201011 Changes to Financial Reporting Framework in Singapore

8/6/2019 201011 Changes to Financial Reporting Framework in Singapore

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Changes to thefnancial reportingramework in Singapore

November 2010


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The inormation in this booklet was prepared by the IFRS Centre o Excellence* o Deloitte & Touche LLP in Singapore

(Deloitte Singapore) to provide general inormation. It is recommended that readers seek appropriate proessional

advice regarding the application o its contents to their specic situation and circumstances. This booklet should

not be relied upon as a substitute or such proessional advice. Partners and proessional sta o Deloitte Singapore

would be pleased to advise you. While all reasonable care has been taken in the preparation o this booklet, Deloitte

Singapore accepts no responsibility or any errors it might contain, whether caused by negligence or otherwise, or or

any loss, howsoever caused, incurred by any person as a result o relying on it.

Acronyms

ASC Accounting Standards Council

ED Exposure Drat

FRS Singapore Financial Reporting Standards

FASB United States Financial Accounting Standards Board

IASB International Accounting Standards Board

ICPAS Institute o Certied Public Accountants o Singapore

IFRIC IFRS Interpretations Committee (known as International Financial Reporting

Interpretations Committee beore 31 March 2010)

IFRS International Financial Reporting Standards

INT FRS Interpretation o Singapore Financial Reporting Standards

RAP Recommended Accounting Practice

US GAAP United States Generally Accepted Accounting Principles

*Deloitte Singapore is one o the 17 Deloitte IFRS Centres o Excellence (COE) around the world. The IFRS COE

accreditation was awarded by the Deloitte Global IFRS Leadership Team as recognition o Deloitte Singapores team

o IFRS experts with evidenced market leadership in IFRS.

11th Edition

Contents o booklet current as o 31 October 2010


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Introduction 1

Section I: Financial Reporting Standards 2

Revised/amended FRSs and INT FRSs issued in 2008 3

General amendments Improvements to FRSs (October 2008) 3

FRS 39 (Amended) Financial Instruments Recognition and Measurement 4- Eligible Hedged Items


General amendments Improvements to FRSs (June 2009) 6

FRS 27 (Revised) Consolidated and Separate Financial Statements 10

FRS 103 (Revised) Business Combinations 10

FRS 32 (Amended) Classication o Rights Issues 15

FRS 39 and INT FRS FRS 39 Financial Instruments: Recognition and Measurementand INT 15

109 (Amended) FRS 109 Reassessment o Embedded Derivatives 15

- Amendments regarding the assessment o embedded derivatives on reclassication

FRS 101 (Revised) First-time Adoption o Financial Reporting Standards 16

- Amendments to improve the structure o the Standard

FRS 101 (Amended) First-time Adoption o Financial Reporting Standards 16

- Additional Exemptions or First-time Adopters

FRS 102 (Amended) FRS 102 Share-based payment

- Group Cash-settled Share-based Payment Transactions

INT FRS 117 Distributions o Non-cash Assets to Owners 20

INT FRS 118 Transer o Assets rom Customers 22


General amendments Improvements to FRSs (October 2010) 24

FRS 24 (Revised) Related Party Disclosures 27

FRS 101 (Amended) First-time Adoption o Financial Reporting Standards 31

- Limited Exemption rom Comparative FRS 107 Disclosures or First-time Adopters

INT FRS 114 (Amended) The limit on a dened benet, asset, minimum nding requirement and

their interaction

- Prepayments o a Minimum Funding Requirement 31

INT FRS 115 Agreements or the Construction o Real Estate - with an Accompanying Note 33

INT FRS 119 Extinguishing Financial Liabilities with Equity Instruments 35

Section 2: Exposure Drats issued in 2010 38

Exposure Drats issued in 2010 39

ED SFRS or Small Entities

- including a summary o IFRS orSmall and Medium-sized Entities

ED Measurement o Liabilities in FRS 37 (Limited re-exposure o proposed amendment to FRS 37 issued in 2005) 45

ED Revenue rom Contracts with Customers 46 ED Proposed amendments to FRS 1 Presentation o Financial Statements 49

- Presentation o Items o Other Comprehensive Income

Contents


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ED Proposed amendments to FRS 19 Employee Benets 50

- Dened benet plans

ED Leases 51

ED Proposed amendments to FRS 12Income Tax 56

- Deerred Tax: Recovery o Underlying Assets

ED Proposed amendment to FRS 101 First-time Adoption o Financial Reporting Standards - 56

Severe Hyperinfation ED Proposed amendments to FRS 101 First-time Adoption o Financial Reporting Standards 56

- Removal o Fixed Dates or First-time Adopters

ED Insurance Contracts 57

Drat Interpretation Stripping Costs in the Production Phase o a Surace Mine 57

ED on Conceptual Framework - Description o the Reporting Entity 58

ED Fair Value Option or Financial Liabilities 59

(Accompanied by a summary o ED Financial Instruments:

Classication and Measurementissued in 2009 and 2010)

ED Financial Instruments: Amortised Cost and Impairment 63

ED Measurement Uncertainty Analysis Disclosure or Fair Value Measurements 64

Section 3: Summary o dierences between FRS and IAS/IFRS 65


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The purpose o this publication is to provide a regular update o the recent changes

in the Singapore nancial reporting ramework which we believe are important to

accounting and audit proessionals.

In this edit ion, we continue to provide a summary o the new/revised FRSs and INT

FRSs, as well as Exposure Drats issued since the last edition in November 2009,

including an updated comparison o FRS against IFRS. We have also retained

summaries o the new/revised FRSs and INT FRSs issued beore November 2009, which

are eective or nancial periods beginning on or ater 1 June 2009.

1

Introduction


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Contents

Changes to the nancial reporting ramework in Singapore 2

Section I: FinancialReporting Standards



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Revised/amended FRS

General amendments Improvements to FRSs (October 2008)

- Amendment to FRS 105 Non-Current Assets Held or Sale and Discontinued

Operations

(eective or annual periods beginning on or ater 1 July 2009)

FRS 39 (Amended) Financial Instruments: Recognition and Measurement

- Eligible Hedged Items


Improvements to FRSs (October 2008)The Improvements to FRSs are intended to deal with non-urgent, minor amendments to FRSs. These amendments

ocus on areas o inconsistency in FRSs or where clarication o wording is required. Most o the key improvements in

this rst set o Improvements to FRSs were eective rom 1 January 2009 and have been excluded rom this summary.

The ollowing key improvement became eective rom 1 July 2009.

Standard Subject o amendment New requirements

FRS 105

Non-current AssetsHeld or Sale and

Discontinued

Operations

Plan to sell a controlling

interest in a subsidiary

Clarication that assets and liabilities o a subsidiary should

be classied as held or sale i the parent is committed to asale plan involving loss o control o the subsidiary, regardless

o whether the entity will retain a non-controlling interest

ater the sale.

Eective date aligned with FRS 27 (2009) (i.e. rom 1 July

2009).

3

Revised/amended FRSs issuedin 2008


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FRS 39 Financial Instruments: Recognition and Measurement- Eligible hedged items

The amendment claries how the existing pr inciples underlying hedge accounting should be applied in below given

situations:

(a) Infation in a nancial hedged item, and

(b) Hedging one sided risk with options.

Identifying inflation as a hedged risk or portion

The amendment claries that it is not possible to designate the infation component o a xed rate instrument as

a hedged risk or portion because infation is not a separately identiable component o such an instrument. Also,

changes in infation do not have a reliably measurable eect on the cash fows or air value o the entire nancial

instrument. However, infation may only be hedged in the instance where changes in infation are a contractually-

specied portion o cash fows o a recognised nancial instrument. This may be the case where an entity acquires or

issues infation-linked debt. In such circumstances, the entity has a cash fow exposure to changes in uture infation

that may be designated as a hedged portion o an infation linked bond.

