A Practical Guide to New IFRSs 2011 (2)

7/31/2019 A Practical Guide to New IFRSs 2011 (2)

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A practical guide to new

IFRSs for 2011

March 2011

www.pwc.com/ifrs



PwC’s IFRS and corporate governance publications and tools 2011

IFRS technical publications

Manual of accounting – IFRS 2011Global guide to IFRS providing comprehensive practical guidanceon how to prepare nancial statements in accordance withIFRS. Includes hundreds of worked examples and extracts fromcompany accounts. The Manual is a three-volume set comprising:• Manual of accounting – IFRS 2011• Manual of accounting – Financial instruments 2011• Illustrative IFRS corporate consolidated nancial statements

for 2010 year ends

A practical guide to capitalisation of borrowing costsGuidance in question and answer format addressing the challengesof applying IAS 23R, including how to treat specic versus generalborrowings, when to start capitalisation and whether the scopeexemptions are mandatory or optional.

IFRS pocket guide 2010Provides a summary of the IFRS recognition and measurementrequirements. Including currencies, assets, liabilities, equity,income, expenses, business combinations and interimnancial statements.

A practical guide to new IFRSs for 2011 A 24-page guide providing high-level outline of the key requirements of new IFRSs effective in 2011, in question andanswer format.

IFRS student manual 2010Designed as a practical guide to IFRS for researchers,teachers, students and those studying for professional exams.Includes worked examples and illustrations from real IFRSnancial statements.

A practical guide to segment reportingProvides an overview of the key requirements of IFRS 8, ‘Operatingsegments’, and some points to consider as entities prepare for theapplication of this standard for the rst time.

Illustrative interim nancial information 2011Illustrative information, prepared in accordance with IAS 34,reecting standards issued up to March 2011. Includes a disclosurechecklist, IAS 34 application guidance and an appendix for rst- time adopters.

A practical guide to share-based payments Answers the questions we have been asked by entitiesand includes practical examples to help management drawsimilarities between the requirements in the standard and their ownshare-based payment arrangements. Updated in February 2011.

Available in PDF format only.

Illustrative IFRS corporate consolidated nancial

statements for 2010 year endsIllustrative set of consolidated nancial statements for an existingpreparer of IFRS. Includes appendices with disclosures for rst-timeadopters, and for IFRS 9. Included with ‘Manual of accounting –IFRS 2011’; also available separately.

Executive guide to IFRS – Topic summaries 2010

Key information on the major accounting topic areas. Each summary includes an explanation of current requirements along with aresources table showing external source material as well as PwCguidance and publications that relate to the topic.

Illustrative consolidated nancial statements• Investment property, 2009 • Private equity, 2009• Banking, 2009 • Insurance, 2009• Investment funds, 2009Realistic sets of nancial statements – for existing IFRSpreparers in the above sectors – illustrating the required disclosureand presentation.

Financial instruments under IFRS – A guide through

the mazeHigh-level summary of IAS 32, IAS 39 and IFRS 7, updated in June2009. For existing IFRS preparers and rst-time adopters.

Impairment guidanceGuidance includes:• Questions and answers on impairment of nonnancial assets in

the current crisis• Top 10 tips for impairment testing.

IAS 39 – Achieving hedge accounting in practiceCovers in detail the practical issues in achieving hedgeaccounting under IAS 39. It provides answers to frequently asked

questions and step-by-step illustrations of how to apply commonhedging strategies.

Manual of accounting – Financial instruments 2011Comprehensive guidance on all aspects of the requirementsfor nancial instruments accounting. Detailed explanationsillustrated through worked examples and extracts from company accounts. Included with ‘Manual of accounting – IFRS 2011’; alsoavailable separately.

IAS 39 – Derecognition of nancial assets in practiceExplains the requirements of IAS 39, providing answers tofrequently asked questions and detailed illustrations of how to apply the requirements to traditional and innovative structures.

Preparing your rst IFRS nancial statements:

Adopting IFRSOutlines how companies should address the process of selectingtheir new IFRS accounting policies and applying the guidance inIFRS 1. Provides specic considerations for US market.

IFRS 3R: Impact on earnings – the crucial Q&A for

decision-makersGuide aimed at nance directors, nancial controllers and deal-makers, providing background to the standard, impact on thenancial statements and controls, and summary differences with

US GAAP.

IFRS and US GAAP: similarities and differences A 240 –page comparison of the similarities and differences betweenthe reporting methods and the subsequent impact on entities. Orderhard copies from [email protected].

Keeping up to dateStay informed about key IFRS developments via free email alerts.IFRS mail-shotTwice-monthly email summarising new items added to pwc.com/ifrs,including breaking news from the IASB on new standards, exposure drafts andinterpretations; PwC IFRS publications and quarterly updates; IFRS blog posts;PwC webcasts; and more.IFRS newsMonthly newsletter focusing on the business implications of the IASB’s proposalsand new standards.

To subscribe, email [email protected]

IFRS disclosure checklist 2010Outlines the disclosures required for 31 December 2010 year ends.

Only available in electronic format. To download visit ‘Publications’ page at www.pwc.com/ifrs

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Contents

Page

Introduction 2

1. New and amended standards

Financial instruments:

• Classicationofrightsissues–IAS32amendment 4

• Disclosuresontransfersofnancialassets–IFRS7amendment 5

• Classicationandmeasurementofnancialassets−IFRS9 6 • Classicationandmeasurementofnancialliabilities–IFRS9 8

Deferredtaxaccountingforinvestmentpropertyatfairvalue–

IAS 12 amendment 11

Related-partydisclosures–IAS24amendment 13

First-time adoption:

•Financialinstrumentdisclosures–IFRS1amendment 15

• Severehyperinationandeffectivedates–IFRS1amendments 16

2. New and amended interpretations

Pre-paymentsofaminimumfundingrequirement−

IFRIC14amendment 18

Extinguishingnancialliabilitieswithequityinstruments–IFRIC19 19

3. Annualimprovementsproject2010 21


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Introduction

ThispublicationisapracticalguidetothenewIFRSstandardsandinterpretationsthatcomeintoeffectin2011.SignicantchangestoIFRSareduetobepublishedin2011,butthereisarelativelysmallnumberofchangesthatcomeintoeffectfor2011yearends:anewnancialinstrumentstandard,anIFRIC,anumberofamendmentstostandardsandtheannualimprovementsproject.

IFRS9,‘Financialinstruments’,was reissued in 2010 to include guidance onnancialliabilitiesandderecognitionofnancialinstruments.Thismaterial wasrelocatedfromIAS39,‘Financialinstruments: Recognition andmeasurement’,withoutchange,exceptfornancialliabilitiesthataredesignatedatfairvaluethroughprotorloss.Therulesontheclassicationandmeasurementof

nancialassetswerepreviouslypublishedintheearlierversionofIFRS9.ThestandardisbeingaddedtoastheIASBendorsesdifferentphasesoftheprojecttoreplace IAS39.ThereissuedIFRS9appliesto2013yearendsbutcanbeadopted withimmediateeffect(subjecttoEUendorsement for European entities).

OnlyoneIFRIC–IFRIC19,‘Extinguishingnancialliabilitieswithequityinstruments’

–comesintoeffectin2011.Itclariestheaccountingwhenanentityrenegotiatesthetermsofitsdebtwhentheliabilityisextinguishedbythedebtorissuingitsownequity.Itappliesfrom1July2010.

Twofurtheramendmentsthathaveeffectivedatesin2010willimpact2011year

ends.AmendmentstoIAS32,‘Financialinstruments:Presentation’,onclassicationofrightsissuesandamendmenttoIFRS1,‘First-timeadoptionofIFRS’,onnancialinstrument disclosures. Amendmentsthatapplyfrom1January2011includeanamendmenttoIAS24,‘Relatedpartydisclosures’,andanamendmentto IFRIC14,‘IAS19–Thelimitonadenedbenetasset,minimumfundingrequirementsandtheirinteraction’.

TheIASB’s2010annualimprovements

projecthaveaffectedanumberofstandards.Someofthechangesaddressinconsistencyinterminologybetweenthestandards;otherswillimpactcertainentitiesandthereforeneedcarefulconsideration.

Thetableonp3summarisestheimplementationdatesforthenewandamendedIFRSsthatareconsideredin moredetailinthepagesthatfollow.



