In last month's blog we talked about the Financial Reporting Council (FRC) and the International Accounting Standards Board (IASB) announcing several changes which could have an impact on your financial disclosures. We also advised that we had consolidated the proposed changes and standards that will come into effect within the next 12 months into a useful one page reference guide. Our initial focus was on the changes proposed by the FRC and now we look at the IASB and in particular their announcement of new IFRS standards. The below standards will become effective for accounting periods on, or after the 1st January 2018.
This is a new standard to replace IAS 39. This makes changes to the classification and measurement of financial instruments, impairment and hedge accounting.
Classification has been amended to a principal based approach and is now driven by cash flow characteristics and introduces the concept of the business model.
The changes to impairment replaces the previous incurred loss model with an expected loss model.
There has been an overhaul of hedge accounting to align the accounting treatment with risk management activities including enhanced disclosures.
This is a new standard to replace IAS 11 and IAS 18.
In this new standard, an entity will recognise revenue to reflect the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This involves the following five step approach:
- Identify the contract(s) with a customer
- Identify the performance obligations in the contract
- Determine the transaction price
- Allocate the transaction price to the performance obligations in the contract
- Recognise revenue when, or as, the entity satisfies a performance obligation
Clarifications to IFRS 15
This amendment provides further guidance for assessing whether an entity’s promise to transfer goods or services to the customer are separately identifiable.
Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions
This amendment provides requirements on the accounting for the effects of vesting and non-vesting condition for cash-settled share-based payments, share-based payment transactions with a net settlement feature for withholding tax obligations, and a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled.
Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts
This amendment introduces two approaches, an overlay approach and a deferral approach, to address concerns about temporary volatility in reported results as a result of applying IFRS 9 before the replacement standard IFRS 4 is issued.
IFRIC 22 Foreign Currency Transactions and Advance Consideration
IFRIC 22 addresses the exchange rate to use in transactions that involve advance consideration paid or received in a foreign currency.
Amendments to IAS 40 Transfers of Investment Property
This amendment clarifies the requirements on transfers to, or from, investment property.
Amendments to IFRS 1 Annual improvements 2014-2016
The amendment deletes the short-term exemptions for first-time adopters.
Amendments to IAS 28 Annual improvements 2014-2016
This amendment is to allow the measurement of an associate or joint venture at fair value as an election that is made separately for each associate or joint venture at initial recognition.
Download your complimentary reference guide to the proposed changes and standards that will come into effect within the next 12 months.