Hedging one sided risk with options

FRS 39 permits an entity to designate purchased (or net purchased) options as a hedging instrument in a hedge o

a nancial or non-nancial item. An entity may designate an option as a hedge o changes in the cash fows or air

value o a hedged item above or below a specied price or other variable (a one-sided risk).

The amendment make it clear that the intrinsic value not the time value o an option refects a one-sided risk,

thereore, an option designated in its entirety cannot be perectly eective. The time value o a purchased option is

not a component o the orecast transaction that impacts prot or loss. Entities can continue to use option-hedging

but will need to designate only the intrinsic value o the option within the relationship. As a result o this designa-

tion, changes in the time value o the option will be recognised immediately in prot or loss.

The amendments are to be applied retrospectively or annual periods beginning on or ater 1 July 2009. Thereore,

i an entity has a hedge accounting relationship which, ollowing the amendments would be considered non-qual-

iying, the entity must restate its comparative inormation, including the opening reserves, in order to refect that

hedge accounting was not applied in the reporting period.

It is not permitted to restate the comparatives to refect an alternative hedge accounting designation as hedge

accounting can only ever be applied prospectively when all hedge accounting documentation is complete.



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Revised/amended FRSs and INTFRSs issued in 2009

New/revised/amended FRSs/INT FRSs

General amendments Improvements to FRSs (June 2009)

(reer to document or eective dates)

FRS 27 and FRS 103 (Revised) Revised FRS 27 Consolidated and Separate Financial Statements and FRS 103

Business Combinations


FRS 32 (Amended) FRS 32 Financial Instruments: Presentation

- Amendments on Classications o Rights Issues

(eective or annual periods beginning on or ater 1 February 2010)

FRS 39 and INT FRS 109

(Amended)

FRS 39 Financial Instruments: Recognition and Measurementand INT FRS 109

Reassessment o Embedded Derivatives

- Amendments regarding the assessment o embedded derivatives on

reclassication

(eective or periods ending on or ater 30 June 2009)

FRS 101 (Revised) First-time Adoption o Financial Reporting Standards

- Amendments to improve the structure o the Standard


FRS 101 (Amended) First-time Adoption o Financial Reporting Standards

- Additional Exemptions or First-time Adopters(eective or annual periods beginning on or ater 1 January 2010)

FRS 102 (Amended) FRS 102Share-based payment

Group Cash-settled Share-based Payment Transactions

(eective or annual periods beginning on or ater 1 January 2010)

INT FRS 117 Distributions o Non-cash Assets to Owners


INT FRS 118 Transer o Assets rom Customers

(eective or transers o assets on or ater 1 July 2009)


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Improvements to FRSs (2009)

This is the second set o Improvements to FRSs that are intended to deal with non-urgent, minor amendments to

FRSs. These amendments ocus on areas o inconsistency in FRSs or where clarication o wording is required. The

improvements are eective rom 1 January 2010 except i otherwise specied.

Detail o amendments

The ollowing table provides a summary o each o the amendments.


FRS 102

Share-based

Payment

Scope o FRS 102 and revised

FRS 103

Amendment to conrm that, in addition to business

combinations as dened by FRS 103 (2009) Business

Combinations, contributions o a business on ormation

o a joint venture and common control transactions are

excluded rom the scope o FRS 102Share-based Payment.

Eective or annual periods beginning on or ater 1 July

2009. Linked to application o FRS 103 (2009).

FRS 105

Non-current AssetsHeld or Sale and

Discontinued

Operations

Disclosures required in respect

o noncurrent assets (ordisposal groups) classied as

held or sale or discontinued

operations

Amendment to clariy that FRS 105 Non-current Assets

Held or Sale and Discontinued Operations species thedisclosures required in respect o non-current assets (or

disposal groups) classied as held or sale or discontinued

operations. Consequently, disclosures in other FRSs do not

apply to such assets (or disposal groups) unless:

Those FRSs specically require disclosures in respect o

noncurrent assets (or disposal groups) classied as held

or sale or discontinued operations; or

The disclosures relate to the measurement o assets or

liabilities within a disposal group that are outside the

scope o FRS 105s measurement requirements and theinormation is not disclosed elsewhere in the nancial

statements.

To be applied prospectively. Earlier application permitted

FRS 108

Operating

Segments

Disclosure o inormation

about segment assets

Minor textual amendment to the Standard, to clariy that

an entity is required to disclose a measure o segment

assets only i that measure is regularly reported to the chie

operating decision maker.

Segment inormation or prior periods presented as

comparatives shall be restated unless the necessary

inormation is not available and the cost to develop it

would be excessive.

Earlier application permitted.


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FRS 1

Presentation

o Financial

Statements

Current/non-current

classication o convertible

instruments

Clarication that the potential settlement o a liability by the

issue o equity is not relevant to its classication as current

or non-current.

By amending the denition o current liability, the

amendment permits a liability to be classied as non-current

(provided that the entity has an unconditional right to deer

settlement by transer o cash or other assets or at least 12months ater the accounting period) notwithstanding the

act that the entity could be required by the counterparty to

settle in shares at any time.


FRS 7

Statement o Cash

Flows

Classication o expenditures

on unrecognised assets

Amendment to require that only expenditures that result in

a recognised asset in the statement o nancial position can

be classied as investing activities.


FRS 17

Leases

Classication o leases o land

and buildings

Amendments made to IAS 17 - Deletion o specic

guidance regarding classication o leases o land. Leaseso land should be classied as either nance or operating

using the general principles o IAS 17.

To be applied retrospectively to existing leases i the

necessary inormation is available at the inception o the

lease. Otherwise land leases should be reassessed on the

date o adoption o the amendment. Earlier application

permitted.

Comparison o FRS 17 and IAS 17 - Beore the

amendments, IAS 17 stated that land normally has an

indenite economic lie and, i title is not expected to pass

to the lessee by the end o the lease term, the lessee does

not receive substantially all o the risks and rewards incident

to ownership.

On the other hand, FRS 17 did not explicitly state that

leases o land will be operating leases unless title passes.

Thus, with this amendment, FRS 17s treatment o leases o

land does not change, but IAS 17s treatment o leases o

land appears to be more consistent with FRS 17.

FRS 18

Revenue

Determining whether an

entity is acting as a principal

or as an agent

Additional guidance added to the appendix to FRS 18

Revenue regarding the determination as to whether an

entity is acting as a principal or an agent.

No eective date is applicable or this as the appendix is

not part o the Standard.



FRS 36

Impairment o

Assets

Unit o accounting or

goodwill impairment test

Amendment to clariy that the largest cash-generating unit

(or group o units) to which goodwill should be allocated

or the purposes o impairment testing is an operating

segment as dened by paragraph 5 o FRS 108 Operating

Segments (i.e. beore the aggregation o segments with

similar economic characteristics permitted by FRS 108.12).

To be applied prospectively. Earlier application permitted.FRS 38

Intangible Assets

Additional consequential

amendments arising rom

revised FRS 103 (2009)

Amendments to FRS 38 Intangible Assets to clariy the

requirements under FRS 103 (2009) regarding accounting

or intangible assets acquired in a business combination.

FRS 103 (2004) included reliability o measurement as a

recognition condition or intangible assets. FRS 103 (2009),

on the other hand, presumes that i an intangible asset

acquired in a business combination is separable or arises

rom contractual or other legal rights, sucient inormation

exists to measure the air value o the asset reliably.

Related amendments are made to FRS 38 to be consistentwith the recognition criteria in FRS 103 (2009).


2009. To be applied prospectively. Linked to application o

FRS 103 (2009).

Measuring the air value o an

intangible asset acquired in a

business combination

Amendments to FRS 38 to clariy the description o

valuation techniques commonly used by entities when

measuring the air value o intangible assets acquired in a

business combination that are not traded in active markets.

To be applied prospectively. Earlier application permitted.


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FRS 39

Financial

Instruments:

Recognition and

Measurement

Treating loan prepayment

penalties as closely related

derivatives

Clarication that prepayment options, the exercise price

o which compensates the lender or loss o interest by

reducing the economic loss rom reinvestment risk, should

be considered closely related to the host debt contract.