Standard

Adopted

by EU Early-adoption status Page

Changes that apply from 1 February 2010

Amendments to IAS 32, ‘Financial instruments:Presentation’, on classication o rights issues

4 N/A 4

Changes that apply from 1 July 2010 Amendment to IFRS 1, ‘First-time adoption’, on nancialinstrument disclosures

4 N/A 15

IFRIC 19, ‘Extinguishing nancial liabilities with equityinstruments’

4 N/A 19

Annual improvements 2010

Amendment to IAS 27, ‘Consolidated and separate

nancial statements’*

4 N/A 21

Amendment to IFRS 3, ‘Business combinations’ –contingent consideration

4 N/A 23

Amendment to IFRS 3, ‘Business combinations’ – share-based payment transactions

4 N/A 24

Amendment to IFRS 3, ‘Business combinations’ –non-controlling interests

4 N/A 23

Changes that apply from 1 January 2011

Amendment to IAS 24, ‘Related party disclosures’ 4 Early adoption is permitted 13

Amendment to IFRIC 14, ‘IAS 19 – The limit on a denedbenet asset, minimum unding requirements and theirinteraction’

4 Early adoption is permitted 18

Annual improvements 2010

Amendment to IAS 1, ‘Presentation o nancialstatements’


Amendment to IAS 34, ‘Interim nancial reporting’ 4 Early adoption is permitted 21

Amendment to IFRS 1, ‘First-time adoption’ – interiminormation


Amendment to IFRS 1, ‘First-time adoption’ – deemedcost exemption


Amendment to IFRS 1, ‘First-time adoption’ –rate-regulated entities


Amendment to IFRS 7, Financial instruments:Disclosures’ – nature and extent o risks arising romnancial instruments


Amendment to IFRIC 13, ‘Customer loyalty programmes’– air value


Changes that apply from 1 July 2011

Amendment to IFRS 1, ‘First-time adoption’ – exemptionor severe hyperinfation and removal o xed dates

Early adoption is permitted 16

Amendment to IFRS 7, ‘Financial instruments:Disclosures’ – disclosures on transers o nancial assets



Amendment to IAS 12, ‘Income taxes’ – deerred taxaccounting or investment properties



IFRS 9, ‘Financial instruments’ – classication o nancialassets and nancial liabilities


*Eective date: Annual periods starting 1 July 2009



Financial instruments

Classicationofrightsissues–IAS32amendment

‘Classicationofrightsissues–anamendmenttoIAS32’waspublishedon 8October2009.Theamendmentrecognisesthatthepreviousrequirementtoclassifyforeign-currency-denominatedrightsissuedtoallexistingshareholdersonaproratabasisasderivativeliabilitiesisnotconsistent

withthesubstanceofthetransaction,whichrepresentsatransactionwithownersactingintheircapacityassuch.Theamendmentthereforecreatesanexceptiontothe‘xedforxed’ruleinIAS32andrequiresrightsissueswithinthescopeoftheamendmenttobeclassiedasequity.

What is a rights issue?

Arightsissueisusedasameansofcapital-raisingwherebyanentityissuesaright,optionorwarranttoallexistingshareholdersofaclassofequityonaproratabasistoacquireaxednumberofadditionalsharesataxedstrikeprice.Thestrikepriceisusuallysetbelowcurrentmarketshareprice,andshareholdersareeconomicallycompelledtoexercisetherightssothattheirinterestintheentityisnotdiluted.Rightsissuesarenotusedforspeculativepurposesandarerequiredbylawsorregulationsinmanyjurisdictions whenraisingcapital.

Why new guidance now?

Rightsissueshavebecomepopularinthecurrentenvironmentduetoliquidityconstraintsonthemarkets.Entities

listedindifferentjurisdictionsare normallyrequiredbylawsorregulations toissuerightsdenominatedinrespectivelocalcurrencies.Unfortunately,axed

strikepriceinotherthantheentity’sfunctionalcurrencyviolates‘xedfor xed’equityclassicationcriterionin IAS32andhenceresultsintheinstrumentbeingclassiedasaderivativeliability measuredatfairvaluethroughprotor loss.Giventhatrightsissuesareusuallyrelativelylargetransactions,thiswould

haveasubstantialeffectonentities’nancialstatements.

What does the amendmentrequire?

TheIASBrecognisedthatclassifyingforeign-currency-denominatedrightsissuedtoallexistingshareholdersonaproratabasisasderivativeliabilitieswasnotconsistent withthesubstanceofthetransaction,whichrepresentsatransactionwithownersactingintheircapacityassuch.Theamendment

thereforecreatedanexceptiontothe‘xedforxed’ruleinIAS32andrequiredrightsissueswithinthescopeoftheamendmenttobeclassiedasequity.

Effective date

Annual periods beginning on or ater 1 February 2010. It should be applied

retrospectively. Early adoption is permitted.

EU adoption status

Adopted by the European Commission on 24 December 2009.



What is the scope o the new guidance?

Thescopeisnarrowandappliesonlyto proratarightsissuestoallexistingshareholdersinaclass.Itdoesnot

extendtolong-datedforeigncurrency rightsissuesorforeign-currency-denominatedconvertiblebonds.Fortheseinstruments,theoptiontoacquiretheissuer’sequitywillcontinuetobe accountedforasaderivativeliability, withfairvaluechangesrecordedinprot or loss.

How will this change current practice?

Rightsissuesarenowrequiredtobeclassiedasequityiftheyareissuedforaxedamountofcashregardlessofthe

currencyinwhichtheexercisepriceisdenominated,providedtheyareofferedonaproratabasistoallownersofthesameclassofequity.Unlikederivativeliabilities,equityinstrumentsarenotsubsequentlyre-measuredatfairvaluethroughprotorloss.Theaccountingisthereforelesscomplex,andthereislessvolatilityinprotorloss.

How extensive are the newrequirements?

Thenewdisclosurerequirementsapplytotransferrednancialassets.Anentitytransfersanancialassetwhenittransfersthecontractualrightstoreceivecashowsoftheassettoanotherparty−for example,onthelegalsaleofabond. Alternatively,atransfertakesplacewhen

theentityretainsthecontractualrightsofthenancialassetbutassumesa contractualobligationtopaythecashowsontoanotherparty,asisoftenthecase whenfactoringtradereceivables.

Theamendmenthasdifferent requirementsforthefollowingtwocategories:• transferredassetsthatarenot derecognisedintheirentirety(for example,inatypicalsaleand repurchase(‘repo’)ofasecurityfora

xedprice,oronthetransferofassets tosecuritisationvehiclesthatare consolidatedbythetransferor);and • certaintransferredassetsthatare

derecognisedintheirentirety(for example,factoringoftradereceivables withnorecourse).

Theamendmentrequiresonlyminoradditionaldisclosurefortherstcategory;however,thenewdisclosurerequirementsforthesecondcategorycouldbeextensive.

What are the disclosurerequirements or the transerred

assets that are not derecognised?

TherequireddisclosuresforthesenancialassetsaddtothosealreadyinIFRS7.Thereareonlytwonewrequirements:

adescriptionofthenatureofthe•relationshipbetweenthetransferredassetsandtheassociatedliabilitiesshouldbeprovided,includingrestrictionsarisingfromthetransferonthereportingentity’suseofthetransferredassets;and whenthecounterpartytotheassociated•liabilitieshasrecourseonlytothetransferredassets,ascheduleshouldbegiventhatsetsoutthefairvalueofthe transferredassets,thefairvalueoftheassociatedliabilitiesandthenetposition.

Effective date

Annual periods beginning on or ater 1 July 2011. Comparative inormation is not

needed in the rst year o adoption.

EU adoption status

Not adopted by the European Commission at the time o going to print. Expected to

be adopted Q2 2011.

TheIASBissuedanamendmenttoIFRS7 on8October2010.Theamendment

requiresgreaterdisclosureoftransferrednancialassets.

Disclosuresontransfersofnancialassets–

IFRS7amendment




What are the disclosurerequirements or the transerredassets that are derecognised intheir entirety?

Thenewdisclosurerequirementsfor

derecognisednancialassetsapplyonlywheretheentityhasa‘continuinginvolvement’,whichmaynotoccurfrequentlyinpractice.Thisiswhere,aspartofthetransfer,theentityretainsanyofthecontractualrightsorobligationsinherentinthederecognisednancialassetorobtainsanynewcontractualrightsorobligationsrelatingtothetransferrednancialasset.

Thenewdisclosuresaremainlyabouttheentity’scontinuinginvolvement.Theyinclude disclosure of:

thecarryingamountandfairvalueofthe•continuinginvolvement;themaximumexposuretolossfromthe•continuinginvolvement;anyfuturecashoutowstorepurchase•thederecognisedassets(forexample,

thestrikepriceinanoptionagreement)andamaturityanalysisofthosecashoutows;adescriptionofthenatureandpurpose•ofthecontinuinginvolvementandtherisktheentityremainsexposedto;thegainorlossatdateofderecognition;•theincomeandexpenserecognisedfrom•thecontinuinginvolvement(currentandcumulative);and whethertransferactivityisunevenly•distributedintheperiod.

IFRS9,‘Financialinstruments’

IFRS9,‘Financialinstruments’,replacesIAS39,‘Financialinstruments:Recognitionandmeasurement’.Itgenerallyappliesretrospectively,withsomeexceptions.Comparativeinformationisnotrequiredtobeadjustedretrospectivelyforadoptions before2012.

