CTools Update March2015

EY IFRS Core Tools

IFRS Update of standards and interpretations in issue at 31 March 2015

1 IFRS Update of standards and interpretations in issue at 31 March 2014

Contents

Introduction 2

Section 1: New pronouncements issued at 31 March 2015 4

Table of mandatory application 4

IFRS 9 Financial Instruments 5

IFRS 10, IFRS 12 and IAS 27 Investment Entities Amendments to IFRS 10, IFRS 12 and IAS 27 6

IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception Amendments to IFRS 10, IFRS 12 and IAS 28 6

IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associateor Joint Venture Amendments to IFRS 10 and IAS 28 7

IFRS 11 Accounting for Acquisitions of Interests in Joint Operations Amendments to IFRS 11 7

IFRS 14 Regulatory Deferral Accounts 8

IFRS 15 Revenue from Contracts with Customers 8

IAS 1 Disclosure Initiative Amendments to IAS 1 10

IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation Amendments to IAS 16 and IAS 38 10

IAS 16 and IAS 41 Agriculture: Bearer Plants Amendments to IAS 16 and IAS 41 11

IAS 19 Defined Benefit Plans: Employee Contributions Amendments to IAS 19 11

IAS 27 Equity Method in Separate Financial Statements Amendments to IAS 27 12

IAS 32 Offsetting Financial Assets and Financial Liabilities Amendments to IAS 32 12

IAS 36 Recoverable Amount Disclosures for Non-Financial Assets Amendments to IAS 36 13

IAS 39 Novation of Derivatives and Continuation of Hedge Accounting Amendments to IAS 39 13

IFRIC 21 Levies 14

Improvements to International Financial Reporting Standards 15

Section 2: Items not taken onto the IFRS Interpretations Committees agenda in Q1 2015 18Section 3: Active IASB projects 23

IFRS Update of standards and interpretations in issue at 31 March 2015 2

Introduction

Companies reporting under International Financial ReportingStandards (IFRS) continue to face a steady flow of new standardsand interpretations. The nature of the resulting changes rangesfrom significant amendments of fundamental principles to someminor changes from the annual improvements process (AIP).They will affect different areas of accounting, such asrecognition, measurement, presentation and disclosure.

Some of the changes have implications that go beyond matters ofaccounting, potentially also impacting the information systems ofmany entities. Furthermore, the changes may impact businessdecisions, such as the creation of joint arrangements or thestructuring of particular transactions.

The challenge for preparers is to gain an understanding of whatlies ahead.

Purpose of this publicationThis publication provides an overview of the upcoming changes instandards and interpretations (pronouncements). It also providesan update on selected active projects. It does not attempt toprovide an in-depth analysis or discussion of the topics. Rather,the objective is to highlight key aspects of these changes.Reference should be made to the text of the pronouncementsbefore taking any decisions or actions.

This publication consists of three sections:

Section 1 provides a high-level overview of the key requirementsof each pronouncement issued by the International AccountingStandards Board (IASB or the Board) and the IFRS InterpretationsCommittee (IFRS IC) as at 31 March 2015 that are applicable forthe first time for annual periods ended March 2015 andthereafter. This overview provides a summary of the transitionalrequirements and a brief discussion of the potential impact thatthe changes may have on an entitys financial statements.

This section is presented in the numerical order of thepronouncements, except for the AIP. All AIP amendments arepresented at the end of Section 1.

In addition, a table comparing mandatory application for differentyear ends is presented at the beginning of Section 1. In the table,the pronouncements are presented in order of their effectivedates. However, many pronouncements contain provisions thatwould allow entities to adopt in earlier periods.

When a standard or interpretation has been issued, but has yet tobe applied by an entity, IAS 8 Accounting Policies, Changes inAccounting Estimates and Errors requires the entity to discloseany known (or reasonably estimable) information relevant tounderstanding the possible impact that the new pronouncementwill have on the financial statements, or indicate the reason fornot doing so. The table at the beginning of Section 1 is helpful inidentifying the pronouncements that fall within the scope of thisdisclosure requirement.

Section 2 provides a summary of the agenda rejection noticespublished in the IFRIC Update

1since 1 January 2015 (our

previous IFRS Update). For agenda rejection notices publishedbefore 1 January 2015, please refer to previous editions ofIFRS Update. In some rejection notices, the IFRS IC refers to theexisting pronouncements that provide adequate guidance. Theserejection notices provide a view on the application of thepronouncements and fall within other accounting literature andaccepted industry practices in paragraph 12 of IAS 8.

Section 3 summarises the key features of selected IASB activeprojects. The Key projects addressed are those initiated withthe objective of issuing new standards and those involvingoverarching considerations across several standards. Otherprojects include amendments with narrower applicability.Generally, only those projects that have reached the exposuredraft stage are included, but in selected cases, significantprojects that have not yet reached the exposure draft stage arealso highlighted.

1The IFRIC Update is available on the IASBs website athttp://www.ifrs.org/Updates/IFRIC+Updates/IFRIC+Updates.htm


IFRS Core ToolsThis publication provides an overview of new pronouncementsissued as at 31 March 2015. Frequent changes to IFRS add to thecomplexity entities face when approaching the financial reportingcycle.

EYs IFRS Core Tools2 provide the starting point for assessing theimpact of these changes to IFRS. Our IFRS Core Tools includea number of practical building blocks that can help the user tonavigate the changing landscape of IFRS. In addition to thispublication, EYs IFRS Core Tools include the publicationsdescribed below.

International GAAP Disclosure Checklist

Our 2015 edition of International GAAP Disclosure Checklistcaptures disclosure requirements applicable to periods ended30 June 2015 or thereafter, disclosures that are permitted to beadopted early. These disclosure requirements are for allpronouncements issued as at 28 February 2015. This tool assistspreparers to comply with the presentation and disclosurerequirements of IFRS in their interim and year-end IFRS financialstatements. Previous editions of this tool for earlier year-endsare available on our EYs IFRS Core Tools website.

Good Group (International) Limited

Good Group (International) Limited for the year ended31 December 2014 is a set of illustrative financial statements,incorporating presentation and disclosure requirements that arein issue as at 31 August 2014 and effective for the year ended31 December 2014. Good Group (International) Limited Illustrative interim condensed financial statements for the periodended 30 June 2015, based on IFRS in issue at 28 February2015, supplements Good Group (International) Limited Illustrative financial statements. Among other things, theseillustrative financial statements can assist in understanding theimpact accounting changes may have on the financialstatements.

2 EYs core tools are available onhttp://www.ey.com/GL/en/Issues/IFRS/Issues_GL_IFRS_NAV_Core-tools-library

Good Group (International) Limited is supplemented by illustrativefinancial statements that are aimed at specific sectors, industriesand circumstances. These include:

Good Group (International) Limited An Alternative Format Good Investment Fund Limited (Equity) Good Investment Fund Limited (Liabilities) Good Mining (International) Limited Good Petroleum (International) Limited Good Real Estate Group (International) Limited

Also available from EY:Other EY publications

References to other EY publications that contain further detailsand discussion on these topics are included throughout the IFRSUpdate, all of which can be downloaded from our website3.

International GAAP 20154

Our International GAAP 2015 is a comprehensive guide tointerpreting and implementing IFRS5. It includes pronouncementsmentioned in this publication that were issued prior to September2014, and it provides examples that illustrate how therequirements are applied.