Scope exemption o business

combination contracts

Amendments to the scope exemption in FRS 39 Financial

Instruments: Recognition and Measurementto clariy that:

Itonlyappliestobinding(forward)contractsbetweenan

acquirer and a vendor in a business combination to buy an

acquiree at a uture date;

Thetermoftheforwardcontractshouldnotexceed

a reasonable period normally necessary to obtain any

required approvals and to complete the transaction; and

Theexemptionshouldnotbeappliedtooptioncontracts

(whether or not currently exercisable) that on exercise will

result in control o an entity, nor by analogy to investmentsin associates and similar transactions.

To be applied prospectively to all unexpired contracts.


Cash fow hedge accounting Amendment to clariy when to recognise gains or losses

on hedging instruments as a reclassication adjustment

in a cash fow hedge o a orecast transaction that results

subsequently in the recognition o a nancial instrument.

The amendment claries that gains or losses should be

reclassied rom equity to prot or loss in the period in

which the hedged orecast cash fow aects prot or loss.

To be applied prospectively to all unexpired contracts.


INT FRS 109

Reassessment

o Embedded

Derivatives

Scope o INT FRS 109 and

revised FRS 103

Amendment to conrm that, in addition to business

combinations as dened by FRS 103 (2009), derivatives

acquired in the ormation o a joint venture and in common

control transactions are outside the scope o INT FRS 109.


2009. To be applied prospectively. Linked to application o

FRS 103 (2009).

INT FRS 116

Hedges o a NetInvestment in a

Foreign Operation

Amendment to the restriction

on the entity that can holdhedging instruments

Amendment to clariy that hedging instruments may be

held by any entity or entities within the group. This includesa oreign operation that itsel is being hedged.


2009. Earlier application permitted.



FRS 103 (Revised) Business Combinationsand FRS 27 (Revised)

Consolidated and Separate Financial Statements

Overview

The revised Standards include the ollowing signicant changes:

a greater emphasis on the use o air value, potentially increasing the judgement and subjectivity around business

combination accounting, and requiring greater input by valuation experts;

ocusing on changes in control as a signicant economic event introducing requirements to remeasure interests

to air value at the time when control is achieved or lost, and recognising d irectly in equity the impact o all

transactions between controlling and non-controlling shareholders not involving a loss o control; and

ocusing on what is given to the vendor as consideration, rather than what is spent to achieve the acquisition.

Transaction costs, changes in the value o contingent consideration, settlement o pre-existing contracts, share-

based payments and similar items will generally be accounted or separately rom business combinations and will

generally aect prot or loss.

The revised Standards resolve many o the more contentious aspects o business combination accounting by

restricting options or allowable methods. As such, they should result in greater consistency in accounting among

entities applying FRSs.

Summary of main changes to FRS 103

The main changes to FRS 103 are as ollows:

Acquisition-related costs: Acquisition-related costs e.g. nders ees, advisory, legal, accounting, valuation

and other proessional or consulting ees are generally recognised as period expenses (rather than included in

goodwill). Costs incurred to issue debt or equity securities will be recognised in accordance with FRS 32 and FRS

39.

Step acquisitions: Changes to FRS 27 and FRS 103 work together with the eect that a business combination

leading to acquisition accounting applies only at the point where control is achieved. This has a number o

implications:

Where the acquirer has a pre-existing equity interest in the entity acquired: that equity interest may be

accounted or as a nancial instrument in accordance with FRS 39, as an associate or a joint venture using

the equity method in accordance with FRS 28 Investments in Associates or FRS 31 Interests in Joint Ventures,

or as a jointly controlled entity using the proportionate consolidation method in accordance with FRS 31. I

the acquirer increases its equity interest suciently to achieve control (described in the revised FRS 103 as a

business combination achieved in stages), it must remeasure its previously-held equity interest in the acquiree

at acquisition-date air value and recognise the resulting gain or loss, i any, in prot or loss.

Once control is achieved: all other increases and decreases in ownership interests are treated as transactions

among equity holders and reported within equity (see below). Goodwill does not arise on any increase, and no

gain or loss is recognised on any decrease.


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Goodwill: The acquirer recognises goodwill at the acquisition date, measured as the dierence between:

the aggregate o:

(i) the acquisition-date air value o the consideration transerred;

(ii) the amount o any non-controlling interest (NCI) in the entity acquired; and

(iii) in a business combination achieved in stages, the acquisition date air value o the acquirers previously-

held equity interest in the entity acquired; and

the net o the acquisition-date amounts o the identiable assets acquired and the liabilities assumed, both

measured in accordance with the revised FRS 103.

Non-controlling interests (ormerly known as minority interests): On a transaction-by-transaction basis,

the acquirer has an option to measure any NCI in the entity acquired either at air value or at the non-controlling

interests proportionate share o the net identiable assets o the entity acquired. The latter treatment corresponds

to the measurement basis in the current version o FRS 103.

For the purpose o measuring NCI at air value, it may be possible to determine the acquisition-date air value on

the basis o market prices or the equity shares not held by the acquirer. When a market price or the equity shares

is not available because the shares are not publicly-traded, the acquirer must measure the air value o the NCI

using other valuation techniques.

Note: Improvements to FRSs was issued in October 2010, and it claries that the option to measure NCI either at

air value or at the proportionate share o the acquirees net identiable assets at the acquisition date applies only

to NCI that are:

(i) present ownership interests; and

(ii) entitle their holders to a proportionate share o the acquirees net assets in the event o liquidation.

All other components o NCI should be measured at their acquisition date air value, unless another measurement

basis is required by FRSs. For example, a share-based payment transaction that is classied as equity shall

be measured in accordance with FRS 102Share-based Paymentand the equity component o a convertible

instrument shall be measured in accordance with FRS 32 Financial Instruments: Presentation. The clarication is

eective or annual periods beginning on or ater 1 July 2010, with earlier application permitted.

Contingent consideration: The revised FRS 103 requires the consideration or the acquisition to be measured

at air value at the acquisition date. This includes the air value o any contingent consideration payable. FRS 103

permits very ew subsequent changes to this measurement and only as a result o additional inormation about

acts and circumstances that existed at the acquisition date. All other changes (e.g. changes resulting rom events

ater the acquisition date such as the acquiree meeting an earnings target, reaching a specied share price, or

meeting a milestone on a research and development project) are recognised in prot or loss or in accordance with

other FRSs.

Note: Improvements to FRSs was issued in October 2010, and it claries that the accounting requirements or

changes to contingent consideration above do not apply to contingent consideration that arose rom business

combinations whose acquisition dates preceded the application o the revised FRS 103. For those contingent

considerations, the requirements o the previous FRS 103 continue to apply. The clarication is eective or annual

periods beginning on or ater 1 July 2010, with earlier application permitted.



Re-acquired rights: Where the acquirer and acquiree were parties to a pre-existing relationship (e.g. the

acquirer had granted the acquiree a right to use its intellectual property), there are two implications or acquisition

accounting:

rstly, where the terms o any contract are not market terms, a gain or loss is recognised and the purchase

consideration adjusted to refect a payment or receipt or the non-market terms; and

secondly, an intangible asset (being the rights re-acquired) is recognised at air value and amortised over the

contract term.

Reassessments: The revised FRS 103 claries that an entity must classiy and designate al l contractual

arrangements at the acquisition date with two exceptions: (i) leases, and (ii) insurance contracts.

In other words, the acquirer applies its accounting policies and makes the choices available to it as i it had

acquired those contractual relationships outside o the business combination. The existing treatment applied by

the acquiree or classication o leases and insurance is applied by the acquirer and thereore is not reassessed.

Reassessing assets and liabilities is particularly relevant when acquiring nancial assets and nancial liabilities in a

business combination.

Consideration will be required as to how nancial instruments are classied, whether embedded derivatives

exist (which the acquiree may not have previously recognised) and whether hedge accounting perormed by theacquiree will continue to be highly eective by the acquirer.

