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Ifrs in Practice 2019

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Ifrs in Practice 2019 IFRS IN PRACTICE 2019 IFRSs, Amendments to IFRSs, IFRICs and Agenda Decisions that are mandatory for 31 December 2018 year-ends and those that are effective in future periods 2 IFRS IN PRACTICE 2019 – IFRSs, Amendments to IFRSs, IFRICs and Agenda Decisions that are mandatory for 31 December 2018 year ends and those that are effective in future periods IFRS IN PRACTICE 2019 – IFRSs, Amendments to IFRSs, IFRICs and Agenda Decisions that are mandatory for 31 December 2018 year ends and those that are effective in future periods 3 TABLE OF CONTENTS 1. Introduction 5 2. IFRSs, Amendments to IFRSs, IFRICs and Agenda Decisions effective in 31 December 2018 year-ends 8 3. IFRS Standards 11 3.1. IFRS 9 Financial Instruments 11 3.2. IFRS 15 Revenue from Contracts with Customers 12 4. Amendments to IFRSs and IFRIC Interpretations 13 4.1. Annual Improvements to IFRSs 2014-2016 Cycle 13 4.2. Amendment to IAS 40 – Transfers of Investment Property 13 4.3. Amendment to IFRS 2 Share-Based Payments (Amendment – Classification and Measurement of Share-Based Payment Transactions) 14 4.4. IFRS 4 Insurance Contracts (Amendment – Applying IFRS 9 Financial Instruments) 14 4.5. IFRIC Interpretation 22 – Foreign Currency Transactions and Advance Consideration 14 5. Agenda Decisions 15 5.1. Contributing property, plant and equipment to associates (IAS 28 Investments in Associates and Joint Ventures) 15 5.2. Revenue recognition in a real estate contract that includes the transfer of land (IFRS 15 Revenue from Contracts with Customers) 16 5.3. Revenue recognition in a real estate contract (IFRS 15 Revenue from Contracts with Customers) 19 5.4. Presentation of interest revenue for particular financial instruments (IFRS 9 Financial Instruments and IAS 1 Presentation of Financial Statements) 21 5.5. Right to payment for performance completed to date (IFRS 15 Revenue from Contracts with Customers) 22 5.6. Classification of short-term loans and credit facilities (IAS 7 Statement of Cash Flows) 23 5.7. Determination of the exchange rate when there is a long-term lack of exchangeability (IAS 21 The Effects of Changes in Foreign Exchange Rates) 24 5.8. Borrowing costs on land (IAS 23 Borrowing Costs) 25 5.9. Expenditures on a qualifying asset (IAS 23 Borrowing Costs) 26 6. IFRSs and Amendments effective in periods after 31 December 2018 year-ends 27 6.1. Timing of Mandatory Adoption 27 7. Future IFRS Standards 30 7.1. IFRS 16 Leases 30 7.2. IFRS 17 Insurance Contracts 31 4 IFRS IN PRACTICE 2019 – IFRSs, Amendments to IFRSs, IFRICs and Agenda Decisions that are mandatory for 31 December 2018 year ends and those that are effective in future periods 8. Future Amendments to IFRSs and IFRIC Interpretations 33 8.1. Amendment to IFRS 9 – Prepayment Features with Negative Compensation and Modifications of Financial Liabilities 33 8.2. Amendment to IAS 28 – Long-term Interests in Associates and Joint Ventures 33 8.3. Annual Improvements to IFRSs 2015-2017 Cycle 34 8.4. Amendment to IAS 19 – Plan Amendment, Curtailment or Settlement 34 8.5. IFRIC Interpretation 23 – Uncertainty over Income Tax Treatments 34 8.6. IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendment – Definition of Material) 35 8.7. IFRS 3 Business Combinations (Amendment – Definition of Business) 35 9. Agenda Decisions finalised in January 2019 36 9.1. Investment in a subsidiary accounted for at cost: Step acquisition (IAS 27 Separate Financial Statements) 36 9.2. Investment in a subsidiary accounted for at cost: Partial disposal (IAS 27 Separate Financial Statements) 38 9.3. Assessment of promised goods or services (IFRS 15 Revenue from Contracts with Customers) 39 9.4. Deposits relating to taxes other than income tax (IAS 37 Provisions, Contingent Liabilities and Contingent Assets) 41 10. IASB projects in progress 42 10.1. Financial Instruments with Characteristics of Equity (FICE) 42 10.2. Onerous Contracts – Cost of Fulfilling a Contract 43 10.3. IASB Workplan 44 11. Conclusion 45 IFRS IN PRACTICE 2019 – IFRSs, Amendments to IFRSs, IFRICs and Agenda Decisions that are mandatory for 31 December 2018 year ends and those that are effective in future periods 5 1. INTRODUCTION This publication covers changes to International Financial Reporting Standards (IFRSs) that are effective for the first time in the annual financial statements of entities with 31 December 2018 year-ends, comprising: – New and amended IFRSs; – IFRS Interpretations Committee Interpretations (IFRICs). It also includes Agenda Decisions issued by the IFRS Interpretations Committee during 2018. In addition, this publication covers changes to IFRSs that are effective in future periods, together with a discussion about major projects