3 These publications are available on http://www.ey.com/ifrs4 International GAAP is a registered trademark of Ernst & Young LLP (UK).5 International GAAP is available on http://www.igaap.info


Table of mandatory application

New pronouncement Page Effective Date* Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

IFRS 10, IFRS 12 and IAS 27 Investment Entities - Amendments to IFRS 10, IFRS 12 and IAS 27 6 1 Jan 2014 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015

IAS 32 Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32 12 1 Jan 2014 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015

IAS 36 Recoverable Amount Disclosures for Non-Financial Assets - Amendments to IAS 36 13 1 Jan 2014 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015

IAS 39 Novation of Derivatives and Continuation of Hedge Accounting - Amendments to IAS 39 13 1 Jan 2014 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015

IFRIC 21 Levies 14 1 Jan 2014 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015

IAS 19 Defined Benefit Plans: Employee Contributions - Amendments to IAS 19 11 1 July 2014 2016 2016 2016 2016 2016 2015 2015 2015 2015 2015 2015 2015

AIP IFRS 2 Share-based Payment - Definitions of vesting conditions 15 1 Jul 2014 2016 2016 2016 2016 2016 2015 2015 2015 2015 2015 2015 2015

AIP IFRS 3 Business Combinations - Accounting for contingent consideration in a business combination 15 1 Jul 2014 2016 2016 2016 2016 2016 2015 2015 2015 2015 2015 2015 2015

AIP IFRS 8 Operating Segments - Aggregation of operating segments 15 1 Jul 2014 2016 2016 2016 2016 2016 2015 2015 2015 2015 2015 2015 2015

AIP IFRS 8 Operating Segments - Reconciliation of the total of the reportable segments assets to the entity's assets 15 1 Jul 2014 2016 2016 2016 2016 2016 2015 2015 2015 2015 2015 2015 2015AIP IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets - Revaluation method - proportionate restatement ofaccumulated depreciation/amortisation

16 1 Jul 2014 2016 2016 2016 2016 2016 2015 2015 2015 2015 2015 2015 2015

AIP IAS 24 Related Party Disclosures - Key management personnel 16 1 Jul 2014 2016 2016 2016 2016 2016 2015 2015 2015 2015 2015 2015 2015

AIP IFRS 3 Business Combinations - Scope exceptions for joint ventures 15 1 Jul 2014 2016 2016 2016 2016 2016 2015 2015 2015 2015 2015 2015 2015

AIP IFRS 13 Fair Value Measurement - Scope of paragraph 52 (portfolio exception) 16 1 Jul 2014 2016 2016 2016 2016 2016 2015 2015 2015 2015 2015 2015 2015

AIP IAS 40 Investment Property - Interrelationship between IFRS 3 and IAS 40 (ancillary services) 16 1 Jul 2014 2016 2016 2016 2016 2016 2015 2015 2015 2015 2015 2015 2015IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - Amendments toIFRS 10 and IAS 28

7 1 Jan 2016 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2016

IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception - Amendments to IFRS 10, IFRS 12and IAS 28

6 1 Jan 2016 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2016

IFRS 11 Accounting for Acquisitions of Interests in Joint Operations - Amendments to IFRS 11 7 1 Jan 2016 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2016

IFRS 14 Regulatory Deferral Accounts 8 1 Jan 2016 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2016

IAS 1 Disclosure Initiative - Amendments to IAS 1 10 1 Jan 2016 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2018

IAS 16 and IAS 38 - Clarification of Acceptable Methods of Depreciation and Amortisation - Amendments to IAS 16 and IAS 38 10 1 Jan 2016 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2016

IAS 16 and IAS 41 Agriculture - Bearer Plants - Amendments to IAS 16 and IAS 41 11 1 Jan 2016 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2016

IAS 27 - Equity Method in Separate Financial Statements - Amendments to IAS 27 11 1 Jan 2016 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2016

AIP IFRS 5 Non-current Assets Held for Sale and Discontinued Operations - Changes in methods of disposal 17 1 Jan 2016 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2016

AIP IFRS 7 Financial Instruments: Disclosures - Servicing contracts 17 1 Jan 2016 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2016AIP IFRS 7 Financial Instruments: Disclosures - Applicability of the offsetting disclosures to condensed interim financialstatements

17 1 Jan 2016 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2016

AIP IAS 19 Employee Benefits - Discount rate: regional market issue 17 1 Jan 2016 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2016

AIP IAS 34 Interim Financial Reporting - Disclosure of information 'elsewhere in the interim financial report' 17 1 Jan 2016 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2016

IFRS 15 Revenue from Contracts with Customers 8 1 Jan 2017 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2017

IFRS 9 Financial Instruments 5 1 Jan 2018 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2018

First time applied in annual periods ending on the last day of these months**

AIP: Annual IFRS Improvements Process. *Effective for annual periods beginning on or after this date. ** Assuming that an entity has not early adopted the pronouncement according to specific provisions in the standard. Standards already effective for entities with these year-ends.

Section 1: New pronouncements issued as at 31 March 2015


IFRS 9 Financial InstrumentsEffective for annual periods beginning on or after 1 January 2018.

Key requirements

Classification and measurement of financial assetsAll financial assets are measured at fair value on initialrecognition, adjusted for transaction costs if the instrument isnot accounted for at fair value through profit or loss (FVTPL).

Debt instruments are subsequently measured at FVTPL,amortised cost or fair value through other comprehensive income(FVOCI), on the basis of their contractual cash flows and thebusiness model under which the debt instruments are held.

There is a fair value option (FVO) that allows financial assets oninitial recognition to be designated as FVTPL if that eliminates orsignificantly reduces an accounting mismatch.

Equity instruments are generally measured at FVTPL. However,entities have an irrevocable option on an instrument-by-instrumentbasis to present changes in the fair value of non-trading instrumentsin other comprehensive income (OCI) (without subsequentreclassification to profit or loss).

Classification and measurement of financial liabilitiesFor financial liabilities designated as FVTPL using the FVO, theamount of change in the fair value of such financial liabilities thatis attributable to changes in credit risk must be presented in OCI.The remainder of the change in fair value is presented in profit orloss, unless presentation of the fair value change in respect ofthe liabilitys credit risk in OCI would create or enlarge anaccounting mismatch in profit or loss.

All other IAS 39 Financial Instruments: Recognition andMeasurement classification and measurement requirements forfinancial liabilities have been carried forward into IFRS 9,including the embedded derivative separation rules and thecriteria for using the FVO.

ImpairmentThe impairment requirements are based on an expected creditloss (ECL) model that replaces the IAS 39 incurred loss model.The ECL model applies to: debt instruments accounted for atamortised cost or at FVOCI; most loan commitments; financialguarantee contracts; contract assets under IFRS 15; and leasereceivables under IAS 17 Leases.

Entities are generally required to recognise either 12-months orlifetime ECL, depending on whether there has been a significantincrease in credit risk since initial recognition (or when thecommitment or guarantee was entered into). For some tradereceivables, the simplified approach may be applied whereby thelifetime expected credit losses are always recognised.

Hedge accountingHedge effectiveness testing is prospective, without the 80% to125% bright line test in IAS 39, and, depending on the hedgecomplexity, can be qualitative.

A risk component of a financial or non-financial instrument maybe designated as the hedged item if the risk component isseparately identifiable and reliably measureable.

The time value of an option, any forward element of a forwardcontract and any foreign currency basis spread, can be excludedfrom the designation as the hedging instrument and accountedfor as costs of hedging.

More designations of groups of items as the hedged item arepossible, including layer designations and some net positions.

TransitionEarly application is permitted for reporting periods beginningafter 24 July 2014. The transition to IFRS 9 differs byrequirements and is partly retrospective and partly prospective.Despite the requirement to apply IFRS 9 in its entirety, entitiesmay elect to apply early only the requirements for thepresentation of gains and losses on financial liabilities designatedas FVTPL without applying the other requirements in thestandard.

Impact

The application of IFRS 9 may change the measurement andpresentation of many financial instruments, depending on theircontractual cash flows and business model under which they are held.The impairment requirements will generally result in earlierrecognition of credit losses. The new hedging model may lead tomore economic hedging strategies meeting the requirements forhedge accounting.

Other EY publicationsIFRS Developments Issue 100: Basel Committee proposesguidance on accounting for expected credit losses (February2015) EYG no. AU2891

Applying IFRS - Impairment of financial instruments under IFRS 9(December 2014) EYG no. AU2827

IFRS Developments Issue 87: IASB issues IFRS 9 FinancialInstruments expected credit losses (July 2014) EYG no. AU2537

IFRS Developments Issue 86: IASB issues IFRS 9 FinancialInstruments classification and measurement (July 2014) EYG no.AU2536

Applying IFRS Hedge accounting under IFRS 9 (February 2014)EYG no. AU2185.


IFRS 10, IFRS 12 and IAS 27 Investment Entities Amendments to IFRS 10, IFRS 12 and IAS 27Effective for annual periods beginning on or after 1 January 2014.

Key requirements

The investment entities amendments provide an exception to theconsolidation requirement for entities that meet the definition ofan investment entity.

The key amendments include:

Investment entity is defined in IFRS 10 ConsolidatedFinancial Statements

An entity must meet all three elements of the definition andconsider whether it has four typical characteristics, in orderto qualify as an investment entity

An entity must consider all facts and circumstances,including its purpose and design, in making its assessment

An investment entity accounts for its investments insubsidiaries at fair value through profit or loss inaccordance with IFRS 9 (or IAS 39, as applicable), exceptfor investments in subsidiaries that provide services thatrelate to the investment entitys investment activities,which must be consolidated

An investment entity must measure its investment inanother controlled investment entity at fair value

A non-investment entity parent of an investment entity isnot permitted to retain the fair value accounting that theinvestment entity subsidiary applies to its controlledinvestees

For venture capital organisations, mutual funds, unit trustsand others that do not qualify as investment entities, theexisting option in IAS 28 Investments in Associates and JointVentures, to measure investments in associates and jointventures at fair value through profit or loss, is retained

Transition

The amendments must be applied retrospectively, subject tocertain transition reliefs.