The revised FRS 103 shall be applied prospectively to business combinations or which the acquisit ion date is on

or ater the beginning o the rst annual reporting period beginning on or ater 1 July 2009. Earlier application is

permitted. However, the revised FRS 103 shall be applied only at the beginning o an annual reporting period that

begins on or ater 30 June 2007.

Summary of main changes to FRS 27

The main changes o the revised FRS 27 are as ollows:

Acquisitions and d isposals that do not result in a change o control: Changes in a parents ownership

interest in a subsidiary that do not result in a loss o control are accounted or within shareholders equity astransactions with owners acting in their capacity as owners. No gain or loss is recognised on such transactions and

goodwill is not re-measured. Any dierence between the change in the NCI and the air value o the consideration

paid or received is recognised directly in equity and attributed to the owners o the parent.

Loss o control: A parent can lose control o a subsid iary through a sale or distribution, or through some other

transaction or event in which it takes no part (e.g. expropriation or the subsidiary being placed in administration or

bankruptcy).

I a parent loses control o a subsidiary, it:

(a) derecognises the assets (including any goodwill) and liabilities o the subsidiary at their carrying amounts at the

date when control is lost;

(b) derecognises the carrying amount o any non-controlling interests in the ormer subsidiary at the date when

control is lost (including any components o other comprehensive income attributable to them);


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(c) recognises:

(i) the air value o the consideration received, i any, rom the transaction, event or circumstances that

resulted in the loss o control; and

(ii) i the transaction that resulted in the loss o control involves a distribution o shares o the subsidiary to

owners in their capacity as owners, that distribution;

(d) recognises any investment retained in the ormer subsidiary at its air value at the date when control is lost;

(e) reclassies to prot or loss, or transers directly to retained earnings i required in accordance with other FRSs,

the amounts recognised in other comprehensive income in relation to that subsidiary on the same basis as

would be required i the parent had directly disposed o the related assets or liabilities e.g. i a subsidiary has

available-or-sale nancial assets and the parent loses control o the subsid iary, the parent shall reclassiy to

prot or loss the gain or loss previously recognised in other comprehensive income in relation to those assets;

and

() recognises any resulting dierence as a gain or loss in prot or loss attributable to the parent.

Attribution o prot or loss to non-controlling interests: The revised Standard requires an entity to attribute

their share o total comprehensive income to the NCI even i this results in the NCI having a decit balance.

Loss o signicant infuence or joint control: Amendments to FRS 28 and FRS 31 extend the treatment

required or loss o control to these Standards. Thus, when an investor loses signicant infuence over an

associate, it derecognises that associate and recognises in prot or loss the dierence between the sum o the

proceeds received and any retained interest, and the carrying amount o the investment in the associate at the

date signicant infuence is lost. A similar treatment is required when an investor loses joint control over a jointly

controlled entity.

The revised FRS 27 is to be applied or annual periods beginning on or ater 1 July 2009. Earlier application is

permitted. However, an entity shall not apply these amendments or annual periods beginning beore 1 July 2009

unless it also applies the revised FRS 103. An entity shall apply the revised FRS 27 retrospectively, with the ollowing

exceptions:

(a) the requirements or accounting or acquisitions and disposals that do not result in a change o control.

Thereore, the requirements do not apply to changes that occurred beore an entity applies the amendments.

(b) the requirements or accounting or the loss o control o a subsidiary. An entity shall not restate the carrying

amount o an investment in a ormer subsidiary i control was lost beore it applies those amendments. In

addition, an entity shall not recalculate any gain or loss on the loss o control o a subsidiary that occurred

beore the amendments are applied.

(c) the amendment or attributing total comprehensive income to the owners o the parent and to the NCI even i

this results in the NCI having a decit balance. Thereore, an entity shall not restate any prot or loss attribution

or reporting periods beore the amendment is applied.



Consequential amendments to FRS 21 The Effects of Changes in Foreign Exchange Rates

As a consequence o the amendments to FRS 27, FRS 21 has also been amended to clariy the meaning o disposals

as opposed to partial disposals o a oreign operations i.e. where disposals are those that result in loss o control o

a subsidiary, loss o signicant infuence o an associate, or loss o joint control over a jointly controlled entity. On

the disposal o a oreign operation, the cumulative amount o the exchange dierences relating to that oreign

operation, recognised in other comprehensive income and accumulated in the separate component o equity, shall be

reclassied rom equity to prot or loss.

Any other reduction in an entitys ownership interest in a oreign operation is considered as partial disposals. On

partial disposal o a subsidiary that includes a oreign operation, the entity shall re-attribute the proportionate

share o the cumulative amount o the exchange dierences recognised in other comprehensive income to the

non-controlling interests in that oreign operation. In any other partial disposal o a oreign operation the entity

shall reclassiy to prot or loss only the proportionate share o the cumulative amount o the exchange dierences

recognised in other comprehensive income.

Note: Improvements to FRSs was issued in October 2010, and it claries that the above amendment made to FRS

21 should be applied prospectively. The clarication is eective or annual periods beginning on or ater 1 July 2010,

with earlier application permitted.


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FRS 32 (Amended) Financial Instruments: Presentation

- Amendments on classications of rights Issues

Under the amendments, rights, options and warrants issued to acquire a xed number o an entitys own non-deriva-

tive equity instruments or a xed amount in any currency are classied as equity instruments provided that the oer

is made pro-rata to all existing owners o the same class o the entitys non-derivative equity instruments.

The amendment is eective or annual periods beginning on or ater 1 February 2010 with earlier applicationpermitted

FRS 39 (Amended) Financial Instruments: Measurementand INT FRS 109 (Amended)Reassessment of Embedded Derivatives

- Amendments regarding the assessment of embedded derivatives on reclassication

The amendments require an assessment o embedded derivatives when there is a reclassication o a nancial asset

out o the air value through prot or loss (FTVPL) category as permitted by the December 2008 amendments to

FRS 39 and FRS 107 on reclassications.

Prior to the amendments, INT FRS 109 prohibited the reassessment o the separation o an embedded derivative ater

an entity rst became a party to the contract unless there is a change in the terms o the contract that signicantlymodies the cash fows that otherwise would be required under the contract. INT FRS 109 d id not consider whether

reassessment is appropriate when a nancial asset is reclassied out o FVTPL because such reclassications were

prohibited at the time INT FRS 109 was issued.

The amendments added new requirements where:

an entity should assess whether an embedded derivative is required to be separated rom a host contract when the

entity reclassies a hybrid (combined) nancial asset out o the FVTPL category;

such an assessment should be made based on circumstances that existed on the later o (a) when the entity

rst became a party to the contract, i .e. when the nancial asset was initially recognised and (b) when there is a

change in the terms o the contract that signicantly modies the cash fows that otherwise would be requiredunder the contract; and

i the air value o an embedded derivative cannot be reliably measured on reclassication, the entire hybrid

nancial instrument must remain in the FVTPL category.

An entity shall apply these amendments or periods ending on or ater 30 June 2009, and must be applied

retrospectively.



FRS 101 (Revised) - First-time Adoption of Financial Reporting Standards

- Amendments to improve the structure of the Standard

The objective o the revision is to improve the structure o the Standard no new or revised technical material has

been introduced. FRS 101 had been amended a number o times, so that the text o the Standard had become

increasingly complex.

The revisions are designed to make the Standard clearer and easier to ollow by reorganising and moving toappendices most o the Standards numerous exceptions and exemptions. The improved structure is also intended to

better accommodate uture changes to the Standard.

Material has been reorganised within appendices as ollows:

exceptions to the retrospective application o other FRSs (new Appendix B);

exemptions or business combinations (new Appendix C); and

exemptions rom other FRSs (new Appendix D).

Interestingly, another appendix (Appendix E) was created which or the moment is unused, but which could be used

or uture possible short-term exemptions rom FRSs on rst-time adoption.

Certain out-o-date transitional provisions are also removed and some minor wording amendments made.

The revisions are eective or periods beginning on or ater 1 July 2009, with earlier application permitted.

