Accountants & business advisers

Accounting Update 10
Amendments to IFRSs that potentially impact 31 December 2012 year end financial statements

There are a number of amendments to IFRSs that become effective or are available for early adoption for financial statements for years ending 31 December 2012. This update provides an overview of these amendments. The following IFRS amendments are effective for 31 December 2012 year end financial statements:

1. I FRS 1 First-time Adoption of International Financial Reporting Standards (Amendments) 2. I FRS 7 Financial Instruments: Disclosures (Amendments - Transfers of Financial Assets) 3. IAS 12 Income Taxes (Amendments) The amendments to IFRS 10, IFRS 12 and IAS 27 regarding investment entities are effective for 1 January 2014 with early adoption permitted.

AMENDMENTS EFFECTIVE FOR 31 DECEMBER 2012 YEAR END FINANCIAL STATEMENTS

IFRSs IFRS 1 Amendments Fixed dates for first-time adopters First-time adopters were required to restate certain transactions that had been derecognised from a fixed date of 1 January 2004. This fixed restatement date has been replaced with the date of transition to IFRSs. This amendment aims to ease the burden of transition for entities that are adopting IFRSs. Hyperinflation The amendments cover how an entity should resume presenting its financial statements in accordance with IFRSs after a period when the entity was not able to comply with IFRSs because its functional currency was subject to severe hyperinflation. IFRS 7 Transfers of Financial Assets The amended disclosures are required to be sufficient to enable users of financial statements: a)  to understand the relationship between transferred financial assets that are not derecognised in their entirety and the associated liabilities; and b) t o evaluate the nature of, and risks associated with, the entitys continuing involvement in derecognised financial assets. Transferred financial assets that are not derecognised in their entirety Required disclosures include description of the nature of the transferred assets, nature of risk and rewards as well as description of the nature and quantitative disclosure depicting the relationship between transferred financial assets and the associated liabilities. Transferred financial assets that are derecognised in their entirety Required disclosures include the carrying amount of the assets and liabilities recognised, fair value of the assets and liabilities that represent continuing involvement, maximum exposure to loss from the continuing involvement as well as maturity analysis of the undiscounted cash flows to repurchase the derecognised financial assets. Additional disclosures are required for any gain or loss recognised at the date of transfer of the assets, income or expenses recognised from the entitys continuing involvement in the derecognised financial assets as well as details of uneven distribution of proceeds from transfer activity throughout the reporting period. Effective date

Mandatory adoption for periods beginning on or after 1 July 2011

Mandatory adoption for periods beginning on or after 1 July 2011

AMENDMENTS EFFECTIVE FOR 31 DECEMBER 2012 YEAR END FINANCIAL STATEMENTS

IFRSs IAS 12 Amendments Amendments have been made to IAS 12 Income Taxes in respect of measuring deferred tax when investment property is being measured using the fair value model as per IAS 40 Investment Property. IAS 12 requires the measurement of deferred tax to be based on an entitys expected recovery of the related asset or liability. This is usually difficult and subjective to compute where an investment property is measured at fair value. Consequently, an exception has been introduced to incorporate a presumption that the carrying amount of an investment property is recovered entirely through sale. The requirements of SIC-21 Income Taxes Recovery of Revalued Non-Depreciable Assets, which deals with similar issues that involve non-depreciable assets that are measured using the revaluation model as per IAS 16 Property, Plant and Equipment, have been included in IAS 12. Mandatory adoption for periods beginning on or after 1 January 2012 Effective date

AMENDMENTS AVAILABLE FOR EARLY ADOPTION FOR 31 DECEMBER 2012 YEAR END FINANCIAL STATEMENTS
IFRSs IFRS 10, IFRS 12 and IAS 27 Amendments The amendments apply to a particular class of business that qualify as investment entities. The IASB uses the term investment entity to refer to an entity whose business purpose is to invest funds solely for returns from capital appreciation, investment income or both. An investment entity must also evaluate the performance of its investments on a fair value basis. Such entities could include private equity organisations, venture capital organisations, pension funds, sovereign wealth funds and other investment funds. Under IFRS 10 Consolidated Financial Statements, reporting entities were required to consolidate all investees that they control (i.e. all subsidiaries). The Investment Entities amendments provide an exception to the consolidation requirements in IFRS 10 and require investment entities to measure particular subsidiaries at fair value through profit or loss, rather than consolidate them. The amendments also set out disclosure requirements for investment entities. Effective date

Effective date is 1 January 2014 with early adoption permitted

WHAT ELSE SHOULD BE DISCLOSED?

In order to comply with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors entities need to disclose effects of the initial application of IFRSs and amendments that are mandatory for the first time. An entity shall disclose the following when applying IFRSs and related amendments: 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 (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 h)  If retrospective application required 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.

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