Impact

The concept of an investment entity is new in IFRS. Theamendments represent a significant change for investmententities, which were required to consolidate investees that theycontrol. Significant judgement of facts and circumstances may berequired to assess whether an entity meets the definition ofinvestment entity.

Other EY publications

IFRS Developments Issue 44: Investment entities finalamendment exception to consolidation (October 2012)EYG no. AU1330.

IFRS 10, IFRS 12 and IAS 28 Investment Entities:Applying the Consolidation Exception -Amendments to IFRS 10, IFRS 12 and IAS 28Effective for annual periods beginning on or after 1 January 2016.

Key requirements

The amendments address issues that have arisen in applying theinvestment entities exception under IFRS 10.

The amendments to IFRS 10 clarify that the exemption (inIFRS 10.4) from presenting consolidated financial statementsapplies to a parent entity that is a subsidiary of an investmententity, when the investment entity measures all of its subsidiariesat fair value.

Furthermore, the amendments to IFRS 10 clarify that only asubsidiary of an investment entity that is not an investmententity itself and that provides support services to the investmententity is consolidated. All other subsidiaries of an investmententity are measured at fair value.

The amendments to IAS 28 allow the investor, when applying theequity method, to retain the fair value measurement applied bythe investment entity associate or joint venture to its interestsin subsidiaries.

Transition

The amendments must be applied retrospectively. Earlyapplication is permitted and must be disclosed.

Impact

The amendments to IFRS 10 and IAS 28 provide helpfulclarifications that will assist preparers in applying the standardsmore consistently. However, it may still be difficult to identifyinvestment entities in practice when they are part of a multi-layered group structure.


IFRS Developments Issue 97: IASB issues amendments to theinvestment entities consolidation exception (December 2014)EYG no. AU2833


IFRS 10 and IAS 28 Sale or Contribution of Assetsbetween an Investor and its Associate or JointVenture Amendments to IFRS 10 and IAS 28Effective for annual periods beginning on or after 1 January 2016.

Key requirements

The amendments address the conflict between IFRS 10 andIAS 28 in dealing with the loss of control of a subsidiary that issold or contributed to an associate or joint venture.

The amendments clarify that the gain or loss resulting from thesale or contribution of assets that constitute a business, asdefined in IFRS 3 Business Combinations, between an investorand its associate or joint venture, is recognised in full. Any gainor loss resulting from the sale or contribution of assets that donot constitute a business, however, is recognised only to theextent of unrelated investors interests in the associate or jointventure.

Transition

The amendments must be applied prospectively. Early applicationis permitted and must be disclosed.

Impact

The amendments will effectively eliminate diversity in practiceand give preparers a consistent set of principles to apply for suchtransactions. However, the application of the definition of abusiness is judgemental and entities need to consider thedefinition carefully in such transactions.

IFRS 11 Accounting for Acquisitions of Interests inJoint Operations Amendments to IFRS 11Effective for annual periods beginning on or after 1 January 2016.

Key requirements

The amendments require an entity acquiring an interest in a jointoperation in which the activity of the joint operation constitutes abusiness to apply, to the extent of its share, all of the principles inIFRS 3, and other IFRSs, that do not conflict with therequirements of IFRS 11. Furthermore, entities are required todisclose the information required in those IFRSs in relation tobusiness combinations.

The amendments also apply to an entity on the formation of ajoint operation if, and only if, an existing business is contributedby the entity to the joint operation on its formation.

Furthermore, the amendments clarify that for the acquisition ofan additional interest in a joint operation in which the activity ofthe joint operation constitutes a business, previously heldinterests in the joint operation must not be remeasured if thejoint operator retains joint control.

Transition

The amendments are applied prospectively. Early application ispermitted and must be disclosed.

Impact

The amendments to IFRS 11 increase the scope of transactionsthat would need to be assessed to determine whether theyrepresent the acquisition of a business or an asset, which wouldbe highly judgemental. Entities need to consider the definitioncarefully and select the appropriate accounting method based onthe specific facts and circumstances of the transaction.


Applying IFRS in the Oil & Gas Sector: Potential implications ofthe amendments to IFRS 11 Joint Arrangements (November2014) EYG no. AU2749

Applying IFRS: Challenges in adopting and applying IFRS 11(June 2014) EYG no. AU2512.


IFRS 14 Regulatory Deferral AccountsEffective for annual periods beginning on or after 1 January 2016.

Key requirements

IFRS 14 allows an entity, whose activities are subject to rate-regulation, to continue applying most of its existing accountingpolicies for regulatory deferral account balances upon its first-time adoption of IFRS. The standard does not apply to existingIFRS preparers. Also, an entity whose current GAAP does notallow the recognition of rate-regulated assets and liabilities,or that has not adopted such policy under its current GAAP,would not be allowed to recognise them on first-time applicationof IFRS.

Entities that adopt IFRS 14 must present the regulatory deferralaccounts as separate line items on the statement of financialposition and present movements in these account balances asseparate line items in the statement of profit or loss and othercomprehensive income.

The standard requires disclosures on the nature of, and risksassociated with, the entitys rate regulation and the effects ofthat rate regulation on its financial statements.

Transition

Early application is permitted and must be disclosed.

Impact

IFRS 14 provides first-time adopters of IFRS with relief fromderecognising rate-regulated assets and liabilities until acomprehensive project on accounting for such assets andliabilities is completed by the IASB. The comprehensive rate-regulated activities project is on the IASBs active agenda.


Applying IFRS for IFRS 14 Regulatory Deferral Accounts(November 2014) EYG no. AU2640

IFRS Developments Issue 72: The IASB issues IFRS 14 interimstandard on regulatory deferral accounts (February 2014)EYG no. AU2146.

IFRS 15 Revenue from Contracts with CustomersEffective for annual periods beginning on or after 1 January 2017.

Key requirements

IFRS 15 replaces all existing revenue requirements in IFRS(IAS 11 Construction Contracts, IAS 18 Revenue,IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreementsfor the Construction of Real Estate, IFRIC 18 Transfers of Assetsfrom Customers and SIC 31 Revenue Barter TransactionsInvolving Advertising Services) and applies to all revenue arisingfrom contracts with customers. It also provides a model for therecognition and measurement of disposal of certain non-financialassets including property, equipment and intangible assets.

The standard outlines the principles an entity must apply tomeasure and recognise revenue. The core principle is that anentity will recognise revenue at an amount that reflects theconsideration to which the entity expects to be entitled inexchange for transferring goods or services to a customer.

The principles in IFRS 15 will be applied using a five-step model:1. Identify the contract(s) with a customer

2. Identify the performance obligations in the contract

3. Determine the transaction price

4. Allocate the transaction price to the performance obligationsin the contract

5. Recognise revenue when (or as) the entity satisfies aperformance obligation

The standard requires entities to exercise judgement, takinginto consideration all of the relevant facts and circumstanceswhen applying each step of the model to contracts with theircustomers.

The standard also specifies how to account for the incrementalcosts of obtaining a contract and the costs directly related tofulfilling a contract.

Application guidance is provided in IFRS 15 to assist entities inapplying its requirements to certain common arrangements,including licences of intellectual property, warranties, rights ofreturn, principal-versus-agent considerations, options foradditional goods or services and breakage.


Transition

Entities can choose to apply the standard using either a fullretrospective approach with some limited relief provided, or amodified retrospective approach. Early application is permittedand must be disclosed.

Impact

IFRS 15 is more prescriptive than current IFRS and providesmore application guidance. The disclosure requirements are alsomore extensive. The standard will affect entities across allindustries. Adoption will be a significant undertaking for mostentities with potential changes to an entitys current accounting,systems and processes. Therefore, it is important for entities tostart assessing the impact early. In addition, as the IASB andFASB (together, the Boards) and the Joint Transition ResourceGroup for Revenue Recognition (TRG) continue to discussimplementation issues, it will be important for entities to monitortheir discussions. See Section 3 Active IASB projects for moredetails.