IfanentityearlyadoptsIFRS9,itwillnot

berequiredtoearlyadoptsubsequentstagesintheIAS39replacementproject–thatis,impairmentandhedging.ThisistofacilitateearlyadoptionofIFRS9.However,ifanentitychoosestoearlyadoptanyofthesubsequentstages,itwillberequiredtoearlyadoptallprecedingstagesfromthesame date.

Effective date

Annual periods starting 1 January 2013. Early adoption is permitted rom 12 November

2009 (see detail below). However, the IASB is consulting – at the time o going to print

– on the eective dates o a number o standards. The eective date o IFRS 9 may

thereore change.

EU adoption statusNot adopted by the European Commission at the time o going to print.

How are nancial assets to bemeasured?

IFRS9requiresallnancialassetstobemeasuredateitheramortisedcostorfullfairvalue.Amortisedcostprovidesdecision-usefulinformationfornancialassetsthatareheldprimarilytocollectcashowsthatrepresentthepaymentofprincipalandinterest.Forallothernancialassets,

includingthoseheldfortrading,fairvalue

isthemostrelevantmeasurementbasis.

What determines classication?

IFRS9introducesatwo-stepclassicationapproach.First,anentityconsidersitsbusinessmodel−thatis,whetheritholdsthenancialassettocollectcontractualcashowsratherthantosellitpriortomaturitytorealisefairvaluechanges.Ifthelatter,theinstrumentismeasuredatfairvaluethroughprotorloss.Iftheformer,anentity

furtherconsidersthecontractualcashowcharacteristicsoftheinstrument.

Classicationandmeasurementofnancialassets





What is a contractual cash fowcharacteristics test?

Anancialassetwithinaqualifying businessmodelwillbeeligiblefor amortisedcostaccountingifthe

contractualtermsofthenancialassetgiveriseonspecieddatestocashowsthat aresolelypaymentsofprincipaland interestontheprincipalamountoutstanding.Interestisdenedasconsiderationforthetimevalueofmoneyandforthecreditriskassociatedwiththeprincipal amount outstanding during aparticular period of time.

Anyleveragefeatureincreasesthe variabilityofthecontractualcashows withtheresultthattheydonothavethe

economiccharacteristicsofinterest.Ifacontractualcashowcharacteristicisnotgenuine,itdoesnotaffecttheclassicationofanancialasset.Acashow characteristicisnotgenuineifitaffectstheinstrument’scontractualcashowsonlyontheoccurrenceofaneventthatis extremelyrare,highlyabnormalandveryunlikelytooccur.

What are common eatures that would generally pass the cash

fow characteristics test?Unleveragedlinkagetoaninationindex•inthecurrencyinwhichthenancialasset is denominated.Multipleextensionoptions(forexample,•aperpetualbond).Callandputoptionsiftheyarenot•contingentonfutureevents,andthe pre-paymentamountsubstantiallyrepresents unpaid amounts of principalandinterestontheprincipalamountoutstanding,whichmayinclude

reasonableadditionalcompensationfortheearlyterminationofthecontract.Interestratecaps,oorsandcollarsthat•effectivelyswitchtheinterestratefromxedtovariableandviceversa.Inavariableratenancialasset,a•borroweroptiontochoosearateateachinterestrateresetdayaslongastheratecompensatesthelenderforthetimevalueofmoney(forexample,anoptiontopaythree-monthLIBORforathree-monthtermorone-monthLIBORforaone-monthterm).

What are common eatures that would generally ail the cash fowcharacteristics test?

Linkagetoequityindex,borrower’snet•incomeorothervariables.

Inverseoatingrate.• Calloptionatanamountnotreective •of outstanding principal and interest.Issuerisrequiredorcanchoosetodefer•interestpaymentsandadditional interestdoesnotaccrueonthose deferred amounts.Inavariableratenancialasset,a•borroweroptiontochoosearateateachinterestrateresetdaysuchthattheratedoesnotcompensatethelenderforthetimevalueofmoney(forexample,anoptiontopayone-monthLIBORforathree-monthtermandone-monthLIBORisnotreseteachmonth). Avariableratethatisresetperiodically•butalwaysreectsave-yearmaturityinave-yearconstantmaturitybond(thatis,therateisdisconnectedwiththetermoftheinstrumentexceptatorigination). Anequityconversionoptioninadebt•host(fromaholderperspective).

Are reclassications permitted?

Classicationofnancialassetsis

determined on initial recognition.Subsequentreclassicationispermittedonlyinthoserarecircumstanceswhenthereisachangetothebusinessmodelwithinwhichthenancialassetisheld.Insuchcases,reclassicationofallaffectednancialassetsisrequired.

IFRS9speciesthatchangesinbusinessmodelareexpectedtobeveryinfrequent,shouldbedeterminedbytheentity’sseniormanagementasaresultofexternalorinternalchanges,shouldbesignicantto

theentity’soperationsanddemonstrabletoexternalparties.

Forexample,anentityhasaportfolioofcommercialloansthatitholdstosellintheshortterm.Theentityacquiresacompanythatmanagescommercialloansandhasabusinessmodelthatholdstheloansinordertocollectthecontractualcashows.Theportfolio of commercial loans is no longerforsale,andtheportfolioisnowmanagedtogetherwiththeacquiredcommercialloans;allareheldtocollectthecontractual

cashows.



Anotherexampleofachangeinthebusinessmodeliswhereanentitydecidestoshutdownalineofservice(forexample,aretailmortgagebusiness).Thelineofservicedoesnotacceptnewbusiness,andtheaffectedportfolioisbeingactivelymarketedforsale.

IFRS9indicatesthatchangesinintentions withrespecttoindividualinstruments,temporarydisappearanceofaparticularmarketortransfersofinstrumentbetweenbusinessmodelsdonotrepresentachange

inbusinessmodel.

What does this mean orequity investments?

Equityinvestmentsdonotdemonstratecontractualcashowcharacteristicsof

principalandinterest;theyarethereforeaccountedforatfairvalue.However,IFRS9providesanoptiontodesignateanon-tradingequityinvestmentatfair valuethoughprotorlossoratfairvaluethroughothercomprehensiveincome.Thedesignationisavailableonaninstrument-by-instrumentbasisandonlyoninitialrecognition.Oncemade,thedesignationisirrevocable.

Allrealisedandunrealisedfairvaluegainsandlossesfollowtheinitialdesignation,and

thereisnorecyclingoffairvaluegainsandlossesrecognisedinothercomprehensiveincometoprotorloss.Dividendsthatrepresentareturnoninvestmentfromequityinvestmentswillcontinuetoberecognisedinprotorlossregardlessofthe

designation.

Can an equity investment bemeasured at cost where noreliable air value measureis available?

IFRS9removesthecostexemptionforunquotedequitiesandderivativesonunquotedequitiesbutstipulatesthat,incertaincircumstances,costmaybeanappropriateestimateoffairvalue.Thismaybethecasewhereinsufcient

recentinformationisavailableorwherethereisawiderangeofpossiblefair valuemeasurements.Costwillnotbeanappropriateestimateoffairvalueiftherearechangesininvesteecircumstances,marketsorwidereconomy,orifthereis

evidencefromexternaltransactionsorforinvestmentsinquotedequityinstruments.Totheextentfactorsexistthatindicatecostmightnotberepresentativeoffairvalue,the

entityshouldestimatefairvalue.

What does this mean orhybrid contracts?

IFRS9requiresnancialassetstobeclassiedintheirentirety.Hybrid contractsarethoseinstrumentsthat containanancialornon-nancialhost

andanembeddedderivative.HybridcontractswithinthescopeofIFRS9− thatis,hybridcontractswithnancial assethosts−areassessedintheir entiretyagainstthetwoclassicationcriteria.Hybridcontractsoutsidethescope ofIFRS9areassessedforbifurcation underIAS39.Inmanycases,hybridcontractsmayfailthecontractualcash owcharacteristictestandshould thereforebemeasuredatfairvalue

throughprotorloss.

Is a air value option available?

Twooftheexistingthreefairvalue optioncriteriacurrentlyinIAS39 becomeobsoleteunderIFRS9,asafair- value-drivenbusinessmodelrequiresfair valueaccounting,andhybridcontracts areclassiedintheirentirety.The remainingfairvalueoptionconditionin IAS39iscarriedforwardtothenewstandard–thatis,managementmay stilldesignateanancialassetasatfair valuethroughprotorlossoninitial

recognitionifthissignicantlyreducesrecognitionormeasurementinconsistency,commonlyreferredtoas‘anaccountingmismatch’.Thedesignationatfairvaluethroughprotorlosswillcontinueto beirrevocable.

How are nancial liabilities tobe measured?

Financialliabilitiesaremeasuredatamortisedcostunlesstheyarerequiredto

bemeasuredatfairvaluethroughprot orlossoranentityhaschosentomeasure aliabilityatfairvaluethroughprot

or loss.

Classicationandmeasurementofnancialliabilities




What determines classication?