FRS 101 (Amended) - First-time Adoption of Financial Reporting Standards

- Additional Exemptions for First-time Adopters

The amendments relate to two new exemptions related to the accounting on rst-time adoption or oil and gas

assets and arrangements containing leases.

The new exemptions will be refected in FRS 101 and will be eective or annual periods beginning on or ater 1

January 2010 with earlier application permitted.

Exemption for oil and gas assets

For the purposes o this exemption, the term oil and gas assets is limited to those assets used in the exploration and

evaluation (FRS 106) or development and production (FRS 38) o oil and gas.

Under some national GAAPs, exploration and development costs or oil and gas properties in the development or

production phases are accounted or in cost centres that include al l properties in a large geographical area.

FRS 101 has been amended to permit a rst-time adopter that has previously used this basis o accounting to elect to

measure the related oil and gas assets at the date o transition to FRSs on the ollowing basis:

exploration and evaluation assets at amounts determined under the entitys previous GAAP; and

oil and gas assets in the development or production phases at the amount determined or the cost centre under

the entitys previous GAAP. The entity shall allocate this amount to the cost centres underlying assets pro rata

using reserve volumes or reserve values as o that date.


22/7617

Entities electing to use the exemption are required to test both exploration and evaluation assets and assets in the

development and production phases or impairment at the date o transition to FRSs. The exploration and evaluation

assets are tested in accordance with FRS 106 Exploration or and Evaluation o Mineral Resources and development

and production assets are tested in accordance with FRS 36 Impairment o Assets.

Any identied impairment losses must be recognised at the date o transition.

Entities are required to disclose the act that they have used the deemed cost exemption or oil and gas assets and

disclose the basis on which the carrying amounts determined under previous GAAP were allocated.

Decommissioning liabilities included in the cost o property, plant and equipment - Decommissioning

liabilities are included in the cost o property, plant and equipment. I an entity elects to use the deemed cost

exemption discussed above or oil and gas assets in the development or production phases, the entity must:

measure decommissioning, restoration and similar liabilities as at the date o transition to FRSs in accordance with

FRS 37; and

recognise directly in retained earnings any d ierence between that amount and the carrying amount o those

liabilities at the date o transition to FRSs determined under the entitys previous GAAP.

This treatment diers rom the existing exemption in FRS 101 which requires entities to measure the liability as at the

date o transition to FRSs in accordance with FRS 37 and then estimate the amount that would have been included inthe cost o the related asset when the liability rst arose, and calculating accumulated depreciation on the amount,

as o the date o transition.

Exemption for leases

Under INT FRS 104 Determining whether an Arrangement contains a Lease, the assessment as to whether an

arrangement contains a lease is made at the inception o the arrangement. Prior to this new exemption, FRS 101

contained an exemption or all rst-time adopters which allowed them to undertake that assessment or existing

arrangements based on acts and circumstances at the date o transition to FRSs. Alternatively, i the exemption was

not used an entity was required to reer to acts and circumstances at the inception o the arrangement.

An additional exemption has been added to provide urther relie to certain rst-time adopters. The new exemption

applies to a rst-time adopter who has made an assessment o whether an arrangement contains a lease under itsprevious GAAP that is consistent with INT FRS 104, but at a date other than that required under INT FRS 104. With

the exemption, a rst-time adopter will not be required to reassess its determination o whether an arrangement

contains a lease under previous GAAP i that previous determination would have given the same outcome as that

resulting rom the application o FRS 17 Leases and INT FRS 104.



FRS 102 (Amended) Share-Based Payment Group Cash-Settled Share-Based PaymentTransactions

The amendments to FRS 102 clariy the scope o FRS 102, as well as the accounting or group cash-settled share-

based payment transactions in the separate (or individual) nancial statements o an entity receiving the goods or

services when another group entity or shareholder has the obligation to settle the award.

Guidance in these areas previously provided in INT FRS 108Scopeo FRS 102 and INT FRS 111 FRS 102 Group andTreasury Share Transactions have been incorporated into the amended FRS 102 and, as a result, these Interpretations

have been withdrawn rom the eective date o the amendments.

The amendments are eective or annual periods beginning on or ater 1 January 2010, with earlier application

permitted.

Key principles

The amendments to FRS 102:

provide additional guidance on the accounting or share-based payment transactions among group entities

(incorporating guidance previously contained in INT FRS 111); and

amend the scope o the Standard to incorporate the guidance previously provided in INT FRS 108.

Share-based payment transactions among group entities

FRS 102 applies when an entity enters into a share-based payment transaction regardless o whether the transaction

is to be settled by the entity itsel, or by another group member on behal o the entity.

The amendments to FRS 102 clariy the classication o share-based payment transactions or both the entity that

receives the goods or services, and the entity that settles the share-based payment transaction. These amendments

are summarised below.

The entity receiving the goods or services - will recognise the transaction as an equity-settled share-based

payment transaction only i:

the awards granted are its own equity instruments; or

it has no obligation to settle the transaction.

In all other circumstances, the entity will measure the transaction as a cash-settled share-based payment.

Subsequent remeasurement o such equity-settled transactions will only be carried out or changes in non-market

vesting conditions.


24/7619

The entity responsible or settling the transaction - will recognise it as an equity-settled share-based payment

only i the transaction is settled in its own equity instruments. In all other circumstances, the transaction will be

recognised by the entity that settles the award as a cash-settled share-based payment.

The guidance incorporated into FRS 102 can be illustrated or the most commonly occurring scenarios as ollows:

Entity receiving

goods andservices

Obligation to

settle share-basedpayment

transaction

How is it settled? Classication:

Subsidiarysindividual nancial

statements

Classication:

Consolidatednancial

statements

Subsidiary Subsidiary Equity o the

subsidiary

Equity Equity

Subsidiary Subsidiary Cash Cash Cash

Subsidiary Subsidiary Equity o the parent Cash Equity

Subsidiary Parent* Equity o the parent Equity Equity

Subsidiary Parent* Cash Equity Cash

* The same classication will result i the settlement obligation lies with the shareholders or another group entity (e.g.

a ellow subsidiary).

Amendment of the scope of FRS 102

The scope o FRS 102 has been amended to clariy that it applies to all share-based payment transactions, whether or

not the goods or services received under the share-based payment transaction can be individually identied.

Any unidentiable goods and services are measured on the grant date as the dierence between the air values o

the share-based payment and the identiable goods and services. This guidance was previously set out in INT FRS

108.

The amendments to FRS 102 arising rom the incorporation o the requirements o INT FRS 108 and INT FRS 111 are

subject to the eective date and transitional provisions o the original Interpretations (now withdrawn). The other

amendments to FRS 102 are to be applied retrospectively or annual periods beginning on or ater 1 January 2010(subject to the transitional provisions in FRS 102), with earlier application permitted. I sucient inormation or

retrospective application is not available, the entity will refect in its separate or individual nancial statements the

amounts previously recognised in the groups consolidated nancial statements.



INT FRS 117 Distributions of Non-cash Assets to Owners

The Interpretation provides guidance on the appropriate accounting treatment when an entity distributes assets

other than cash as dividends to its shareholders.

Scope

The interpretation applies to non-reciprocal distributions o non-cash assets made by an entity to its shareholders

acting in their capacity as owners, covering:

distributions o non-cash assets (e.g. items o property, plant and equipment, businesses as dened in FRS 103

Business Combinations, ownership interests in another entity and disposal groups as dened in FRS 105); and

distributions that give owners a choice o receiving either non-cash assets or a cash alternative.

Specically excluded rom the scope o the Interpretation are:

distributions in which all owners o the same class o equity instruments are not treated equally. For example,

the Interpretation will not apply i the distribution is made to a specic shareholder and is not oered to other

shareholders o the same class o shares;

distributions o non-cash assets that are ultimately controlled by the same party or parties beore and ater the

distribution; and

distributions by an entity o some o its ownership interest in a subsidiary where the entity retains control o that

subsidiary. In such circumstances, FRS 27 sets out the appropriate accounting treatment.