Applying IFRS: Joint Transition Resource Group for RevenueRecognition discusses more implementation issues (April 2015)EYG no. AU3075

Applying IFRS: The new revenue standard affects more than justrevenue (February 2015) EYG no. AU2881

Applying IFRS: The new revenue recognition standard JointTransition Resource Group (February 2015) EYG no. AU2888

Applying IFRS: A closer look at the new revenue recognitionstandard (June 2014) EYG no. AU2516

IFRS Developments Issue 104: IASB and FASB decide to makemore changes to their new revenue standards (March 2015)EYG no. AU3019

IFRS Developments Issue 102: Boards reach different decisionson some of the proposed changes to the new revenue standards(February 2015) EYG no. AU2918

IFRS Developments Issue 95: Joint Transition Resource Grouptackles new revenue topics (November 2014) EYG no. AU2731

IFRS Developments Issue 92: Audit committee considerationsfor the new revenue standard (October 2014) EYG no. AU2661

IFRS Developments Issue 85: Joint Transition Resource Groupfor Revenue Recognition debates implementation issues (July2014) EYG no. AU2535

IFRS Developments Issue 80: IASB and FASB issue new revenuerecognition standard IFRS 15 (May 2014) EYG no. AU2427.Sector publications Applying IFRS: The new revenue recognitionstandard

Asset Management (January 2015) EYG no. AU2874 Automotive Industry (December 2014) EYG no. AU2786 Insurance (February 2015) EYG no. AU2921 Life Sciences (November 2014) EYG no. AU2573 Real estate (March 2015) EYG no. AU2978 Software and cloud services (January 2015) EYG no. 2828 Technology (January 2015) EYG no. AU2829 Telecommunications (March 2015) EYG no. AU2922

Sector publications - IFRS Developments: The new revenuerecognition standard

Mining & Metals (September 2014) EYG no. AU2603 Oil & Gas (October 2014) EYG no. AU2651 Oil & Gas Oilfield Services (October 2014)

EYG no. AU2665

Power and Utilities (September 2014) EYG no. AU2618 Retail and Consumer Products (September 2014)

EYG no. AU2619


IAS 1 Disclosure Initiative Amendments to IAS 1Effective for annual periods beginning on or after 1 January 2016.

Key requirements

The amendments to IAS 1 Presentation of Financial Statementsclarify, rather than significantly change, existing IAS 1requirements.

The amendments clarify

The materiality requirements in IAS 1 That specific line items in the statement(s) of profit or loss

and OCI and the statement of financial position may bedisaggregated

That entities have flexibility as to the order in which theypresent the notes to financial statements

That the share of OCI of associates and joint venturesaccounted for using the equity method must be presentedin aggregate as a single line item, and classified betweenthose items that will or will not be subsequently reclassifiedto profit or loss

Furthermore, the amendments clarify the requirements thatapply when additional subtotals are presented in the statement offinancial position and the statement(s) of profit or loss and othercomprehensive income.

Transition

Early application is permitted and entities do not need to disclosethat fact because the Board considers these amendments to beclarifications that do not affect an entitys accounting policies oraccounting estimates.

Impact

These amendments are intended to assist entities in applyingjudgement when meeting the presentation and disclosurerequirements in IFRS, and do not affect recognition andmeasurement.


IFRS Developments Issue 98: IASB makes progress on theDisclosure Initiative (December 2014) EYG no. AU2836.

IAS 16 and IAS 38 Clarification of AcceptableMethods of Depreciation and Amortisation Amendments to IAS 16 and IAS 38Effective for annual periods beginning on or after 1 January 2016.

Key requirements

The amendments clarify the principle in IAS 16 Property, Plantand Equipment and IAS 38 Intangible Assets that revenue reflectsa pattern of economic benefits that are generated from operatinga business (of which the asset is part) rather than the economicbenefits that are consumed through use of the asset. As a result,the ratio of revenue generated to total revenue expected to begenerated cannot be used to depreciate property, plant andequipment and may only be used in very limited circumstances toamortise intangible assets.

Transition

The amendments are effective prospectively. Early application ispermitted and must be disclosed.

Impact

Entities currently using revenue-based amortisation methods forproperty, plant and equipment will need to change their currentamortisation approach to an acceptable method, such as thediminishing balance method, which would recognise increasedamortisation in the early part of the assets useful life. Revenuegenerated may be used to amortise an intangible asset only invery limited circumstances.


IFRS Developments Issue 78: IASB prohibits revenue-baseddepreciation (May 2014) EYG no. AU2353.


IAS 16 and IAS 41 Agriculture: Bearer Plants Amendments to IAS 16 and IAS 41Effective for annual periods beginning on or after 1 January 2016.

Key requirements

The amendments to IAS 16 and IAS 41 Agriculture change thescope of IAS 16 to include biological assets that meet thedefinition of bearer plants (e.g., fruit trees). Agriculturalproduce growing on bearer plants (e.g., fruit growing on atree) will remain within the scope of IAS 41. As a result of theamendments, bearer plants will be subject to all the recognitionand measurement requirements in IAS 16 including the choicebetween the cost model and revaluation model for subsequentmeasurement.

In addition, government grants relating to bearer plants will beaccounted for in accordance with IAS 20 Accounting forGovernment Grants and Disclosure of Government Assistance,instead of IAS 41.

Transition

Entities may apply the amendments on a fully retrospective basis.Alternatively, an entity may choose to measure a bearer plant atits fair value at the beginning of the earliest period presented.Earlier application is permitted and must be disclosed.

Impact

The requirements will not entirely eliminate the volatility in profitor loss as agricultural produce will still be measured at fair value.Furthermore, entities will need to determine appropriatemethodologies to measure the fair value of these assetsseparately from the bearer plants on which they are growing,which may increase the complexity and subjectivity of themeasurement.


IFRS Developments Issue 84: Bearer plants the newrequirements (July 2014) EYG no. AU2518.

IAS 19 Defined Benefit Plans: EmployeeContributions Amendments to IAS 19Effective for annual periods beginning on or after 1 July 2014.

Key requirements

IAS 19 requires an entity to consider contributions fromemployees or third parties when accounting for defined benefitplans. IAS 19 requires such contributions that are linked toservice to be attributed to periods of service as a negativebenefit.

The amendments clarify that, if the amount of the contributionsis independent of the number of years of service, an entity ispermitted to recognise such contributions as a reduction inthe service cost in the period in which the service is rendered,instead of allocating the contributions to the periods of service.Examples of such contributions include those that are a fixedpercentage of the employees salary, a fixed amount ofcontributions throughout the service period, or contributionsthat depend on the employees age.

Transition

The amendments must be applied retrospectively.

Impact

These changes provide a practical expedient for simplifying theaccounting for contributions from employees or third parties incertain situations.


IAS 27 Equity Method in Separate FinancialStatements Amendments to IAS 27Effective for annual periods beginning on or after 1 January 2016.

Key requirements

The amendments to IAS 27 Separate Financial Statements allowan entity to use the equity method as described in IAS 28 toaccount for its investments in subsidiaries, joint ventures andassociates in its separate financial statements. Therefore, anentity must account for these investments either:

At cost In accordance with IFRS 9 (or IAS 39)

Or

Using the equity method

The entity must apply the same accounting for each categoryof investments.

A consequential amendment was also made to IFRS 1 First-timeAdoption of International Financial Reporting Standards. Theamendment to IFRS 1 allows a first-time adopter accounting forinvestments in the separate financial statements using the equitymethod, to apply the IFRS 1 exemption for past businesscombinations to the acquisition of the investment.

Transition

The amendments must be applied retrospectively. Earlyapplication is permitted and must be disclosed.

Impact

The amendments eliminate a GAAP difference for countrieswhere regulations require entities to present separate financialstatements using the equity method to account for investmentsin subsidiaries, associates and joint ventures.

IAS 32 Offsetting Financial Assets and FinancialLiabilities Amendments to IAS 32Effective for annual periods beginning on or after 1 January 2014.

Key requirements

The amendments to IAS 32 Financial Instruments: Presentationclarify the meaning of currently has a legally enforceable right toset-off. The amendments also clarify the application of theIAS 32 offsetting criteria to settlement systems (such as centralclearing house systems), which apply gross settlementmechanisms that are not simultaneous.

The amendments clarify that rights of set-off must not only belegally enforceable in the normal course of business, but mustalso be enforceable in the event of default and the event ofbankruptcy or insolvency of all of the counterparties to thecontract, including the reporting entity itself. The amendmentsalso clarify that rights of set-off must not be contingent on afuture event.

The amendments clarify that only gross settlement mechanismswith features that eliminate or result in insignificant credit andliquidity risk and that process receivables and payables in a singlesettlement process or cycle would be, in effect, equivalent to netsettlement and, therefore, meet the net settlement criterion.

Transition


Impact

Entities will need to review legal documentation and settlementprocedures, including those applied by the central clearinghouses they deal with to ensure that offsetting of financialinstruments is still possible under the new criteria. Changes inoffsetting may have a significant impact on financial statementpresentation. The effect on leverage ratios, regulatory capitalrequirements, etc., will need to be considered.