TheclassicationandmeasurementofnancialliabilitiesunderIFRS9remainsunchangedfromtheguidanceinIAS39exceptwhereanentityhaschosentomeasurealiabilityatfairvaluethroughprotorloss.Therecontinuetobetwomeasurementcategoriesfornancialliabilities:fairvalueandamortisedcost.Certainliabilitiesarerequiredtobeatfairvaluethroughprotorloss,suchasliabilitiesheldfortradingandderivatives.Otherliabilitiesaremeasuredatamortisedcostunlesstheentityelectsthefair valueoption;however,iftheliabilitycontainsembeddedderivatives,theembeddedderivativesmightberequiredtobeseparatedandmeasuredatfairvalue

throughprotorloss.

What is the accounting or nancial liabilities that arerequired to be at air valuethrough prot and loss?

Financialliabilitiesthatarerequiredtobemeasuredatfairvaluethroughprotorloss(asdistinctfromthosethattheentityhaschosentomeasureatfairvaluethroughprotorloss)continuetohaveallfairvaluemovementsrecognisedinprotorloss,with

noneofthefairvaluemovementrecognisedin‘othercomprehensiveincome’(OCI).Thisincludesallderivatives(suchasforeigncurrencyforwardsorinterestrateswaps),oranentity’sownliabilitiesthatare‘heldfortrading’.Similarly,nancialguaranteesandloancommitmentsthatentitieschoosetomeasureatfairvaluethroughprotorloss willhaveallfairvaluemovementsinprotor loss.

What is the accounting or nancial liabilities that anentity chooses to account orat air value?

IFRS9changestheaccountingfornancialliabilitiesthatanentitychoosestoaccountforatfairvaluethroughprotorloss,usingthefairvalueoption.Forsuchliabilities,changesinfairvaluerelatedtochanges inowncreditriskarepresented separatelyinOCI.

However,ifpresentingthechangesin owncreditofanancialliabilityinOCI

wouldcreateanaccountingmismatchinprotorloss,allfairvaluemovements arerecognisedinprotorloss.

Theaccountingmismatchmustarise duetoaneconomicrelationship betweenthenancialliabilityandanancialassetthatresultsinthe liability’screditriskbeingoffsetbya changeinthefairvalueoftheasset.

Theaccountingmismatch:isrequiredtobedeterminedwhen •theliabilityisrstrecognised;isnotreassessedsubsequently;and•mustnotbecausedsolelybythe•measurementmethodthatanentity usestodeterminethechangesinaliability’screditrisk.

Useofthisexemptionfromthe requirementtopresentmovementsintheowncreditriskofaliabilityinOCIisexpectedtoberare.

What are the eligibility criteria or the air value option?

Theeligibilitycriteriaforthefairvalueoptionremainthesame;theyarebased onwhether:

theliabilityismanagedonafair • valuebasis;electingfairvaluewilleliminateor•reduceanaccountingmismatch;ortheinstrumentisahybridcontract •(thatis,itcontainsahostcontract

andanembeddedderivative)for whichseparationofanembeddedderivativewouldberequired.

What might be a common reason or electing the air value option?

Acommonreasoniswhereentitieshaveembeddedderivativesthattheydonot wishtoseparatefromthehostliability.Inaddition,entitiesmayelectthefairvalueoptionforliabilitiesthatgiverisetoanaccountingmismatchwithassetsthatare

requiredtobeheldatfairvaluethroughprotorloss.

Have there been any changesin the accounting orembedded derivatives?

TheexistingguidanceinIAS39forembeddedderivativeshasbeenretainedinthisnewpartofIFRS9.Entitiesarestillrequiredtoseparatederivativesembeddedinnancialliabilitieswheretheyarenotcloselyrelatedtothehostcontract–for

example,astructurednotewheretheinterestislinkedtoanequityindex.Theseparatedembeddedderivativecontinuesto




bemeasuredatfairvaluethroughprotorloss,andtheresidualdebthostismeasuredatamortisedcost.Theaccountingforembeddedderivativesinnon-nancialhostcontractsalsoremainsunchanged.

Is the treatment o derivativesembedded in nancial liabilities symmetrical to the treatment o derivatives embedded in

nancial assets?

No.TheexistingembeddedderivativeguidanceinIAS39isretainedinIFRS9fornancialliabilitiesandnon-nancialinstruments.Thisresultsinsomeembeddedderivativesstillbeingseparatelyaccountedforatfairvaluethroughprotorloss.However,embeddedderivativesareno

longerseparatedfromnancialassets.Instead,theyarepartofthecontractualtermsthatareconsideredindetermining whethertheentirenancialassetmeetsthecontractualcashowtest(thatis,theinstrumenthassolelypaymentsofprincipalandinterest)tobemeasuredatamortisedcostorwhetheritshouldbemeasuredat

fairvaluethroughprotorloss.

How are nancial liabilities at air value to be measured?

Entitieswillneedtocalculatetheamount ofthefairvaluemovementthatrelatestothecreditriskoftheliability.IFRS7alreadyrequiresdisclosureoftheamountoffair valuechangesthatareattributabletoowncreditriskforliabilitiesdesignatedatfair valuethroughprotorloss.TheexistingguidanceonhowtocalculateowncreditriskinIFRS7isretainedbuthasbeenrelocatedtoIFRS9,andsomeaspectshave

beenclaried.

How can own credit risk

be determined?

Thiscanbedeterminedaseither:theamountoffairvaluechangenot•attributabletochangesinmarketrisk(forexample,benchmarkinterestrates)–thisisoftenreferredtoasthedefaultmethod;oranalternativemethodthattheentity•believesmorefaithfullyrepresents thechangesinfairvaluedueto‘owncredit’(forexample,amethodthatcalculatescreditriskbasedoncreditdefault swap rates).

IFRS9clariesthatifthechangesinfairvaluearisingfromfactorsotherthanchangesintheliability’screditriskorchangesinobservedinterestrates(thatis,benchmarkratessuchasLIBOR)aresignicant,anentityisrequiredtousean

alternativemethodandmaynotusethedefaultmethod.Forexample,changesinthefairvalueofaliabilitymightariseduetochangesinvalueofaderivativeembeddedinthatliabilityratherthanchangesinbenchmarkinterestrates.Inthatsituation,changesinthevalueoftheembeddedderivativeshouldbeexcludedindeterminingtheamountofowncreditriskthatispresentedinOCI.

TheexpandedguidanceinIFRS9 conrmsthatthecreditriskofaliability

withcollateralislikelytobedifferent fromthecreditriskofanequivalent liabilitywithoutcollateralissuedbythesameentity.

Italsoclariesthatunit-linkingfeaturesusuallygiverisetoassetperformanceriskratherthancreditrisk−thatis,thevalueoftheliabilitychangesduetochangesin valueofthelinkedasset(s)andnotbecauseofchangesintheowncreditriskoftheliability.Thismeansthatchangesinthefairvalueofaunit-linkedliabilitydueto

changesinthefairvalueofthelinkedasset willcontinuetoberecognisedintheincomestatement:theyarenotregardedasbeingpartoftheowncreditriskoftheliabilitythatisrecognisedinOCI.

What is the impact o thechanges on the presentationo nancial liabilities?

Elementsofthefairvaluemovementoftheliabilityarepresentedindifferentpartsoftheperformancestatement;changesin

owncreditriskarepresentedinOCI,andallotherfairvaluechangesarepresentedinprotorloss.Thismeansthattheamountoftheoverallfairvaluemovementdoesnotchange,butitispresentedinseparatesectionsofthestatementofcomprehensiveincome.

Amounts in OCI relating to own credit arenotrecycledtotheincomestatementeven whentheliabilityisderecognisedandtheamountsarerealised.However,thestandarddoesallowtransferswithinequity.




Why was this amendment needed?

ThecurrentprincipleinIAS12requiresthemeasurementofdeferredtaxassetsorliabilitiestoreectthetaxconsequencesthatwouldfollowfromthewaythatmanagementexpectstorecoverorsettlethecarryingamountoftheentity’sassetsorliabilities.Forexample,managementmayexpecttorecoveranassetbyusingit,bysellingitorbyacombinationofuseandsale.Management’sexpectationscan affectthemeasurementofdeferredtaxes

whendifferenttaxratesortaxbasesapplytotheprotsgeneratedfromusingandsellingtheasset.

TheIASBbelievesthatentitiesholdinginvestmentpropertiesthataremeasuredatfairvaluesometimesnditdifcultorsubjectivetoestimatehowmuchofthecarryingamountwillberecoveredthroughrentalincome(thatis,throughuse)andhowmuchwillberecoveredthroughsale,particularlywhenthereisnospecicplanfor disposal at a particular time.

Key provisions

TheIASBhasaddedanotherexception totheprinciplesinIAS12:the rebuttablepresumptionthatinvestmentpropertymeasuredatfairvalueis recoveredentirelybysale.Therebuttablepresumptionalsoappliestothedeferredtaxliabilitiesorassetsthatarisefrominvestmentpropertiesacquiredinabusinesscombination,iftheacquirersubsequentlyusesthefairvaluemodeltomeasurethoseinvestmentproperties.

