral’ and ‘non-integral’ associates and joint ventures in the statement(s) of financial performance; and 
  • the cash flows of ‘integral’ and ‘non-integral’ associates and joint ventures in the investing section of the statement of cash flows. 

In this meeting, the Board suggested that the following indicators could help preparers decide whether an associate or joint venture is ‘integral’.

  • the existence of integrated lines of business across the entity and the associate or joint venture that lead to dependency on the associate or joint venture;
  • the associate or joint venture’s critical supplier or customer status;
  • the reporting entity and the associate’s or joint venture’s sharing of a name or brand; and
  • the sharing of capital or borrowing sources, such that the financing for the entity and the associate or joint venture is interrelated. 

The Board tentatively decided to:

  • state that the proposed list of indicators should not be prioritized in any way;
  • state that the classification of an associate or joint venture as integral or non-integral shall be changed only if the relationship between the reporting entity and the associate or joint venture changes; and
  • amend the disclosure requirements of IFRS 12 Disclosure of Interests in Other Entities to reflect the introduction of the integral and non-integral categorization of associates and joint ventures.

In addition, the Board decided to:

  • move the Primary Financial Statements project to the standard-setting programme; and
  • continue using the expertise of existing advisory bodies instead of establishing a dedicated consultative group for the project.

UPCOMING COMMENT DEADLINES

7 January 2019

DP/2018/1 - Financial Instruments with Characteristics of Equity