Applying IFRS: Offsetting financial instruments: clarifying theamendments (May 2012) EYG no. AU1182.

IFRS Developments Issue 22: Offsetting of financial instruments(December 2011) EYG no. AU1053.


IAS 36 Recoverable Amount Disclosures for Non-Financial Assets Amendments to IAS 36Effective for annual periods beginning on or after 1 January 2014.

Key requirements

The amendments to IAS 36 Impairment of Assets clarify thedisclosure requirements in respect of fair value less costs ofdisposal. The amendments remove the requirement to disclosethe recoverable amount for each cash-generating unit for whichthe carrying amount of goodwill or intangible assets withindefinite useful lives allocated to that unit is significant.

In addition, the IASB added two disclosure requirements:

Additional information about the fair value measurementof impaired assets when the recoverable amount is basedon fair value less costs of disposal.

Information about the discount rates that have been usedwhen the recoverable amount is based on fair value lesscosts of disposal using a present value technique. Theamendments harmonise disclosure requirements betweenvalue in use and fair value less costs of disposal.

Transition


Impact

As a result of the amendments, entities are no longer required todisclose information that was regarded as commercially sensitiveby preparers. Nevertheless, additional information needs to beprovided. In general, it is likely that the information required tobe disclosed will be readily available.

IAS 39 Novation of Derivatives and Continuation ofHedge Accounting Amendments to IAS 39Effective for annual periods beginning on or after 1 January 2014.

Key requirements

The amendments provide an exception to the requirement todiscontinue hedge accounting in certain circumstances in whichthere is a change in counterparty to a hedging instrument inorder to achieve clearing for that instrument. The amendmentscover novations:

That arise as a consequence of laws or regulations, or theintroduction of laws or regulations

In which the parties to the hedging instrument agree thatone or more clearing counterparties replace the originalcounterparty to become the new counterparty to each ofthe parties

That did not result in changes to the terms of the originalderivative other than changes directly attributable to thechange in counterparty to achieve clearing

All of the above criteria must be met to continue hedge accountingunder this exception.

The amendments cover novations to central counterparties, aswell as to intermediaries such as clearing members, or clients ofthe latter that are themselves intermediaries.

For novations that do not meet the criteria for the exception,entities have to assess the changes to the hedging instrumentagainst the derecognition criteria for financial instruments andthe general conditions for continuation of hedge accounting.

Transition

The amendments must be applied retrospectively. However,entities that discontinued hedge accounting in the past, becauseof a novation that would be in the scope of the amendments, maynot reinstate that previous hedging relationship.

Impact

The amendments are, in effect, a relief from the hedgeaccounting requirements, and will allow entities to better reflecthedge relationships in the circumstances in which the novationexception applies.


IFRS Developments Issue 62: Amendments to IAS 39: Continuinghedge accounting after novation (June 2013) EYG no. AU1700.


IFRIC 21 LeviesEffective for annual periods beginning on or after 1 January 2014.

Key requirements

IFRIC 21 is applicable to all levies other than outflows that arewithin the scope of other standards (e.g., IAS 12 Income Taxes)and fines or other penalties for breaches of legislation. Levies aredefined in the interpretation as outflows of resources embodyingeconomic benefits imposed by government on entities inaccordance with legislation.

The interpretation clarifies that an entity recognises a liability fora levy when the activity that triggers payment, as identified bythe relevant legislation, occurs. It also clarifies that a levy liabilityis accrued progressively only if the activity that triggers paymentoccurs over a period of time, in accordance with the relevantlegislation. For a levy that is triggered upon reaching a minimumthreshold, the interpretation clarifies that no liability isrecognised before the specified minimum threshold is reached.

The interpretation does not address the accounting for the debitside of the transaction that arises from recognising a liability topay a levy. Entities look to other standards to decide whether therecognition of a liability to pay a levy would give rise to an assetor an expense under the relevant standards.

Transition

The interpretation must be applied retrospectively.

ImpactThe interpretation is intended to eliminate diversity in practice onthe treatment for the obligation to pay levies. The scope of thisinterpretation is very broad and captures various obligations,which are imposed by governments in accordance with legislationand sometimes not always described as levies. Therefore,entities need to consider the nature of payments to governmentscarefully when determining if they are in the scope of IFRIC 21.


Applying IFRS: Accounting for Levies (June 2014) EYG no.AU2514.

IFRS Developments Issue 59: IASB issues IFRIC Interpretation 21Levies (May 2013) EYG no. AU1581.


Improvements to International Financial Reporting StandardsKey requirements

The IASBs annual improvements process deals with non-urgent, but necessary, clarifications and amendments to IFRS.

2010-2012 cycle (issued in December 2013)

In the 2010-2012 annual improvements cycle, the IASB issued seven amendments to six standards, summaries of which are providedbelow. Other than amendments that only affect the standards Basis for Conclusions, the changes are effective 1 July 2014. Earlierapplication is permitted and must be disclosed.

IFRS 2 Share-based Payment Definitions of vesting conditions

The amendment defines performance condition and service condition to clarify variousissues, including the following:

A performance condition must contain a service condition A performance target must be met while the counterparty is rendering service A performance target may relate to the operations or activities of an entity, or to those

of another entity in the same group

A performance condition may be a market or non-market condition If the counterparty, regardless of the reason, ceases to provide service during the

vesting period, the service condition is not satisfied

The amendment must be applied prospectively.

IFRS 3 Business Combinations Accounting for contingent consideration in a business combination

The amendment clarifies that all contingent consideration arrangements classified asliabilities or assets arising from a business combination must be subsequently measured atfair value through profit or loss whether or not they fall within the scope of IFRS 9 (orIAS 39, as applicable).


IFRS 8 Operating Segments Aggregation of operating segments

The amendment clarifies that an entity must disclose the judgements made bymanagement in applying the aggregation criteria in IFRS 8.12, including a brief descriptionof operating segments that have been aggregated and the economic characteristics (e.g.,sales and gross margins) used to assess whether the segments are similar.

The amendment must be applied retrospectively.

Reconciliation of the total of the reportable segments assets to the entitys assets

The amendment clarifies that the reconciliation of segment assets to total assets isrequired to be disclosed only if the reconciliation is reported to the chief operating decisionmaker, similar to the required disclosure for segment liabilities.



IAS 16 Property, Plant andEquipment andIAS 38 Intangible Assets

Revaluation method proportionate restatement of accumulated depreciation/amortisation

The amendments to IAS 16 and IAS 38 clarify that the revaluation can be performed, asfollows:

Adjust the gross carrying amount of the asset to market valueOR

Determine the market value of the carrying amount and adjust the gross carryingamount proportionately so that the resulting carrying amount equals the market value

The amendments also clarify that accumulated depreciation/amortisation is the differencebetween the gross and carrying amounts of the asset.


IAS 24 Related PartyDisclosures

Key management personnel

The amendment clarifies that a management entity an entity that provides keymanagement personnel services is a related party subject to the related party disclosures.In addition, an entity that uses a management entity is required to disclose the expensesincurred for management services.


2011-2013 cycle (issued in December 2013)

In the 2011-2013 annual improvements cycle, the IASB issued four amendments to four standards, summaries of which are providedbelow. Other than amendments that only affect the standards Basis for Conclusions, the changes are effective 1 July 2014. Earlierapplication is permitted and must be disclosed.

IFRS 3 Business Combinations Scope exceptions for joint ventures

The amendment clarifies that: Joint arrangements, not just joint ventures, are outside the scope of IFRS 3. The scope exception applies only to the accounting in the financial statements of the

joint arrangement itself.


IFRS 13 Fair ValueMeasurement

Scope of paragraph 52 (portfolio exception)

The amendment clarifies that the portfolio exception in IFRS 13 can be applied not onlyto financial assets and financial liabilities, but also to other contracts within the scope ofIFRS 9 (or IAS 39, as applicable).


IAS 40 Investment Property Interrelationship between IFRS 3 and IAS 40 (ancillary services)

The description of ancillary services in IAS 40 differentiates between investment propertyand owner-occupied property (i.e., property, plant and equipment). The amendmentclarifies that IFRS 3, not the description of ancillary services in IAS 40, is used to determineif the transaction is the purchase of an asset or business combination.



2012-2014 cycle (issued in September 2014)

In the 2012-2014 annual improvements cycle, the IASB issued five amendments to four standards, summaries of which are providedbelow. The changes are effective 1 January 2016. Earlier application is permitted and must be disclosed.