Thepresumptionofrecoveryentirelybysaleisrebuttediftheinvestmentpropertyisdepreciable(forexample,buildings,andlandheldunderalease)andisheldwithinabusinessmodelwhoseobjectiveistoconsumesubstantiallyalloftheeconomicbenetsembodiedintheinvestmentpropertyovertime,ratherthanthrough sale.Thepresumptioncannotberebuttedforfreeholdlandthatisaninvestmentproperty,becauselandcanonlybe recoveredthroughsale.

Deerred tax accounting orinvestment property at air

value – IAS 12 amendment

TheIASBamendedIAS12,‘Incometaxes’,tointroduceanexceptiontotheexistingprincipleforthemeasurementofdeferred

taxassetsorliabilitiesarisingoninvestmentpropertymeasuredatfairvalue.

Effective date

Annual periods beginning on or ater 1 January 2012. Early adoption is permitted.

EU adoption status


be adopted Q3 2011.



Theamendmentsalsoincorporate SIC21,‘Incometaxes–Recoveryofrevaluednon-depreciableassets’,into IAS12,althoughthisguidancewillnot beappliedtoinvestmentproperty measuredatfairvalue.TheSIC21

guidancehasbeenincludedbecause itisappliedbyanalogyinanumber of situations.

What are the transitionimplications?

Theamendmentiseffectiveforannualperiodsbeginningonorafter1January2012.Managementcanelecttoearly adopttheamendmentfornancial yearsending31December2010. Entitiesshouldapplytheamendment

retrospectivelyinaccordancewith IAS8,‘Accountingpolicies,changesin accountingestimatesanderrors’.

Who does the amendment aect?

Allentitiesholdinginvestmentpropertiesmeasuredatfairvalueinterritorieswherethereisnocapitalgainstaxorwherethecapitalgainsrateisdifferentfromtheincometaxrate(forexample,Singapore,NewZealand,HongKongandSouth Africa)willbesignicantlyaffected.Theamendmentislikelytoreducesignicantlythedeferredtaxassetsandliabilitiesrecognisedbytheseentities.Itwillalsomeanthat,injurisdictionswherethereisnocapitalgainstax,therewilloftenbenotaximpactofchangesinthefairvalueofinvestmentproperties.Itmightbenecessaryformanagementtoreconsiderrecoverabilityofanentity’sdeferredtaxassetsbecauseofthechangesintherecognitionofdeferred

taxliabilitiesoninvestmentproperties,andtoconsidertheimpactoftheamendmentonpreviousbusinesscombinations.

Deferred tax



Related-party disclosures – IAS 24 amendment

IAS24,‘Related-partytransactions’,wasamendedinNovember2009.Therevisedstandardremovestherequirementforgovernment-relatedentitiestodisclosedetailsofalltransactionswiththegovernmentandothergovernment-relatedentities.Italsoclariesandsimpliesthedenitionofarelatedparty.

ThepreviousversionofIAS24didnotcontainanyspecicguidanceforgovernment-relatedentities.Theywerethereforerequiredtodisclosetransactions

withthegovernmentandothergovernment-relatedentities.Thisrequirementwasonerousinterritorieswithpervasivegovernmentcontrol;itplacedasignicantburdenonentitiestoidentifyrelated-partytransactionsandcollecttheinformationrequiredtomakethedisclosures.For

example,agovernment-controlledrailway wastheoreticallyrequiredtodisclosedetailsofitstransactionswiththepostofce.Thisinformationwasnotnecessarilyusefultousersofthenancialstatementsandwascostlyandtime-consumingtocollect.

Thenancialcrisiswidenedtherangeofentitiessubjecttorelated-partydisclosurerequirements.Thenancialsupportprovidedbygovernmentstonancialinstitutionsinmanycountriesmeansthatthegovernmentnowcontrolsorsignicantly

inuencessomeofthoseentities.Agovernment-controlledbank,forexample, wouldberequiredtodisclosedetailsofitstransactions, deposits and commitments withallothergovernment-controlledbanksandwiththecentralbank.

Effective date

Annual periods beginning on or ater 1 January 2011. Earlier adoption is permitted

either or the entire standard or or the reduced disclosures or government-related

entities.EU adoption status

Adopted by the European Commission on 19 July 2010.



What is the denition o a government-related entity?

Government-relatedentitiesarenowdenedasentitiesthatarecontrolled,jointlycontrolledorsignicantlyinuencedbya

government.What disclosures are

government-related entitiesrequired to make?

Theamendmentintroducesanexemptionfromthedisclosurerequirementsof IAS24fortransactionsbetweengovernment-relatedentitiesandthegovernment,andallothergovernment-relatedentities.Thosedisclosuresarereplacedwitharequirementtodisclose: • thenameofthegovernmentand thenatureoftherelationship; • thenatureandamountofany individually-signicant transactions;and • aqualitativeorquantitative indicationoftheextentofany collectively-signicanttransactions.

What is the impact o the changein disclosure requirements?

Thisisasignicantrelaxationofthedisclosurerequirementsandshouldbeof

substantialbenettogovernment-relatedentities.Thecomplexityandvolumeofthedisclosuresinthenancialstatementsandthecostsofrecord-keepingwillbe reduced.Thenewdisclosureswillprovidemoremeaningfulinformationaboutthenatureofanentity’srelationshipwith thegovernment.

Why has the denition o arelated party changed?

Thepreviousdenitionofarelatedparty

wascomplicatedandcontainedanumberofinconsistencies.Theseinconsistenciesmeant,forexample,thatthereweresituationsinwhichonlyonepartytoa

transactionwasrequiredtomakerelated-partydisclosures.Thedenitionhasbeenamendedtoremovesuchinconsistenciesandtomakeitsimplertoapply.

What is the impact o the

amended denition?Whilethenewdenitionwillmakethedenitionofarelatedpartyeasiertoapply,someentitieswillberequiredtomakeadditional disclosures.

Theentitiesthataremostlikelytobeaffectedarethosethatarepartofagroupthatincludesbothsubsidiariesandassociates,andentitieswithshareholdersthatareinvolvedwithotherentities.Forexample,asubsidiaryisnowrequiredtodisclosetransactionswithanassociateof

itsparent.Similarly,disclosureisrequiredoftransactionsbetweentwoentitieswherebothentitiesarejointventures(oroneisanassociateandtheotherisajointventure)ofathirdentity.Inaddition,anentitythatiscontrolledbyanindividualthatispartofthekeymanagementpersonnelofanotherentityisnowrequiredtodisclosetransactionswiththatsecondentity.

What next steps shouldmanagement consider?

Managementofgovernment-relatedentitiesshouldconsiderwhethertheywishtoadopttheamendmentearly.Earlyadoptionislikelytobeattractiveformanyentities,butmanagementintendingtoadoptearlyshouldalsoconsiderthereviseddisclosurerequirementsandputinplaceprocedurestocollecttherequiredinformation.EUentitiescannotcurrentlyapplytheamendmentbecausetheEuropeanCommissionhasnot yetadoptedit.

Managementofallentitiesshouldconsider

thereviseddenitiontodetermine whetheranyadditionaldisclosureswillberequiredandputinplaceprocedurestocollectthatinformation.

Related-party disclosures



What triggered this amendment?

ExistingIFRSpreparersweregrantedrelieffrompresentingcomparativeinformation forthenewdisclosuresrequiredbytheMarch2009amendmentstoIFRS7‘Financialinstruments:Disclosures’.Thereliefwasprovidedbecausethe amendmentstoIFRS7wereissuedafter thecomparativeperiodshadended,and theuseofhindsightwouldhavebeen

required.TheIASBthereforepermittedentitiestoexcludecomparativedisclosuresintherstyearofapplication.Certain rst-timeadopters(forexample,those witharstreportingperiodbeginningon orafter1January2009)wouldotherwiseberequiredtomakethecomparativeperioddisclosures,asrst-timeadoptersdonotusethetransitionprovisionsinotherIFRSs.

TheIASBhasthereforeissuedanamendmenttoIFRS1toproviderst-timeadopterswiththesametransition

provisions(andtherebythesamerelief) asincludedintheamendmenttoIFRS7. Itmadeaconsequentialamendmentto IFRS7toremovethewording,‘Intherstyearofapplication’,andtoreplaceit withdate-specicreliefforcomparativeinformation.Anycomparativeperiods thatendbefore31December2009areexemptfromthedisclosuresrequiredby theamendmentstoIFRS7.Thereliefappliestodisclosuresrelatedtoboththe

statementofcomprehensiveincomeand thestatementofnancialposition.

Who is aected?