Issues and Consensus

The specic questions addressed in the Interpretation are:

1) When should the entity recognise the dividend payable?

It was concluded that an entity should recognise a liability when it has incurred an obligation to pay that liability.

In the context o non-cash distributions, the point at which an obligation arises is the point at which the dividendis appropriately authorised (and is no longer at the discretion o the entity), which will vary according to the legal

requirements in particular jurisdictions.

INT FRS 117 concludes that the entity should recognise a liability or a non-cash distribution:

in jurisdictions where the approval o shareholders (or an equivalent authority) is required, when that approval is

obtained; and

in jurisdictions where urther approval o dividends is not required, when the dividend is declared (e.g. by

management or the board o directors).


26/7621

2) How should the entity measure the dividend payable?

It was concluded that the liabili ty should be measured at the air value o the non-cash assets to be distr ibuted. I

shareholders have a choice o receiving either a non-cash asset or a cash alternative, the liability should be measured

considering both the air value o each alternative and managements assessment o the probabilities or each

outcome.

3) When the entity settles the dividend payable, how should it account or any dierence between the

carrying amount o the assets distributed and the carrying amount o the dividend payable?

When an entity settles the dividend payable, the interpretation requires that it should recognise the dierence, i any,

between the carrying amounts o the assets distributed and the carrying amount o the dividend payable in prot or

loss.

Consequential amendment to FRS 105 Non-current Assets Held or Sale and Discontinued Operations

The Interpretation has resulted in consequential amendments to FRS 105 regarding the appropriate treatment o the

non-cash assets held or distribution. Whether or not a non-cash asset is classied as held or distribution to owners

is determined using FRS 105s general principles regarding whether the transaction is highly probable. Reclassication

under FRS 105 can be triggered in advance o approval by shareholders, but it will be necessary to consider the

probability o that approval being obtained (i required in the jurisdiction) as part o the assessment as to whether thetransaction is highly probable.

When the non-cash asset is classied as held or distribution to owners, it is remeasured at the lower o its carrying

amount and air value less costs to d istribute, with any adjustment to carrying amount recognised in accordance

with the general principles o FRS 105. Thereore, where the air value less costs to distribute o an asset accounted

or using the cost model is less than its carrying amount, an impairment loss should be recognised in prot or loss.

Where the air value less costs to distribute is higher than the carrying amount, no adjustment is made until the

distribution is made.

This interpretation is to be applied prospectively. Retrospective application is not permitted.



INT FRS 118 Transfers of Assets from Customers

The Interpretation provides guidance by recipients or transers o property, plant and equipment rom customers.

Scope

The Interpretation applies to all agreements in which an entity receives rom a customer an item o property, plant

and equipment (or cash to construct or acquire an item o property, plant and equipment) that the entity must then

use either to:

connect the customer to a network; or

to provide the customer with ongoing access to a supply o goods or services; or

to do both.

In some cases, the transeror o the asset may not be the entity that will be the recipient o the ongoing supply o

goods and/or services. However, or convenience, the Interpretation reers to the entity transerring the asset as the

customer.

Specically excluded rom the scope o the Interpretation are:

transers o assets that are government grants as dened in FRS 20Accounting or Government Grants and

Disclosure o Government Assistance;

transers o assets that are inrastructure used in service concession arrangements within the scope o INT FRS 112

Service Concession Arrangements; and

accounting or the transer by the customer.

Issues and consensus

The basic principle o INT FRS 118 is that when the item o property, plant and equipment transerred rom a

customer meets the denition o an asset under the FRS Framework rom the perspective o the recipient, the

recipient must recognise the asset in its nancial statements. I the customer continues to control the transerreditem, the asset denition would not be met even i ownership o the asset is transerred to the recipient entity.

The deemed cost o that asset is its air value on the date o the transer.

INT FRS 118 provides guidance on how to identiy the entity's obligation to provide one or more separately identi-

able services in exchange or the transerred asset and, thereore, how to recognise revenue. The ollowing lists

out revenue recognition or the various orms o service obligations:


28/7623

I the entity has only one service obligation, it would recognise revenue when the service is perormed in

accordance with FRS 18;

I the entity has more than one separately identiable service obligation, it should allocate the air value o the total

consideration received to each service and recognise revenue rom each service separately in accordance with FRS

18; and

I the entity has an obligation to provide ongoing services, the period over which revenue is recognised is generally

determined by the terms o the agreement with the customer. I the agreement does not speciy a period, the

revenue shall be recognised over a period no longer than the useul lie o the transerred asset used to provide the

ongoing service.

In addition to the above, the Interpretation suggests that when a connection to a network is delivered to the

customer and represents stand-alone value or that customer, and the air value o the connection to that network

can be measured reliably, the entity would conclude that connecting the customer to a network is a separately identi-

able service, and is thus an event or which revenue should be recognised.

The Interpretation also addresses agreements where an entity receives cash instead items o property, plant and

equipment rom customers, and such agreements are in scope o INT FRS 118. The accounting or the credit side o

such transactions is outlined above.

The Interpretation must be applied prospectively to transers o assets rom customers received on or ater 1

July 2009. Earlier application is permitted provided the valuations and other inormation needed to apply to the

Interpretation to past transers were obtained at the t ime those transers were made.



Revised/amended FRSs and INTFRSs issued in 2010

New/revised/amended FRSs/INT FRSs

General amendments Improvements to FRSs (October 2010)

(reer to document or eective dates)

FRS 24 (Revised) Related Party Disclosures


FRS 101 (Amended) Limited Exemption rom Comparative FRS 107 Disclosures or First-time Adopters


INT FRS 114 (Amended) Prepayments o a Minimum Funding Requirement


INT FRS 115 Agreements or the Construction o Real Estate, with an Accompanying Note


INT FRS 119 Extinguishing Financial Liabilities with Equity Instruments


Improvements to FRSs (October 2010)

This is the third set o Improvements to FRSs that is intended to deal with non-urgent, minor amendments to FRSs.

These amendments ocus on areas o inconsistency in FRSs or where clarication o wording is required. Theimprovements are eective rom 1 January 2011 except i otherwise specied.

Detail of amendments

The ollowing table provides a summary o each o the amendments.


FRS 103 (2009)

Business

Combinations

Measurement o

non-controlling interests

Species that the option to measure non-controlling

interests either at air value or at the proportionate share

o the acquirees net identiable assets at the acquisition

date under FRS 103 (2009) Business Combinations

applies only to non-controlling interests that are present

ownership interests and entitle their holders to aproportionate share o the acquirees net assets in the

event o liquidation

All other components o non-controlling interests (e.g.

equity component o convertible preerence shares),

should be measured at their acquisition date air value,

unless another measurement basis is required by FRSs.


2010. To be applied prospectively rom the date the entity

rst applied FRS 103 (2009). Earlier application permitted.


30/7625


Un-replaced and voluntary

replaced share based payment

awards

Species that the current requirement to measure awards

o the acquirer that replace acquirees share-based

payment transactions in accordance with FRS 102 at the

acquisition date (market- based measure) applies also to

share-based payment transactions o the acquiree that are

not replaced.

Species that the current requirement to allocate the

market-based measure o replacement awards between

the consideration transerred or the business combination

and post-combination remuneration applies to all

replacement awards regardless o whether the acquirer is

obliged to replace the awards or does so voluntarily.


2010. To be applied prospectively rom the date the entity

rst applied FRS 103 (2009). Earlier application permitted

Transitional requirements or

contingent consideration roma business combination that

occurred beore the eective

date o FRS 103 (2009)

Claries that FRS 32 Financial Instruments: Presentation,

FRS 39 Financial Instruments: Recognition andMeasurementand FRS 107 Financial Instruments:

Disclosures do not apply to contingent consideration

that arose rom business combinations whose acquisition

dates preceded the application o FRS 103 (2009).

For such contingent considerations, the requirements o

FRS 103 (2004) continue to apply.