IFRS 5 Non-Current AssetsHeld for Sale and DiscontinuedOperations

Changes in methods of disposal

Assets (or disposal groups) are generally disposed of either through sale or distribution toowners. The amendment clarifies that changing from one of these disposal methods to theother would not be considered a new plan of disposal, rather it is a continuation of theoriginal plan. There is, therefore, no interruption of the application of the requirements inIFRS 5.


IFRS 7 Financial Instruments:Disclosures

Servicing contracts

The amendment clarifies that a servicing contract that includes a fee can constitutecontinuing involvement in a financial asset. An entity must assess the nature of the fee andthe arrangement against the guidance for continuing involvement in IFRS 7.B30 andIFRS 7.42C in order to assess whether the disclosures are required.

The assessment of which servicing contracts constitute continuing involvement must bedone retrospectively. However, the required disclosures would not need to be providedfor any period beginning before the annual period in which the entity first applies theamendments.

Applicability of the offsetting disclosures to condensed interim financial statements

The amendment clarifies that the offsetting disclosure requirements do not apply tocondensed interim financial statements, unless such disclosures provide a significantupdate to the information reported in the most recent annual report.


IAS 19 Employee Benefits Discount rate: regional market issue

The amendment clarifies that market depth of high quality corporate bonds is assessedbased on the currency in which the obligation is denominated, rather than the countrywhere the obligation is located. When there is no deep market for high quality corporatebonds in that currency, government bond rates must be used.


IAS 34 Interim FinancialReporting

Disclosure of information elsewhere in the interim financial report

The amendment clarifies that the required interim disclosures must either be in the interimfinancial statements or incorporated by cross-reference between the interim financialstatements and wherever they are included within the interim financial report (e.g., in themanagement commentary or risk report).

The other information within the interim financial report must be available to users on thesame terms as the interim financial statements and at the same time.


Other EY publicationsIFRS Developments Issue 71: The IASB issues two cycles of annual improvements to IFRS (December 2013) EYG no. AU2068.

IFRS Developments Issue 91: IASB concludes the 2012-2014 Annual Improvements Cycle (September 2014) EYG no. AU2645.


Certain items deliberated by the IFRS Interpretations Committee (IFRS IC) are published within the Interpretations Committee agendadecisions section of the IASBs IFRIC Update. Agenda decisions (also referred to as rejection notices) are issues that the IFRS IC decidesnot to add to its agenda and include the reasons for not doing so. For some of these items, the IFRS IC includes further informationabout how the standards should be applied. This guidance does not constitute an interpretation, but rather, provides additionalinformation on the issues raised and the IFRS ICs views on how the standards and current interpretations are to be applied.

The table below summarises topics that the IFRS IC decided not to take onto its agenda for the period from 1 January 2015 (since ourprevious edition of IFRS Update) to 31 March 2015 and contains highlights from the agenda decisions. For agenda decisions publishedbefore 1 January 2015, please refer to previous editions of IFRS Update. All items considered by the IFRS IC during its meetings, as wellas the full text of its conclusions, can be found in the IFRIC Update on the IASBs website.6

Final dateconsidered

Issue Summary of reasons given for not adding the issue to the IFRS ICs agenda

January 2015 IFRS 12 Disclosure ofInterests in Other Entities Disclosures for a subsidiarywith a material non-controlling interest

The IFRS IC received a request for clarification in respect of the requirements inIFRS 12.12(e)(g) to disclose information about a subsidiary that has non-controlling interests that are material to the reporting entity.

The IFRS IC noted that within the context of the disclosure objective inIFRS 12.10, materiality must be assessed by the reporting entity on the basis ofthe consolidated financial statements of the reporting entity. In this assessment,a reporting entity would consider both quantitative considerations (i.e. the size ofthe subsidiary) and qualitative considerations (i.e. the nature of the subsidiary).

The IFRS IC also noted that the objective of IFRS 12.10 must be reflected, whendeciding the method of presenting the disclosures required by IFRS 12.12(e)(g).This judgement would be made separately for each subsidiary or subgroup thathas a material non-controlling interest.

January 2015 IFRS 12 Disclosure ofInterests in Other Entities Disclosure of summarisedfinancial information aboutmaterial joint ventures orassociates

The IFRS IC received a request to clarify the requirement to disclose summaryfinancial information on material joint ventures or associates in IFRS 12.21(b)(ii)and its interaction with the aggregation principle in IFRS 12.4 and IFRS 12.B2B6.

The IFRS IC noted that it expected the requirement in IFRS 12.21(b)(ii) to lead tothe disclosure of summarised information on an individual basis for each jointventure or associate that is material to the reporting entity. The IFRS IC observedthat this reflects the IASB's intentions as described in IFRS 12.BC50.

The IFRS IC also observed that a reporting entity must present the summarisedfinancial information required by IFRS 12.21(b)(ii) about a joint venture or anassociate that is material to the reporting entity based on the consolidatedfinancial statements for the joint venture or associate, if it has subsidiaries. If itdoes not have subsidiaries, the presentation is based on the financial statementsof the joint venture or associate in which its own joint ventures or associates areequity-accounted.

6The IFRIC Update is available at http://www.ifrs.org/Updates/IFRIC+Updates/IFRIC+Updates.htm.

Section 2: Items not taken onto the IFRSInterpretations Committees agenda in Q1 2015




January 2015 IFRS 13 Fair ValueMeasurement The fair valuehierarchy when third partyconsensus prices are used tomeasure fair value

The IFRS IC received a request to clarify under what circumstances prices thatare provided by third parties would qualify as Level 1 in the fair value hierarchyin accordance with IFRS 13.

The IFRS IC noted that:

The classification of those measurements within the fair value hierarchywill depend on the evaluation of the inputs used by the third party to derivethose prices, instead of on the pricing methodology used.

A fair value measurement that is based on prices provided by third partiesmay only be categorised within Level 1 of the fair value hierarchy if themeasurement relies solely on unadjusted quoted prices in an active marketfor an identical instrument that the entity can access at the measurementdate.

January 2015 IAS 39 FinancialInstruments: Recognitionand Measurement and IAS 1Presentation of FinancialStatements Income andexpenses arising on financialinstruments with a negativeyield presentation in thestatement of comprehensiveincome

The IFRS IC discussed the ramifications of the economic phenomenon ofnegative effective interest rates for the presentation of income and expenses inthe statement of comprehensive income.

The IFRS IC noted that interest resulting from a negative effective interest rateon a financial asset does not meet the definition of interest revenue in IAS 18Revenue. This is because it reflects a gross outflow, instead of a gross inflow, ofeconomic benefits. Consequently, the negative interest arising on a financialasset is not presented as negative interest revenue, but in an appropriateexpense classification. The IFRS IC noted that in accordance with IAS 1.85 andIAS1.112(c), the entity is required to present additional information about suchan amount if that is relevant to an understanding of the entitys financialperformance or to an understanding of this item.

January 2015 IAS 39 FinancialInstruments: Recognitionand Measurement Accounting for embeddedforeign currency derivativesin host contracts

The IFRS IC received a request to consider whether an embedded foreigncurrency derivative in a licence agreement is closely related to the economiccharacteristics of the host contract. This is on the basis that the currency inwhich the licence agreement is denominated, is the currency in whichcommercial transactions in that type of licence agreement are routinelydenominated around the world (i.e. the routinely-denominated criterion inIAS 39.AG33(d)(ii)).

The IFRS IC noted that the issue related to a contract for a specific type of itemand observed that an assessment of the routinely-denominated criterion isbased on evidence of whether or not such commercial transactions aredenominated in that currency all around the world and not merely in one localarea. The IFRS IC further observed that the assessment of the routinely-denominated criterion is a question of fact and is based on an assessment ofavailable evidence.




January 2015 IFRIC 21 Levies Leviesraised on productionproperty, plant andequipment

The IFRS IC received two requests to consider the treatment of cost of leviesraised on production property, plant and equipment held by service providers. Inparticular, the IFRS IC was asked to consider whether the cost of levies raised onthe productive assets is an administrative cost to be recognised as an expense asit is incurred or a fixed production overhead to be recognised as part of the costof the entitys inventory in accordance with IAS 2 Inventories.

The IFRS IC noted that IFRIC 21 is an interpretation of IAS 37 Provisions,Contingent Liabilities and Contingent Assets and that IAS 37.8 states that IAS 37does not deal with the recognition of either the asset or expense associated witha liability. Therefore, the IFRS IC decided not to provide guidance on this matter;entities must apply other standards to decide whether the recognition of aliability to pay a levy gives rise to an asset or to an expense.