Arst-timeadoptermayusethereliefofferedundertheamendmenttotheextentitsrstIFRSnancialstatementspresentcomparativeperiodsthatendbefore31December2009.Thisincludesanycomparativeannualperiodsthatendbefore31December2009andanyyear-endcomparativestatementsofnancial

First-time adoption − IFRS 1 amendments

Effective date

Annual periods beginning on or ater 1 July 2010. Earlier adoption is permitted. Early

adoption is required or a rst-time adopter that has a rst reporting period that begins

earlier than 1 July 2010 in order to benet rom the disclosure relie.

EU adoption status

Adopted by the European Commission on 30 June 2010.

TheIASBhasissuedanamendmentto IFRS1,‘First-timeadoptionofIFRS’,toproviderst-timeadopterswiththesame

transitionreliefthatexistingIFRSpreparersreceivedintheMarch2009amendmenttoIFRS7,‘Financialinstruments:Disclosures’.

Financial instrument disclosures



positionasatadatebefore31December2009.Thisincludestheopeningstatementofnancialpositionasatthedateoftransition.Anycomparativeinterim periods(fullnancialstatementsandnotIAS34condensed)thatfellwithinthe

rstannualperiodforwhichthe amendedIFRS7disclosureswere effectivearenotexempt.

What action do rst-time adoptersneed to take?

First-timeadoptersshouldconsiderthecomparativeperiodsthatarebeingpresentedintheirrstIFRSnancial

statementsanddeterminewhethertheyshouldtakeadvantageofthedisclosurereliefofferedbythisamendment.

What is the issue?Theamendmentcreatesanadditionalexemptionwhenanentitythathasbeensubjecttoseverehyperinationresumespresenting,orpresentsforthersttime,nancialstatementsinaccordancewithIFRSs.Theexemptionallowsanentitytoelect to measure certain assets andliabilitiesatfairvalue;andtousethatfair valueasthedeemedcostintheopeningIFRSstatementofnancialposition.

AnentitymightbeunabletopreparenancialstatementsinaccordancewithIFRSsforaperiodoftimebecauseitcouldnotcomplywithIAS29,‘Financialreportinginhyperinationaryeconomies’,duetoseverehyperination.Theexemptionapplieswheretheentityisabletobegin

reportinginaccordancewithIFRS.

What are the key provisions?

Theamendmentstatesthatthecurrencyofahyperinationaryeconomyissubjectto

severehyperinationwhen: • areliablegeneralpriceindexis notavailabletoallentitieswith transactionsandbalancesinthe currency;and • exchangeabilitybetweenthe currencyandarelativelystable foreigncurrencydoesnotexist.

Anentity’sfunctionalcurrencyceasestobesubjecttoseverehyperinationonthefunctionalcurrencynormalisationdate, whichoccurs:

• whenoneorbothofthe characteristicsofsevere hyperinationnolongerexist;or • whentherst-timeadopter changesitsfunctionalcurrencytoa currencythatisnotsubjectto severehyperination.

TheexemptionappliestoentitiesthatweresubjecttoseverehyperinationandareadoptingIFRSforthersttimeorhavepreviouslyappliedIFRS.

ExemptionforseverehyperinationandremovalofxeddatesTheIASBmadetwoamendmentsto IFRS1,‘First-timeadoptionofIFRS’, inDecember2010:

• anexemptionforsevere hyperination;and • removalofxeddates.

Effective date

Annual periods beginning on or ater 1 July 2011. Earlier adoption is permitted.

EU adoption status


be adopted Q3 2011.

Severehyperination

First-time adoption



First-time adoption

Whenanentity’sdateoftransitiontoIFRSisonorafterthefunctionalcurrencynormalisationdate,itmayelecttomeasureassetsandliabilitiesacquiredbeforethatdateatfairvalueandusethatfairvalueasdeemedcostintheopeningIFRSstatement

ofnancialposition.

IFRS1denesthedateoftransitionasthebeginningoftheearliestperiodfor whichanentitypresentscomparativeinformationunderIFRSinitsrstIFRSnancialstatements.Whenthefunctionalcurrencynormalisationdatefallswithinthecomparativeperiod,thatperiodmaybelessthan12months,providedthatacompletesetofnancialstatements(asrequiredbyIAS1)isprovidedforthatshorterperiod.

TheentitycannotcomplywithIFRSduetotheseverehyperinationinperiodsbeforethedateoftransitiontoIFRS,sothecomparativeinformationforthisperiodcannotbepreparedinaccordancewithIFRS.Theentityshouldthereforeconsider whetherdisclosureofnon-IFRS comparativeinformationandhistoricalsummariesinaccordancewithIFRS1 wouldprovideusefulinformationtotheusersofthenancialstatements.

Ifanentityappliesthenew

exemptiontocomplywithIFRS,it shouldexplainthetransitiontoIFRS, andwhyandhowtheentityceasedto haveafunctionalcurrencysubjectto

severehyperination.


Theamendmentisexpectedtohavealimitedimpact,asitisonlyavailabletoentitieswhosefunctionalcurrencywassubjecttoseverehyperination.TheZimbabweaneconomyhasbeen identiedasaneconomythatwassubject toseverehyperinationuntilearly2009;theamendmentisunlikelytoapplyin otherterritoriesatthetimeofgoingtoprint.

TheamendmentwouldnotchangeorallowanyadditionalIFRS1exemptionsforareportingentitythathascontrol, jointcontrolorsignicantinuenceoveranentitysubjecttoseverehyperination,excepttotheextentthatthereporting

entityisalsoarst-timeadopter.What do aected entities needto do?

ManagementofentitiesinZimbabweandrst-timeadoptersthathaveinterestsinZimbabweshouldconsider: • theirfunctionalcurrency normalisationdate; • theirproposeddateoftransition toIFRS; • whetherthecomparativeperiod willbepresentedforaperiod shorterthan12months;and • theassetsandliabilitiestheywish tomeasureatfairvalueon

transition to IFRS.

What is the issue?

TheIASBamendedIFRS1toeliminatereferencestoxeddatesforoneexceptionandoneexemption,bothdealingwith

nancialassetsandliabilities.

Therstchangerequiresrst-time adopterstoapplythederecognitionrequirementsofIFRSprospectively fromthedateoftransition,ratherthan from1January2004.

Thesecondamendmentrelatestonancialassetsorliabilitiesatfairvalueoninitialrecognitionwherethefairvalueisestablishedthroughvaluationtechniquesintheabsenceofanactivemarket.Theamendmentallowstheguidancein IAS39AG76andIAS39AG76Atobeappliedprospectivelyfromthedateof

transitiontoIFRSratherthanfrom 25October2002or1January2004.Thismeansthatarst-timeadopterdoesnotneedtodeterminethefairvalueofnancialassetsandliabilitiesforperiodspriortothedateoftransition.IFRS9hasalsobeen

amendedtoreectthesechanges.


EntitiesthathadderecognisednancialassetsorliabilitiesbeforethedateoftransitiontoIFRSwillneedtoapplythederecognitionguidancefromthedateoftransition,asitisamandatoryexception.Thesecondchangewillonlyberelevant forentitiesthatelecttousethe exemptionforfairvalueestablishedby

valuationtechniques.

Removalofxeddatesrequirement



How does the amendment dier rom previous guidance?

Somecompaniesthataresubjecttoaminimumfundingrequirementmayelecttopre-paytheirpensioncontributions.Thepre-paidcontributionsarerecoveredthroughlowerminimumfundingrequirementsinfutureyears.Anunintendedconsequenceoftheinterpretation,priortothisamendment, wasthatIFRIC14couldpreventthe

recognitionofanassetforanysurplusarisingfromsuchvoluntarypre-paymentofminimumfundingcontributionsinrespectoffutureservice.Theinterpretationhasbeenamendedtorequireanassettoberecognisedinthesecircumstances.


Itwillhavealimitedimpact,asitappliesonlytocompaniesthatarerequiredtomakeminimumfundingcontributionstoadened

benetpensionplanandchoosetopre-paythosecontributions.

Thoseaffectedarecompaniesthat: • haveadenedbenetpensionplan -thatissubjecttoaminimum fundingrequirement;and • haveprepaid(orexpecttoprepay)the minimumfundingrequirementin respectoffutureemployeeservice,

leading to a pension surplus.

What do aected entities needto do?

Suchentitiesshouldreconsidertheiraccountinginthelightoftherevisedguidancetodeterminewhetheranassetforthepre-paidcontributionsshouldberecognised.Theyshouldassesstheimpactasearlyaspossibletodeterminewhethertheamendmentshouldbeadoptedbeforetheeffectivedate.

Pre-payments o a minimum unding requirement −

IFRIC 14

TheamendmenttoIFRIC14,‘IAS19–Thelimitonadenedbenetasset,minimumfundingrequirementsandtheirinteraction’, waspublishedon26November2009.It

removesanunintendedconsequenceofIFRIC14relatingtovoluntarypensionpre-paymentswhenthereisaminimum fundingrequirement.

Effective date

Annual periods beginning on or ater 1 January 2011; it will apply rom the beginning

o the earliest comparative period presented. Earlier adoption is permitted.

EU adoption status




Why new guidance now?

