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IAS 27  Separate Financial Statements (2011)

Amended version of IAS 27 which now only deals with the requirements for separate financial statements, which have been carried over largely unchanged from IAS 27 Consolidated and Separate Financial Statements. Requirements for consolidated financial statements are now contained in IFRS 10 Consolidated Financial Statements.

The Standard requires that when an entity prepares separate financial statements, investments in subsidiaries, associates, and jointly controlled entities are accounted for either at cost, or in accordance with IFRS 9 Financial Instruments / IAS 39 Financial Instruments: Recognition and Measurement.

The Standard also deals with the recognition of dividends, certain group reorganisations and includes a number of disclosure requirements.

Note: Entities early adopting this standard must also adopt the other standards included in the ‘suite of five’ standards on consolidation, joint arrangements and disclosures: IFRS 10 Consolidated Financial StatementsIFRS 11 Joint ArrangementsIFRS 12 Disclosure of Interests in Other Entities and IAS 28 Investments in Associates and Joint Ventures (2011).

Issued: 12 May 2011 (newsletter)

Applicable to annual reporting periods beginning on or after 1 January 2013
(see note regarding early adoption)

IAS 28 Investments in Associates and Joint Ventures (2011)

This Standard supersedes IAS 28 Investments in Associates and prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures.

The Standard defines ‘significant influence’ and provides guidance on how the equity method of accounting is to be applied (including exemptions from applying the equity method in some cases). It also prescribes how investments in associates and joint ventures should be tested for impairment.

Note: Entities early adopting this standard must also adopt the other standards included in the ‘suite of five’ standards on consolidation, joint arrangements and disclosures: IFRS 10 Consolidated Financial StatementsIFRS 11 Joint ArrangementsIFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements(2011).

Issued: 12 May 2011 (newsletter)

Applicable to annual reporting periods beginning on or after 1 January 2013
(see note regarding early adoption)

IFRS 9 Financial Instruments (2009)

IFRS 9 introduces new requirements for classifying and measuring financial assets, as follows:

  • Debt instruments meeting both a ‘business model’ test and a ‘cash flow characteristics’ test are measured at amortised cost (the use of fair value is optional in some limited circumstances)
  • Investments in equity instruments can be designated as ‘fair value through other comprehensive income’ with only dividends being recognised in profit or loss
  • All other instruments (including all derivatives) are measured at fair value with changes recognised in the profit or loss
  • The concept of ‘embedded derivatives’ does not apply to financial assets within the scope of the Standard and the entire instrument must be classified and measured in accordance with the above guidelines.

Note: In October 2010, the IASB reissued IFRS 9 Financial Instruments, including revised requirements for financial liabilities and carrying over the existing derecognition requirements from IAS 39 ‘Financial Instruments: Recognition and Measurement’. IFRS 9 (2010) supersedes IFRS 9 (2009). However, for annual reporting periods beginning before 1 January 2015, an entity may early adopt IFRS 9 (2009) instead of IFRS 9 (2010). However, the IASB has proposed in ED/2012/4 Classification and Measurement: Limited Amendments to IFRS 9 to remove the choice of which version of IFRS 9 may be applied early.

Note: On 16 December 2011, the IASB issued Mandatory Effective Date and Transition Disclosures (Amendments to IFRS 9 and IFRS 7), which amended the effective date of IFRS 9 to annual periods beginning on or after 1 January 2015, and modified the relief from restating comparative periods and the associated disclosures in IFRS 7.

Issued: 12 November 2009 (newsletter)

Applies on a modified retrospective basis to annual periods beginning on or after 1 January 2015
(see note)

IFRS 9 Financial Instruments (2010)

A revised version of IFRS 9 incorporating revised requirements for the classification and measurement of financial liabilities, and carrying over the existing derecognition requirements from IAS 39 Financial Instruments: Recognition and Measurement.

The revised financial liability provisions maintain the existing amortised cost measurement basis for most liabilities. New requirements apply where an entity chooses to measure a liability at fair value through profit or loss – in these cases, the portion of the change in fair value related to changes in the entity’s own credit risk is presented in other comprehensive income rather than within profit or loss.

Note: This Standard supersedes IFRS 9 (2009). However, for annual reporting periods beginning before 1 January 2015, an entity may early adopt IFRS 9 (2009) instead of applying this Standard. However, the IASB has proposed in ED/2012/4 Classification and Measurement: Limited Amendments to IFRS 9 to remove the choice of which version of IFRS 9 may be applied early.

Note: On 16 December 2011, the IASB issued Mandatory Effective Date and Transition Disclosures (Amendments to IFRS 9 and IFRS 7), which amended the effective date of IFRS 9 to annual periods beginning on or after 1 January 2015, and modified the relief from restating comparative periods and the associated disclosures in IFRS 7.

Issued: 28 October 2010 (newsletter)

Applies to annual periods beginning on or after 1 January 2015
(see note)

IFRS 10 Consolidated Financial Statements

Requires a parent to present consolidated financial statements as those of a single economic entity, replacing the requirements previously contained in IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation – Special Purpose Entities.