March 2015 IFRS 11 Joint Arrangements Classification of jointarrangements: theassessment of other factsand circumstances

In May 2014, the IFRS IC published an agenda decision with regard to an issue ofhow an assessment of other facts and circumstances as noted in IFRS 11.17should be performed. The IFRS IC considered whether the assessment should beundertaken with a view only towards whether those facts and circumstancescreate enforceable rights to the assets and obligations for the liabilities, orwhether that assessment should also consider the design and purpose of thejoint arrangement, the entitys business needs and the entitys past practices.

The IFRS IC noted that the assessment of other facts and circumstances mustfocus on whether those facts and circumstances create enforceable rights to theassets and obligations for the liabilities. The IFRS IC also discussed how and whyparticular facts and circumstances create rights to the assets and obligations forthe liabilities.

March 2015 IFRS 11 Joint Arrangements Classification of jointarrangements: application ofother facts andcircumstances to specificfact patterns

The IFRS IC discussed how other facts and circumstances should be applied tosome specific fact patterns. It identified four different cases and considered howparticular features of those fact patterns would affect the classification of thejoint arrangement. The IFRS IC noted that:

The sales of output from a joint arrangement to the parties at market pricedoes not, on its own, determine the classification of the joint arrangement

If the cash flows to a joint arrangement from the sale of output to theparties (along with any other funding the parties are obliged to provide)satisfy the liabilities of the joint arrangements, then third-party financingalone would not affect the classification

Whether the output produced by the joint arrangement and purchased bythe parties is fungible or bespoke, does not, on its own, determine theclassification of the arrangement

When determining whether the parties to the joint arrangement takesubstantially all of the output as part of the assessment of other factsand circumstances, the assessment is based on the monetary value of theoutput, not the physical quantity




March 2015 IFRS 11 Joint Arrangements- Classification of jointarrangements: considerationof two joint arrangementswith similar features that areclassified differently

The IFRS IC discussed a situation where two joint arrangements that have similarfeatures may be classified differently because one is structured through aseparate vehicle and the other is not. This is because the legal form of theseparate vehicle may affect the rights and obligations of the parties to the jointarrangement. The IFRS IC believe different accounting would not conflict withthe concept of economic substance. Economic substance would require that theclassification of the joint arrangement must reflect the rights and obligations ofthe parties to the joint arrangement. The presence of a separate vehicle plays asignificant part in determining the nature of those rights and obligations.

March 2015 IFRS 11 Joint Arrangements Accounting by the jointoperator: recognition ofrevenue by a joint operator

The IFRS IC discussed whether a joint operator should recognise revenue inrelation to the output purchased from the joint operation by the parties. If a jointarrangement is structured through a separate vehicle, but is classified as a jointoperation because the joint operators purchase all of the output, a joint operatorwould recognise its share of revenue only when the output is sold to thirdparties. This means a joint operator would only recognise its share of therevenue from the sale of the output by the joint operation when the jointoperation sells output to third parties.

March 2015 IFRS 11 Joint Arrangements Accounting by the jointoperator: the accountingtreatment when the jointoperators share of outputpurchased differs from itsshare of ownership interestin the joint operation

The IFRS IC considered a fact pattern in which an assessment of other facts andcircumstances leads to the conclusion that the joint arrangement is a jointoperation, and the joint arrangement agreement does not specify the allocationof assets, liabilities, revenues or expenses. The question arises, should the shareof assets, liabilities, revenue and expenses recognised reflect the percentage ofownership of the legal entity, or should it reflect the percentage of outputpurchased by each joint operator?

The IFRS IC noted that it is important to understand why the share of the outputpurchased differs from the ownership interests in the joint operation.

The IFRS IC acknowledged that there are concerns about the sufficiency of theguidance in IFRS 11 on the accounting by a joint operator in the circumstancesdescribed, but noted that to develop additional guidance for this issue wouldrequire a broader analysis than could be achieved by the IFRS IC.

March 2015 IFRS 11 Joint Arrangements Accounting in separatefinancial statements:accounting by the jointoperator in its separatefinancial statements

The IFRS IC discussed the accounting by a joint operator in its separate financialstatements for its share of a joint operation when that joint operation isstructured through a separate vehicle.

The IFRS IC noted that the same accounting is required in the consolidatedfinancial statements and in the separate financial statements of the jointoperator. That is, the joint operator accounts for its rights and obligations, whichare its share of the assets held by the entity and its share of the liabilitiesincurred by it. Therefore, the joint operator would not additionally account forits shareholding in the separate vehicle.




March 2015 IFRS 11 Joint Arrangements Accounting by the jointoperation: accounting by thejoint operation that is aseparate vehicle in itsfinancial statements

The IFRS IC discussed the accounting by a joint operation that is a separatevehicle in its financial statements. The recognition by joint operators in bothconsolidated and separate financial statements of their share of assets andliabilities held by the joint operation leads to the question of whether those sameassets and liabilities should also be recognised in the financial statements of thejoint operation itself.

The IFRS IC noted that IFRS 11 does not apply to the financial statements of theseparate vehicle and they would be prepared in accordance with the applicableIFRS. When identifying the assets and liabilities of the separate vehicle, it isnecessary to understand the joint operators rights to the assets and obligationsfor the liabilities.

March 2015 IAS 12 Income Taxes Selection of applicable taxrate for the measurementdeferred tax relating to aninvestment in an associate

The IFRS IC received a request to clarify the selection of the applicable tax ratefor the measurement of deferred tax relating to an investment in an associate ina multi-tax rate jurisdiction. The submitter asked how the tax rate should beselected when local tax legislation prescribes different tax rates for differentmanners of recovery (for example, dividends, sale, liquidation).

The IFRS IC noted that IAS 12.51A states that an entity measures deferred taxliabilities and deferred tax assets using the tax rate and the tax base that areconsistent with the expected manner of recovery or settlement. Accordingly, thetax rate must reflect the expected manner of recovery or settlement. If one partof the temporary difference is expected to be received as dividends, and anotherpart is expected to be recovered upon sale or liquidation, different tax rateswould be applied to the parts of the temporary difference in order to beconsistent with the expected manner of recovery.

March 2015 IAS 19 Employee Benefits Should longevity swaps heldunder a defined benefit planbe measured as a plan assetat fair value or on anotherbasis as a qualifyinginsurance policy?

The IFRS IC received a request to clarify the measurement of longevity swapsheld under an entitys defined benefit pension plan. The submitter raised aquestion about whether an entity should:(a) account for a longevity swap as a single instrument and measure its fair valueas part of plan assets in accordance with IAS 19.8, IAS 19.113 and IFRS 13, withchanges in fair value being recorded in other comprehensive income; or(b) split a longevity swap into two components and use another basis ofmeasurement for a qualifying insurance policy for one of the components,applying IAS 19.115.

The outreach did not provide evidence that the use of longevity swaps iswidespread. The IFRS IC observed that when such transactions take place, thepredominant practice is to account for a longevity swap as a single instrument,and measure it at fair value as part of plan assets, by applying IAS 19.8,IAS 19.113 and IFRS 13.


Section 3: Active IASB projects

The IASB continues to move ahead with its standard-setting activities and the ability to stay one-step ahead is critical in a sea ofchange. The following summarises key features of selected active projects of the IASB, along with potential implications of theproposed standards. The Key projects are those initiated with the objective of issuing new standards or that involve overarchingconsiderations across several standards. Other projects include amendments with narrower applicability. Generally, only thoseprojects that have reached the exposure draft stage are included, but in selected cases, projects that have not yet reached theexposure draft stage are also commented on.7

Key projects

Leases

Key developments to dateBackground

The IASB has substantially completed redeliberations on its 2013exposure draft (ED) on leases. The redeliberations focused onways to simplify and reduce the cost of applying a revised leaseaccounting standard in a number of areas, including: definition andscope; lessee and lessor accounting models; measurementprovisions; and disclosure requirements. We expect the Board toissue the new standard in the second half of 2015.

Scope

The scope of the new standard would include leases of all assets,with certain exemptions. A lease would be defined as a contractthat conveys the right to use an asset (the underlying asset) for aperiod of time in exchange for consideration.

Key features

The standard would require lessees to account for all leases(subject to certain exemptions) under a single on-balancesheet model (i.e., in a manner comparable to finance leasesunder IAS 17).

Lessees would recognise a liability to pay rentals with acorresponding asset. The lease accounting model wouldresult in an accelerated expense recognition pattern ascompared to todays operating leases.

The standard would include two recognition andmeasurement exemptions for lessees leases of smallassets (e.g., small printer) and short term leases (i.e.,leases with a lease term of 12 months or less).

Reassessment of certain key considerations (e.g., leaseterm, variable rents based on an index or rate, discountrate) by the lessee would be required upon certain events.