Manyentitieswerecompelledtorenegotiatetheirdebtasitcamedue,inthecurrentchallengingeconomicclimate.Renegotiationswouldcommonlylead eithertomodicationofdebtorsettlementoftheliabilitybywayofissuingequityinstrumentstothelender.IFRSdidnotaddressaccountingforsuchdebtforequityswapsbeforeIFRIC19,andtherewasdiversityinpractice.Somerecognisedtheequityinstrumentatthecarryingamountofthenancialliabilityanddidnotrecogniseanygainorlossonsettlementinprotorloss.Othersrecognisedtheequityinstrumentsattheirfairvalueandrecordedanydifferencebetweenthatamountandthecarryingamountofthenancialliabilityinprotorloss.Thenancialcrisisexacerbatedtheissue.

What is the scope o new guidance?

IFRIC19addressestheaccountingby anentitythatrenegotiatesthetermsof anancialliabilityandissuessharesto thecreditortoextinguishallorpartof thenancialliability.Itdoesnotaddress theaccountingbythecreditor;anditdoesnotapplytosituationswheretheliabilitymaybeextinguishedwithequityinstrumentsinaccordancewiththe originaltermsoftheinstrument(forexample,convertiblebonds).Theinterpretationisfurtherrestrictedto excludetransactionswherethecreditorisalsoashareholderactinginitscapacityassuch,ortransactionsundercommoncontrolwherethetransactioninsubstancerepresentsanequitydistributionby,orcontributionto,theentity.

Extinguishing nancialliabilities with equity

instruments – IFRIC 19

IFRIC19,‘Extinguishingnancialliabilities withequityinstruments’,waspublishedon26November2009.IFRIC19clariestheaccountingwhenanentityrenegotiatesthe

termsofitsdebtwiththeresultthattheliabilityisextinguishedbythedebtorissuingitsownequityinstrumentstothecreditor(referredtoasa‘debtforequityswap’).

Effective date

Annual periods beginning on or ater 1 July 2010. Early adoption is permitted. The

interpretation should be applied retrospectively rom the beginning o the earliest

comparative period presented, as adoption in earlier periods would result only in a

reclassication o amounts within equity.

EU adoption status




What does the interpretationaddress?

IFRIC19addressesthefollowingissues: • Areequityinstrumentsissuedto extinguishanancialliability

‘considerationpaid’? • Howshouldanentityinitially measureequityinstrumentsissued toextinguishanancialliability? • Howshouldanentityaccountfor anydifferencebetweenthe carryingamountofthenancial liabilityextinguishedandtheinitial measurementamountoftheequity instrumentsissued?

What does the interpretationrequire?

IFRIC19considersthatequityinstrumentsissuedtosettlealiabilityrepresent‘considerationpaid’.Itthereforerequiresagainorlosstoberecognisedinprotorlosswhenaliabilityissettledthrough

theissuanceoftheentity’sownequityinstruments.ThisisconsistentwiththegeneralapproachtoderecognitionofnancialliabilitiesestablishedbyIAS39.Theamountofthegainorlossrecognised inprotorlossisdeterminedasthe

differencebetweenthecarryingvalueofthenancialliabilityandthefairvalueoftheequityinstrumentsissued.Ifthefairvalueoftheequityinstrumentscannotbereliablymeasured,thefairvalueoftheexistingnancialliabilityisusedto measurethegainorlossandtorecordissuedequityinstruments.

How will this change current practice?

Entitieswillnolongerbepermittedto

reclassifythecarryingvalueoftheexistingnancialliabilityintoequity(withnogainorlossbeingrecognisedinprotorloss).Theamountofthegainorlossshouldbeseparatelydisclosedinthestatementofcomprehensiveincomeorinthenotes.

IFRIC 19



Thetablebelowidentiesthemoresignicantchangestothestandardsarising

fromthe2010annualimprovementsprojectandtheimplicationsformanagement.

Annual improvements project 2010

Standard/

interpretation Amendment Practical implications Effective date

Amendment

to IAS 1,

‘Presentation

o nancialstatements’

The impact o a previous•

amendment to IAS 1 by

IAS 27 was to make

explicit the requirement topresent each item o other

comprehensive income in

the statement o changes in

equity, along with the protor loss and transactions with

owners. The amendment

removes the requirement

or each item o othercomprehensive income to

be presented separately in

the statement o changes inequity.

The amendment claries that, or•

each component o equity, an entity

may present the breakdown o other

comprehensive income either in thestatement o changes in equity or in

the notes to the nancial statements.

Annual periods

beginning on or

ater 1 January

2011. Earlyadoption is

permitted.

Amendment

to IAS 27,‘Consolidated

and separate

nancialstatements’

Additional guidance has•

been included withinIAS 21, which claries the

accounting or disposals or

partial disposals o a oreignoperations.

Guidance in the IAS 28•

and IAS 31 amendment

claries disposal accounting

or associates and jointly

controlled entities inaccordance with IAS 39.

The amendment is based on the•

changes in IAS 27. It states thatloss o control over a subsidary, the

loss o signicant infuence over an

associate and loss o joint controlover a jointly controlled entity are

similar events and should thereore

be accounted or similarily. Such

an event should be recognised andmeasured at air value and any gain

or loss is recognised in the prot or

loss.

Annual periods

beginning onor ater 1 July

2009.

Amendmentto IAS 34,

‘Interim nancial

reporting’

The amendment emphasises•

the existing disclosure

principles in IAS 34 and

adds urther guidance to

illustrate how to apply these

principles.

Greater emphasis has been placed•

on the disclosure principles or

signicant events and transactions.

Additional requirements cover

disclosure o changes to air value

measurements (i signicant), and theneed to update relevant inormation

rom the most recent annual report.

Annual periodsbeginning on or

ater 1 January

2011. Early

adoption is

permitted.

Effective date

See nal column in table below.

EU adoption status

Adopted by the European Commission on 18 February 2011.



Standard/


IFRS 1, ‘First-

time adoption’– interim

inormation

A rst-time adopter that•

changes its accountingpolicies or its use o IFRS 1

exemptions ater publishing

a set o IAS 34 interimnancial inormation shouldexplain those changes and

include the eects o such

changes in its opening

reconciliations within therst annual IFRS nancial

statements.

IFRS 1 explains that the disclosures•

required when accountingpolicies are changed under IAS 8,

‘Accounting policies, changes in

accounting estimates and errors’, arenot required or a rst-time adopter.

The amendment claries that•

IAS 8 also does not apply to changesmade to accounting policies during

the period o an entity’s rst IFRS

nancial statements. This includes a

change in policy between publicationo an entity’s rst IFRS interim report

and the entity’s rst IFRS nancial

statements. However, managementshould explain the change in its

rst IFRS nancial statements, as

required by o IFRS 1 para 23, and

provide updated reconciliations. Thisdisclosure requirement also applies

where an entity changes its use o

the exemptions in IFRS 1 between

the interim report and its rst IFRSnancial statements.

Annual periods

beginning on orater 1 January

2011. Early

adoption ispermitted.

IFRS 1, ‘First-time adoption’ –

deemed cost

The exemption to use a•

‘deemed cost’ arising rom

a revaluation triggered by an

event such as a privatisation

that occurred at or beorethe date o transition to IFRS

is extended to revaluations

that occur during the period

covered by the rst IFRSnancial statements.

Local regulations might require•

entities to remeasure assets and

liabilities to air value on the event

o a privatisation or an IPO and to

recognise those revalued amountsas deemed cost under local GAAP. I

such an event occurs ater the date

o transition to IFRS, IFRS 1

did not previously permit theserevalued amounts to be recognised

as deemed cost on transition to

IFRS. The amendment to IFRS 1permits entities to use these revalued

amounts as deemed cost at the date

the event occurs provided that this

revluation occurs during the periodcovered by the rst IFRS nancial

statements.

At the date o transition, the assets•

and liabilities are either measured at

deemed cost using either air value

or revaluation as described above, orin accordance with other applicable

IFRSs.

Annual periodsbeginning ater

1 January 2011.

Early adoption is

permitted.

The amendmentis also available

to entities

that applied

IFRS 1 prior tothe eective

date where

such a re-

measurementevent occurred

during their rst

IFRS reporting

period. Theamendment

allows these

entities to applythis amendment

retrospectively

in the rst

annual period

ater theamendment is

eective.



Standard/


IFRS 1, ‘First-

time adoption’ –rate regulation

Entities subject to rate•

regulation are permitted touse previous GAAP carrying

amounts o property, plant

and equipment or intangibleassets as deemed cost on anitem-by-item basis. Entities

that use this exemption are

required to test each item or

impairment under IAS 36 atthe date o transition.

This amendment provides relie to•

entities that carry items o PPE andintangible assets that are or were

previously used in rate-regulated

activities. The amendment statesthat operations are consideredto be subject to rate regulation i

‘they provide goods or services

to customers at prices (ie rates)

established by an authorised bodyempowered to establish rates that

bind the customers and that are

designed to recover the specic

costs the entity incurs in providingthe regulated goods or services

and to earn a specied return’. The

specied return does not need to beo a xed amount and may be stated

as a minimum amount or a range.