FRS 1 Presentation

o FinancialStatements

Clarication o statement o

changes in equity

Claries that an entity may present the analysis o other

comprehensive income by item either in the statemento changes in equity or in the notes to the nancial

statements.





FRS 27

Consolidated and

Separate Financial

Statements

Transitional requirements or

consequential amendments as

a result FRS 27 (2009)

Claries that the amendments made to FRS 21 The

Eects o Changes in Foreign Rates, FRS 28 Investments

in Associates and FRS 31 Interests in Joint Ventures as a

result o FRS 27 (2009) should be applied prospectively

with an exception or new disclosure requirements or

associates and joint ventures e.g. when there are changes

in ownership interests in those investments. Suchdisclosure requirements apply retrospectively.



FRS 107 Financial

Instruments:

Disclosures

Clarications o disclosures Encourages qualitative disclosures in the context o the

quantitative disclosure required to help users to orm an

overall picture o the nature and extent o risks arising

rom nancial instruments.

Claries the required level o disclosure around credit risk

and collateral held and provides relie rom disclosure o

renegotiated loans.


FRS 34 Interim

Financial

Statements

Signicant events and

transactions

Emphasises the principle in FRS 34 that the disclosure

about signicant events and transactions in interim

periods should update the relevant inormation presented

in the most recent annual nancial report.

Claries how to apply this principle in respect o nancial

instruments and their air values.


INT FRS 113Customer Loyalty

Programmes

Fair value o credit awards Claries that the air value o award credits should takeinto account:

the amount o discounts or incentives that would

otherwise be oered to customers who have not

earned award credits rom an initial sale; and

any expected oreitures.



32/7627

FRS 24 (Revised) Related Party DisclosuresThe revised FRS 24 has the two main areas o change as ollows:

(a) providing a partial exemption rom the disclosure requirements or government-related entities; and

(b) simpliying the denition o a related party, clariying its intended meaning and eliminating inconsistencies rom

the denition.

Partial exemption or government-related entities

The previous version o FRS 24 contained no specic exemption or government-related entities. Many entities,

particularly in an environment where government control is pervasive, ound it problematic in practice to identiy all

government-related entities, and to quantiy all related party transactions and balances with those entities.

As a result, the revised Standard provides a partial exemption rom the d isclosure requirements o FRS 24 or govern-

ment-related entities. Specically, a reporting entity is exempt rom the general disclosure requirements set out in FRS

24 in relation to related party transactions and outstanding balances (including commitments) with:

a government that has control, joint control or signicant infuence over the reporting entity; and

another entity that is a related party because the same government has control, joint control or signicant

infuence over both the reporting entity and the other entity.

In this context, government reers to government, government agencies and similar bodies whether local, national or

international.

However, where a reporting entity is exempt rom the general disclosure requirements in accordance outlined above,

the revised Standard requires the reporting entity to disclose the ollowing inormation about the transactions and

related outstanding balances:

the name o the government and the nature o its relationship with the reporting entity (i.e. control, joint control

or signicant infuence);

The ollowing inormation in sucient detail about:

- the nature and amount o each individually signicant transaction; and

- or other transactions that are collectively, but not individually, signicant, a qualitative or quantitative indication

o their extent.

Regarding the level o detail to be disclosed in relation to transactions that are collectively (but not individually)

signicant, the revised FRS 24 states that the closeness o the related party relationship and other actors relevant inestablishing the level o signicance o the transaction should be considered. Examples o actors to be considered

are whether the transaction:

is signicant in terms o size;

is carried out on non-market terms;

is beyond normal day-to-day business operations (e.g. purchases and sales o businesses);

has been disclosed to regulatory or supervisory authorities;

has been reported to the senior management; and

requires shareholders approval.

The revised FRS 24 contains some i llustrative examples in relation to the application o the revised requirements or

government related entities.



Revised definition of a related party

The revised denition o a related party is as ollows:

A related party is a person or entity that is related to the entity that is preparing its nancial statements (i.e.

reporting entity).

(a) A person or a close member o that persons amily is related to a reporting entity i that person:(I) has control or joint control over the reporting entity;

(ii) has signicant infuence over the reporting entity; or

(iii) is a member o the key management personnel o the reporting entity or o a parent o the reporting

entity.

(b) An entity is related to a reporting entity i any o the ollowing conditions applies:

(i) The entity and the reporting entity are members o the same group (which means that each parent,

subsidiary and ellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture o the other entity (or an associate or joint venture o a

member o a group o which the other entity is a member).

(iii) Both entities are joint ventures o the same third party.

(iv) One entity is a joint venture o a third entity and the other entity is an associate o the third entity.

(v) The entity is a post-employment benet plan or the benet o employees o either the reporting entity

or an entity related to the reporting entity. I the reporting entity is itsel such a plan, the sponsoring

employers are also related to the reporting entity.

(vi) The entity is controlled or jointly controlled by a person identied in (a).

(vii) A person identied in (a)(i) has signicant infuence over the entity or is a member o the key

management personnel o the entity (or o a parent o the entity).

The ollowing are some examples o related parties under the revised FRS 24.

Situation 1 Person as an investor

Entity A(Controlled or

jointly controlledby Person X)

Entity B(Controlled, jointly

controlled orsignificantly

influenced by

Person X

Person X


34/7629

Person X has control or joint control over Entity A. Person X has control, joint control or signicant infuence over

Entity B. The revised FRS 24 states that Entity A and Entity B are related parties or the purposes o the nancial

statements o both entities.

Situation 2 Two associates o an investor

Entity C

(Significantlyinluenced by

Investor J)

Entity D

(Significantlyinluenced by

Investor J)

Investor J

Entity C and Entity D are associates o Investor J. The revised FRS 24 makes it clear that Entity C and Entity D are not

related parties o each other. The rationale as expressed by the IASB in the Basis or Conclusions to IAS 24 (Revised) is

that common investment in two associates is not sucient to conclude that the two associates are related parties.

Situation 3 Investments o members o key management personnel

Entity G(Controlled or


Entity F

(Subsidiary ofEntity E)

Person X(a member of the key

managementpersonnelof Entity F)

Entity E



Entity G is controlled or jointly controlled by Person X. Person X is a member o the key management personnel o

Entity F.

Under the revised FRS 24, Entity F (i.e. the entity managed by Person X) is a related party o Entity G or the purposes

o the nancial statements o Entity G.

The previous version o FRS 24 treated some investees o the key management personnel o a reporting entity as

related parties to the reporting entity. However, the previous version o the FRS 24 did not include the reciprocal o

such a situation. Thereore, to remove the inconsistency, the denition o a related party has been revised to ensure

that Entity F and Entity G are treated as related parties in the nancial statements o Entity F and Entity G.

Note: The outcome will be the same i Person X is a member o key management personnel o Entity E and not Entity F.

Situation 4 Close members o the amily holding investments

Entity H(Controlled or


Entity I(Controlled, jointly

controlled orsignificantly influenced

by Person Y)

Person X Person Y

Husband and wife

Person X and Person Y are husband and wie. Person X has control or joint control over Entity H while Person Y has

control, joint control or signicant infuence over Entity I. The revised FRS 24 states that Entity H and Entity I are

related parties or the purposes o the nancial statements o both entities.

In addition, the revised Standard states that, in relation to the denition o a related party, reerences to an

associate and a joint venture include subsidiaries o the associate and subsidiaries o the joint venture. Thereore,

an associates subsidiary and the investor that has signicant infuence over the associate are related to each other.

The revised Standard is eective or annual periods beginning on or ater 1 January 2011 and requires retrospective

application. Thereore, in the year o initial application, disclosures or the comparative period will need to be

restated.

Earlier application is permitted, either o the whole revised Standard or o the partial exemption or government-

related entities. I an entity applies either the whole Standard or the partial exemption or a period beginning beore

1 January 2011, it is required to disclose that act.


36/7631

FRS 101 (Amended) First-time Adoption of Financial Reporting Standards

- Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters

In 2009, an amendment to FRS 107 Financial Instruments: Disclosures was issued entitled Improving Disclosures

about Financial Instruments (the FRS 107 Amendments). These amendments expanded the disclosures required,

or each class o nancial instruments, in respect o air value measurements recognised in the statement o nancial

position, introduced a three-level air value hierarchy and claried the scope o items to be included in the maturity

analyses required under FRS 107.