Lessor accounting would be essentially the same as todayslessor accounting, using IAS 17s dual classificationapproach.

7 The latest IASB work plan and further information on the projects is available athttp://www.ifrs.org/Current-Projects/IASB-Projects/Pages/IASB-Work-Plan.aspx

Transition and effective date

The effective date has not been determined, but is not expectedto be before 2018 for calendar-year companies.

The standard would permit a lessee to choose either a fullretrospective or a modified retrospective transition approach, tobe applied consistently across its entire portfolio of formeroperating leases. Lessees would not change their accounting forfinance leases existing at the date of initial application of the newstandard. Lessors would continue to apply their existingaccounting for any leases that are ongoing at the date of initialapplication, except for intermediate lessors in a sublease. Thestandards transition provisions would also permit certain reliefs.

Impact

For todays operating leases, the lease expense recognitionpattern for lessees would generally be accelerated as comparedto today.

Key balance-sheet metrics such as leverage and finance ratios,debt covenants and income statement metrics, such as EBITDA,could be impacted. Also the cash flow statement for lesseeswould be affected as payments for the principal portion of mostof todays operating leases would be presented within financingactivities.

Lessor accounting would result in few, if any, changes compared totodays lessor accounting.

The new standard would require lessees and lessors to makemore extensive disclosures than under IAS 17.

Given the significant accounting implications, lessees will have topay more attention to their contracts to identify any that are, orcontain, leases. Such evaluation will also be important for lessorsto determine which contracts (or portions of contracts) aresubject to the new revenue recognition standard.


Insurance Contracts


The IASB is redeliberating its second ED on a comprehensivemethod of accounting for insurance contracts, which was issuedin June 2013.

The FASB published its proposals in June 2013; subsequently,the FASB decided not to issue a new insurance contract standard,but to make enhancements to its current accounting forinsurance companies instead.

Scope

The standard would apply to all types of insurance contracts (i.e.,life, non-life, direct insurance and re-insurance), regardless of thetype of entity that issued them, as well as certain guarantee andfinancial instrument contracts with discretionary participationfeatures. A few scope exceptions would apply.

Key features

The proposed approach for the measurement of the insurancecontract liability is based on the following building blocks:

Expected present value of future cash flows A risk adjustment related to the expected present value of

cash flows

A contractual service margin (CSM) that would eliminateany gain at inception of the contract; the CSM would beadjusted subsequently for changes in estimates of futurecash flows and the risk adjustment to the extent thesechanges relate to future coverage or other future services

A discount rate that would be updated at the end of eachreporting period (i.e., the liability discount rate would notbe locked-in at inception of the contract)

Rather than prescribing a rate for discounting insurancecontracts, the proposed approach would be based on theprinciple that the rate must reflect the characteristics of theliability.

The objective of the insurance standard would be to provideprinciples on the accounting for individual contracts, butcontracts could be aggregated as long as this objective is met.

An accounting policy choice would be permitted at a portfoliolevel to recognise the effect of changes in discount rates in eitherOCI or profit or loss.

For contracts with participating features that contain acontractual right to share in the return of underlying items, theED proposed that measurement and presentation of theinsurance liability must be consistent with those items. The IASBhas held a number of educational discussions on this topic andwill make a decision on the accounting for participating contractsat a future meeting, including the critical issue of level ofaggregation.

Revenue would be reported in the income statement throughearned premiums representing the insurers performance underthe contracts in the period for all types of insurance contracts.

A simplified approach based on a premium allocation could beapplied to the liability for remaining coverage if contracts meetcertain eligibility criteria (e.g., contracts with a coverage periodof one year or less).

Transition and effective date

The IASB has not yet concluded on the effective date, but it isexpected to be approximately three years from the issuance ofthe standard. In redeliberations, the Board decided on aretrospective approach to transition for non-participatingcontracts, subject to certain practical reliefs if applicable. TheBoard will make decisions on the transition approach forparticipating contracts at a future meeting.

Impact

The Boards tentative decision to make the use of OCI optional isa compromise necessary to complete the insurance contractsproject. Having an option allows entities to reflect the differencesthat exist in how they run their businesses to fulfil theirobligations under their insurance contracts. Despite the IASBshowing its willingness to provide flexibility by making OCIoptional, volatility will continue to exist in the proposed modelunless further modifications are made.

The Board also continues to demonstrate that it has an openmind to finding a satisfactory solution for participating contracts.Resolving the overarching theme of the unit of account will be akey aspect of finding a solution for participating contracts.


Disclosure Initiative


The IASB is undertaking a broad-based initiative to explore howdisclosures in IFRS financial reporting can be improved. TheDisclosure Initiative is made up of a number of implementationand research projects. In December 2014, amendments toIAS 1 Presentation of Financial Statements were issued. Theamendments are summarised in Section 1 of this publication.The other projects forming part of the Disclosure Initiative aredescribed below.

Reconciliation of liabilities from financing activities

The objective of this project is to identify the informationrequirements of users regarding the reporting of debt. An EDproposing amendments to IAS 7 was issued in December 2014.

The IASB proposes to require a reconciliation of the amounts inthe opening and closing statements of financial position for eachitem classified as financing in the statement of cash flows.

The ED also includes a proposal to require extended disclosuresabout the restrictions on cash and cash equivalent balances toprovide the users with additional information about the entitysliquidity.

The comment period closes on 17 April 2015.

Materiality

The objective of this project is to consider ways to improve theapplication of the materiality concept. The IASB plans to:

Change the current definition of materiality within IFRS toalign it across different standards and the ConceptualFramework for Financial Reporting, and to insert aparagraph in IAS 1 clarifying the key characteristics ofmateriality

Provide guidance on the application of materiality, whichwill take the form of a Practice Statement

Wait until further work has been performed on the generaldisclosure review of other standards before consideringpossible changes to address the use of inconsistent orexcessively prescriptive language in standards

An ED is expected in the second quarter of 2015.

Principles of disclosure

The objective of this project is to identify and develop a possibleset of principles for disclosure in IFRS that could form the basisof a standards-level project. The research phase will focus onreviewing the general requirements in IAS 1, IAS 7 and IAS 8, andconsidering how they might be replaced with a single standard,in essence creating a disclosure framework. The main focus willbe on recommendations for improvements expressed byconstituents in the Financial Reporting Disclosure DiscussionForum and also consider feedback received in the ConceptualFramework project.

The IASB plans to research the following:

Principles of disclosure for the notes, including disclosureof alternative performance measures and non-IFRSinformation

Information in a complete set of IFRS financial statements,including:

Differential disclosures and proportionality Cash flow reporting Disclosure of interim financial information

A Discussion Paper (DP) is expected in the fourth quarter of2015.

General disclosure review

The IASB is planning to carry out a review of existing standards toidentify and eliminate redundancies, conflicts, and duplications.

Impact

At this early stage of the Disclosure Initiative the impact of thedifferent projects is unknown. However, the objective is toimprove disclosure effectiveness by providing guidance on howto enhance the structure of financial statements, makedisclosures entity-specific, and apply the materiality concept.

The amendments to IAS 1 issued in December 2014 generallyonly clarify existing requirements. However, these clarificationscan be effective in steering practice away from makingdisclosures contributing to the observed disclosureineffectiveness. Similarly, the other projects have the potential ofcontributing to more tailored and effective disclosures.


Other projectsThe IASB has a number of projects on its work plan that include projects with narrower applicability and amendments to existing standards and interpretations. Following is a listing of theseprojects based on the IASBs work plan.

Other projects Status/next steps

Clarifications to IFRS 15 Revenue from Contracts with Customers (issues emerging from TRGdiscussions)

The objective of this project is to clarify the requirements in IFRS 15 in respect of theimplementation issues arising from the discussions of the TRG for revenue recognition,which requires further consideration from the IASB.

The IASB decided that it will develop an ED of proposed amendments to IFRS 15. This EDwill include the clarifications that the IASB tentatively decides to make at their meetings.The IASB expects to approve the clarifications to be included in the ED at its meeting inJune 2015.

At the date of publication, it is unclear whether the IASB would propose a deferral of theimplementation of IFRS 15.

Redeliberations continuing through Q2 2015; ED expected Q2 2015

Financial Instruments - Accounting for Dynamic Risk Management: A Portfolio RevaluationApproach to Macro Hedging

The objective of this project is to address specific accounting for risk managementstrategies relating to open portfolios rather than individual contracts. The hedgeaccounting requirements in IAS 39 and IFRS 9 do not provide specific solutions to the issuesassociated with macro hedging.

Although relatively simple in concept, the portfolio revaluation approach - the proposednew accounting approach fo

Documents

CTools Update March2015