The amendment permits a rst-•

time adopter to use the previousGAAP carrying amount o such

rate-regulated assets as deemed

cost at the date o transition to IFRS

even i those assets do not qualiyor recognition under IFRS. The

amendment also permits entities

to choose the assets to which theexemption is applied. This is similar

to the choice available in the deemed

cost exemption or other types o

assets.

Annual periods

beginning ater1 January 2011.

Early adoption is

permitted.

IFRS 3,

‘Business

combinations’– contingent

consideration

Contingent consideration•

arrangements arising rom

business combinations withacquisition dates preceding

the application o IFRS 3

(2008) are accounted or

in accordance with the

guidance in the previous

version o IFRS 3

(as issued in 2004).

This amendment claries that the•

guidance in IAS 39, IAS 32 and

IFRS 7 will not apply to contingentconsideration arising rom business

combinations with an eective

date prior to the application o the

revised version o IFRS 3.

Annual periods

beginning on

or ater 1 July2010. Early

adoption is

permitted.

IFRS 3,

‘Business

combinations’ –

non-controlling

interests

The choice o measuring•

non-controlling interests

at air value or at the

proportionate share o

the acquiree’s net assets

applies only to instruments

that represent ‘present’

ownership interests and

entitle their holders to

a proportionate share

o the net assets in the

event o liquidation. All

other components o

non-controlling interest

are measured at air value

unless IFRS requires

another measurement

basis. Removal o reerence

to transactions between

segments as being

hedgeable transactions

in individual or separate

nancial statements.

This amendment will reduce diversity•

in practice and provides clearer

guidance on how to measure non-

controlling interests.

Annual periods

beginning ater

1 July 2010.

Early adoption is

permitted.



Standard/


IFRS 3,

‘Business

combinations’

– share-based

payments

The application guidance in•

IFRS 3 applies to all share-

based payment transactions

that are part o a business

combination, includingunreplaced and voluntarily

replaced share-based

payment awards.

IFRS 3 did not previously provide•

guidance or situations where the

acquirer does not have an obligation

to replace an award but replaces

an existing acquiree award thatwould otherwise have continued

unchanged ater the acquisition.

This amendment addresses this

gap in the previous guidance. The

amendment made to IFRS 3 results

in the accounting or these awards

being the same as or awards that

the acquirer is obliged to replace.

Annual periods

beginning on

or ater 1 July

2010. Early

adoption ispermitted.

IFRS 7,

‘Financial

instruments:

disclosures’

Amendments to IFRS 7,•

‘Financial instruments:

Disclosures – Nature and

extent o risks arising rom

nancial instruments’.

These are minor•

amendments to the

disclosure o nancial assets,

including the nancial eect

o collateral held as security.

No signicant impact.• Annual periods

beginning on or

ater 1 January

2011. Early

adoption is

permitted.

Amendment

to IFRIC 13,

‘Customer

loyalty

programmes’

The amendment claries•

the meaning o the term

‘air value’ in the context o

measuring award credits

under customer loyalty

programmes.

When the air value o award credits•

is measured on the basis o the

value o the awards (that is, goods

or services) or which they could

be redeemed, the air value o the

award credits should take account

o expected oreitures as well as the

discounts or incentives that would

otherwise be oered to customers

who have not earned award credits

rom an initial sale.

Annual periods

beginning on or

ater 1 January

2011. Early

adoption is

permitted.

This publication has been prepared or general guidance on matters o interest only, and does not constitute

proessional advice. It does not take into account any objectives, nancial situation or needs o any recipient; any

recipient should not act upon the inormation contained in this publication without obtaining independent proessional

advice. No representation or warranty (express or implied) is given as to the accuracy or completeness o the

inormation contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its

members, employees and agents do not accept or assume any liability, responsibility or duty o care or anyconsequences o you or anyone else acting, or reraining to act, in reliance on the inormation contained in this

publication or or any decision based on it.



PwC’s IFRS and corporate governance publications and tools 2011

IFRS for SMEs publications IFRS surveys and market issues

Corporate governance publications

IFRS tools

IFRS for SMEs – pocket guide 2009Provides a summary of the recognition and measurementrequirements in the ‘IFRS for small and medium-sized entities’published by the International Accounting Standards Board inJuly 2009.

P2P IFRS – from principle to practicePwC’s interactive electronic learning tool brings you up to speedon IFRS. Contains 23 hours of learning in 40 interactive modules.Up to date as of March 2009. For more information, visit www.pwc.com/p2pifrs.

Similarities and differences – a comparison of ‘full IFRS’

and IFRS for SMEs A 60-page publication comparing the requirements of the IFRS forsmall and medium-sized entities with ‘full IFRS’ issued up to July 2009. An executive summary outlines some key differences thathave implications beyond the entity’s reporting function.

IFRS for SMEs – Illustrative consolidated nancial

statements 2010Realistic set of nancial statements prepared under IFRS for smalland medium-sized entities, illustrating the required disclosure andpresentation.

Comperio – Your path to knowledgeOnline library of global nancial reporting and assurance literature. Contains fulltext of nancial reporting standards of US GAAP and IFRS, plus materials of specicrelevance to 10 other territories. Register for a free trial at www.pwccomperio.com.

Accounting & corporate reporting• ‘Straight away’ – guidance issued within 48 hours of the release of a draft or nal

IASB standard/interpretation• Technical updates – news items added daily on accounting, auditing and regula-

tory developments• Latest developments – includes nancial reporting diary, summary of recent

EDs, DPs, standards and their EU endorsement status• IFRS newsletters• Full text of standards and interpretations, exposure drafts and

discussion papers* – including a unique set of ‘versioned’ IASB standards andinterpretations showing all consequential amendments made by other standardsand improvements

• Topic summaries – executive guide to accounting issues by topic• IFRS Manual of Accounting* – PwC’s in-depth accounting guidance• Questions and answers* – by topic and by industry • Tools, practice aids and publications – ‘Similarities and differences’ series of

GAAP comparisons, IFRS extracts from accounts*, IFRS disclosure checklists,illustrative nancial statements, pocket guides, ‘Practical guides to IFRS’.

Law and regulations* – applicable companies legislation on accounting, auditingand other areas Auditing* – auditing standards, exposure drafts, discussion papers andother guidance

*Available to subscribers only

PwC inform – IFRS onlinePwC inform is an online resource for nance professionals globally, covering nancial reporting under IFRS. Use PwC inform to access the latest news, PwC guidance,comprehensive research materials and full text of the standards. The search function and intuitive layout enable users to access all they need for reporting under IFRS. Register for

a free trial at www.pwcinform.com. Content available on pwcinform.com includes:

Audit Committees – Good Practices for Meeting

Market ExpectationsProvides PwC views on good practice and summarises auditcommittee requirements in over 40 countries.

World Watch magazineGlobal magazine with news and opinion articles on the latestdevelopments and trends in governance, nancial reporting,narrative reporting, sustainability and assurance. Order hard copiesfrom [email protected].

Corporate reporting: is it what investment professionals expect?Survey looking at the information that companies provide, and whetherinvestors and analysts have the information they need to assesscorporate performance.

IFRS: The European investors’ viewImpact of IFRS reporting on fund managers’ perceptions of value and theirinvestment decisions.

Joining the dots – survey of narrative reporting practicesSurvey of the quality of narrative reporting among FTSE 350 companies,identifying where action is needed in the next reporting cycle forcompanies to gain a competitive edge and help restore trust in this tougheconomic environment.

Measuring assets and liabilitiesSurvey of investment professionals, looking at their use of the balance sheet inanalysing performance and the measurement bases for assets and liabilities thatbest suit their needs.

Performance statement: coming together to shape the future2007 survey of what investment professionals and corporate managementrequire to assess performance.

Presentation of income under IFRSTrends in use and presentation of non-GAAP income measures in IFRSnancial statements.

Recasting the reporting modelSurvey of corporate entities and investors, and PwC insights on how to simplify and enhance communications.

What investment professionals say about nancial instrument reportingPwC survey of investors’ and analysts’ perspectives on accounting for andreporting of nancial instruments.

Hard copies can be ordered from www.ifrspublicationsonline.com (unless indicated otherwise) or via your local

PricewaterhouseCoopers ofce. See the full range of our services at www.pwc.com/ifrs

About PricewaterhouseCoopersPricewaterhouseCoopers provides industry-focused assurance, tax, and advisory services to build public trust and enhance value for its clients and their stakeholders. Morethan 163,000 people in 151 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.

Contacting PricewaterhouseCoopersPlease contact your local PricewaterhouseCoopers ofce to discuss how we can help you make the change to International Financial Reporting Standards or withtechnical queries.

Documents

A Practical Guide to New IFRSs 2011 (2)