The transitional provisions within the FRS 107 Amendments provide relie in the rst year o appl ication rom

providing comparative inormation or the disclosures required by the FRS 107 Amendments or current FRS

preparers. However, FRS 101 was not amended to accommodate the relie at that time.

Consequently, FRS 101 was amended in 2010 to clariy that rst-time adopters will receive the same relie rom

providing comparative period disclosures required by the FRS 107 Amendments as the current FRS preparers.

In addition, it was urther claried that, or both existing FRS preparers and rst-time adopters, an entity need not

provide comparative inormation or the disclosures required by the FRS 107 amendments or any annual compara-

tive periods ending beore 31 December 2009, any interim periods within an annual comparative period ending

beore 31 December 2009, and any statement o nancial position presented within these periods includ ing any

statement o nancial position as at the beginning o the earliest comparative period, i the statement o nancial

position is as at a date beore 31 December 2009. This clarication provides relie to reporting entities presenting

more than one period o comparative inormation and opening statements o nancial position in those cases when

an entity is required to present three statements o nancial position in accordance with FRS 1 or FRS 101.

The amendment to FRS 101 is eective or annual periods beginning on or ater 1 July 2010 with earlier application

permitted.

INT FRS 114 (Amended) The Limit on a Defned Beneft Asset, Minimum FundingRequirements and their Interaction

Prepayments of a Minimum Funding Requirement

The amendments have been made to remedy an unintended consequence o INT FRS 114 where entities are in some

circumstances not permitted to recognise prepayments o minimum unding contributions as an asset.

Background

INT FRS 114 was issued in 2008 to address three issues:

when reunds or reductions in uture contributions should be regarded as available in accordance with FRS 19

Employee Benets;

how minimum unding requirements might aect the availability o reductions in uture contributions; and

when minimum unding requirements might give rise to a liability.



Issue

INT FRS 114 (as originally issued) unintentionally reduced the economic benets available in accordance with FRS 19

arising rom voluntary prepayments o minimum unding contributions.

I an entity is subject to minimum unding requirements or contributions relating to uture benets, INT FRS 114.20

(as originally issued) limited the economic benet available in the orm o reductions in uture contributions to the

present value o:

(a) the estimated uture service cost in each year; less

(b) the estimated minimum unding contributions required in respect o the uture accrual o benets in that year.

INT FRS 114 (as originally issued) d id not consider that a plan surplus may result rom a prepayment o uture

minimum unding contributions and, in some situations, entities may have been prevented rom recognising as

an asset the economic benet arising rom the prepayment. This is because, to the extent that minimum unding

contributions required in respect o the uture accrual o benets exceed service costs calculated under FRS 19 in any

given year, INT FRS 114 species that the present value o that excess reduces the amount o the asset available as a

reduction in uture contributions.

Consensus

Under the amended INT FRS 114.20, i there is a minimum unding requirement or contributions relating to uture

service, the economic benet available as a reduction in uture contributions (and, thereore, the surplus that should

be recognised as an asset) comprises o:

(a) any amount that reduces uture minimum unding requirement contributions or uture services because the

entity made a prepayment (i.e. any amount that the entity has paid beore being required to do so); and

(b) the estimated uture service cost in each period less the estimated minimum unding requirement contributions

that would be required or uture service in that period i there were no prepayment o those contributions as

described in (a).

Further, INT FRS 114 claries that while the amount calculated under (b) may be negative or a given period (i.e. the

estimated minimum unding requirement contribution or that period exceeds the estimated uture service cost or

that same period), the total amount calculated under INT FRS 114.20 (b) can never be less than zero. Accordingly, the

economic benet available as a reduction in uture contributions will correspond, as a minimum, to the amount o

the prepayment, i any.

Effective date and transition

The amendments are eective or annual periods beginning on or ater 1 January 2011. Earlier application is

permitted. I an entity applies the amendments or an earlier period, it should is close that act.

The amendments must be applied rom the beginning o the earliest comparative period presented in the rst annual

nancial statements in which the entity applied INT FRS 114 (mandatory or annual periods beginning on or ater 1

January 2008, but may have been adopted or an earlier accounting period). Any initial adjustment arising rom the

application o the amendments by an entity that had previously applied INT FRS 114 shall be recognised as an adjust-

ment to retained earnings at the beginning o the earliest comparative period presented.


38/7633

INT FRS 115Agreements for Construction of Real Estate with an Accompanying Note

INT FRS 115 is based on its international equivalent IFRIC 15, which standardises accounting practice across jurisdic-

tions or the recognition o revenue among real estate developers or sales o units, such as apartments or houses,

o plan, i.e. beore construction is complete.

Background

The Interpretation provides guidance on how to determine whether an agreement or the construction o real estateis within the scope o FRS 11 Construction Contracts or FRS 18 Revenue and when revenue rom the construction

should be recognised.

Issue and consensus

An agreement or the construction o real estate is a construction contract within the scope o FRS 11 only when the

buyer is able to speciy the major structural elements o the design o the real estate beore the construction begins

and/or speciy major structural changes once construction is in progress (whether it exercises that ability or not). I

the buyer has that ability, FRS 11 applies. I the buyer does not have that ability, FRS 18 applies.

Under FRS 18:

an agreement can be considered as "rendering o services" i the entity is not required to acquire and supply

construction materials, and revenue is recognised by reerence to the stage o completion; and

an agreement will be considered as "sale o goods" i it involves the provision o services together with

construction materials in order to perorm its contractual obligations to deliver real estate to the buyer, and

revenue can only be recognised when the entity has met all the criteria in FRS 18.14 i.e., transer to the buyer

control and the signicant risks and rewards o ownership o the goods.

The interpretation introduces a new concept that the transer o control and signicant risks and rewards in a sale

o goods under FRS 18 could occur continuously as construction progresses, and revenue can be recognised using

percentage completion method. When an entity adopts such accounting, specic disclosures are required, including

how it determines which agreements meet all the criteria in FRS 18.14 continuously as construction progresses. One

o the important indicators o "continuous transer" appears to be that, i the agreement is terminated beore the

construction is complete, the buyer retains the work in progress and the entity has the right to be paid or the work

perormed to date.



The ollowing diagram summarises the above concepts:

Agreement for construction of real estate

INT FRS 15construction

contract?

Agreement is a construction contract - FRS 11Buyer can specify major structural elements of

designs or specify major structural changes duringconstruction

Agreement is for services - FRS 18

Criteria for goods met on continuous basis?

Revenue = % ofcompletion



Sales of goods criteriaper FRS 18

Agreement only forservices?

Agreement is for sale ofgoods - FRS 18

Yes

No

No

No

Yes

Yes

Yes

Yes

Yes

The main expected change in practice is a shit or some entities rom recognising revenue using the percentage o

completion method (i.e. as construction progresses, by reerence to the stage o completion o the development) to

recognising revenue at a single time (i.e. at completion upon or ater delivery).

The main dierences between INT FRS 115 and IFRIC 15 are in the eective dates, and that INT FRS 115 was issued

with an Accompanying Note.

Effective date

INT FRS 115 is eective or annual periods beginning on or ater 1 January 2011. IFRIC 15 however, was eective or

annual periods beginning on or ater 1 January 2009. Both require retrospective application. RAP 11 Pre-Completion

Contracts or the Sale o Development Propertywill cease to have eect ater INT FRS 115 becomes eective.


40/7635

INT FRS 119 Extinguishing Financial Liabilities with Equity Instruments

INT FRS 119 addresses divergent accounting by entities issuing equity instruments in order to extinguish all or part o

a nancial liability (oten

Documents

201011 Changes to Financial Reporting Framework in Singapore