that are currently in progress at the International Accounting Standards Board (IASB). Paragraph 28 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors requires disclosures to be made if the initial application of IFRSs, IFRICs and amendments to IFRSs has an effect on the current period or prior period (or would have an effect except that it is impracticable to determine the amount of the adjustment), or might have an effect on future periods. In some cases, retrospective application is required together with all of the related disclosures set out below. In other cases, retrospective application is not required (for example there may be prospective application, or application to transactions that take place after a specified date) or transitional reliefs are given, meaning that some of the disclosure requirements will not apply. The disclosure requirements in the year of initial application are: a) The title of the IFRS; b) When applicable, that the change in accounting policy is made in accordance with its transitional provisions; c) The nature of the change in accounting policy; d) When applicable, a description of the transitional provisions; e) When applicable, the transitional provisions that might have an effect on future periods; f) For the current period and each prior period presented, to the extent practicable, the amount of the adjustment: i) For each financial statement line item affected; and ii) If IAS 33 Earnings per Share applies to the entity, for basic and diluted earnings per share; g) The amount of the adjustment relating to periods before those presented, to the extent practicable; and h) If retrospective application is required but is impracticable for a particular prior period, or for periods before those presented, the circumstances that led to the existence of that condition and a description of how and from when the change in accounting policy has been applied. In addition, IAS 8.30 requires that when a new IFRS (including amendments to IFRSs and IFRIC Interpretations) has been issued but is not yet effective, the following disclosures are required: a) The fact that a new IFRS has been issued but is not yet effective; and b) Known or reasonably estimable information relevant to assessing the possible impact that application of the new IFRS will have on the entity’s financial statements in the period of initial application. 6 IFRS IN PRACTICE 2019 – IFRSs, Amendments to IFRSs, IFRICs and Agenda Decisions that are mandatory for 31 December 2018 year ends and those that are effective in future periods New and amended IFRSs and IFRICs – 2018 For financial reporting years ended 31 December 2018, two new significant standards became effective: – IFRS 9 Financial Instruments (IFRS 9); and – IFRS 15 Revenue from Contracts with Customers (IFRS 15). Two new IFRIC Interpretations were also issued: – IFRIC 22 – Foreign Currency Transactions and Advance Consideration (IFRIC 22) with an effective date of annual reporting periods beginning on or after 1 January 2018; and – IFRIC 23 – Uncertainty over Income Tax Treatments (IFRIC 23) with an effective date of annual periods beginning on or after 1 January 2019. During 2018, the IASB continued to monitor developments around the implementation of the forthcoming standard IFRS 16 Leases (IFRS 16), which is effective for annual reporting periods beginning on or after 1 January 2019, although there were no formal standard setting activities. There was significant focus on issues arising from the early stages of the analysis and implementation of the requirements of IFRS 17 Insurance Contracts (IFRS 17) with three meetings being held of the IFRS 17 Transition Resource Group (TRG). Based on issues discussed by the TRG, the IASB has proposed to defer the effective date for IFRS 17 to annual reporting periods beginning on or after 1 January 2022. In 2018, the IASB also published its revised Conceptual Framework for Financial Reporting. The IASB also issued several amendments to various standards. Notable amendments are the revised definition of materiality and the new definition of a business. The latter will result in more transactions being accounted for as asset acquisitions in certain industries. The new accounting standard for leases and the IFRIC Interpretation for uncertain tax positions are complex, may require significant judgements and estimates, and are likely to have a significant effect on most entities. For those entities in the insurance sector the issuance of IFRS 17 introduces fundamental accounting changes from current practice. The impact of the changes should be carefully considered and not be underestimated. As entities begin the preparation of their first annual financial statements that include the adoption of IFRS 9 and IFRS 15, they should
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