The Standard identifies the principles of control, determines how to identify whether an investor controls an investee and therefore must consolidate the investee, and sets out the principles for the preparation of consolidated financial statements.

The Standard introduces a single consolidation model for all entities based on control, irrespective of the nature of the investee (i.e. whether an entity is controlled through voting rights of investors or through other contractual arrangements as is common in ‘special purpose entities’). Under IFRS 10, control is based on whether an investor has:

  • Power over the investee
  • Exposure, or rights, to variable returns from its involvement with the investee, and
  • The ability to use its power over the investee to affect the amount of the returns.

Note: Entities early adopting this standard must also adopt the other standards included in the ‘suite of five’ standards on consolidation, joint arrangements and disclosures: IFRS 10 Consolidated Financial StatementsIFRS 11 Joint ArrangementsIFRS 12 Disclosure of Interests in Other EntitiesIAS 27 Separate Financial Statements(2011) and IAS 28 Investments in Associates and Joint Ventures(2011).

Issued: 12 May 2011 (newsletter)

Applicable to annual reporting periods beginning on or after 1 January 2013
(see note regarding early adoption)

IFRS 11 Joint Arrangements

Replaces IAS 31 Interests in Joint Ventures. Requires a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations and then account for those rights and obligations in accordance with that type of joint arrangement.

Joint arrangements are either joint operations or joint ventures:

  • joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint operators recognise their assets, liabilities, revenue and expenses in relation to its interest in a joint operation (including their share of any such items arising jointly)
  • joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (joint venturers) have rights to the net assets of the arrangement. A joint venturer applies the equity method of accounting for its investment in a joint venture in accordance with IAS 28 Investments in Associates and Joint Ventures (2011). Unlike IAS 31, the use of ‘proportionate consolidation’ to account for joint ventures is not permitted.

Note: Entities early adopting this standard must also adopt the other standards included in the ‘suite of five’ standards on consolidation, joint arrangements and disclosures: IFRS 10 Consolidated Financial StatementsIFRS 12 Disclosure of Interests in Other EntitiesIAS 27Separate Financial Statements (2011) and IAS 28 Investments in Associates and Joint Ventures (2011).

Issued: 12 May 2011 (newsletter)

Applicable to annual reporting periods beginning on or after 1 January 2013
(see note regarding early adoption)

IFRS 12 Disclosure of Interests in Other Entities

Requires the extensive disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with, interests in other entities and the effects of those interests on its financial position, financial performance and cash flows.

In high-level terms, the required disclosures are grouped into the following broad categories:

  • Significant judgements and assumptions - such as how control, joint control, significant influence has been determined
  • Interests in subsidiaries - including details of the structure of the group, risks associated with structured entities, changes in control, and so on
  • Interests in joint arrangements and associates - the nature, extent and financial effects of interests in joint arrangements and associates (including names, details and summarised financial information)
  • Interests in unconsolidated structured entities - information to allow an understanding of the nature and extent of interests in unconsolidated structured entities and to evaluate the nature of, and changes in, the risks associated with its interests in unconsolidated structured entities

IFRS 12 lists specific examples and additional disclosures which further expand upon each of these disclosure objectives, and includes other guidance on the extensive disclosures required.

Note: Entities are encouraged to voluntarily provide the information required by IFRS 12 prior to its adoption. Providing some of the disclosures required by IFRS 12 does not compel an entity to comply with all of the requirements of the IFRS or to also apply the other standards included in the ‘suite of five’ standards on consolidation, joint arrangements and disclosures: IFRS 10 Consolidated Financial StatementsIFRS 11 Joint ArrangementsIAS 27 Separate Financial Statements (2011) and IAS 28 Investments in Associates and Joint Ventures (2011).

Issued: 12 May 2011 (newsletter)

Applicable to annual reporting periods beginning on or after 1 January 2013
(see note regarding early adoption)

IFRS 13 Fair Value Measurement

Replaces the guidance on fair value measurement in existing IFRS accounting literature with a single standard.

The IFRS is the result of joint efforts by the IASB and FASB to develop a converged fair value framework. The IFRS defines fair value, provides guidance on how to determine fair value and requires disclosures about fair value measurements. However, IFRS 13 does not change the requirements regarding which items should be measured or disclosed at fair value.

IFRS 13 applies when another IFRS requires or permits fair value measurements or disclosures about fair value measurements (and measurements, such as fair value less costs to sell, based on fair value or disclosures about those measurements). With some exceptions, the standard requires entities to classify these measurements into a ‘fair value hierarchy’ based on the nature of the inputs:

  • Level 1 - quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date
  • Level 2 - inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly
  • Level 3 - unobservable inputs for the asset or liability

Entities are required to make various disclosures depending upon the nature of the fair value measurement (e.g. whether it is recognised in the financial statements or merely disclosed) and the level in which it is classified.

Issued: 12 May 2011 (newsletter)

Applicable to annual reporting periods beginning on or after 1 January 2013

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