Attention has been on the big three new standards IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers that apply to periods beginning 1 January 2018, and IFRS 16 Leases that applies to periods beginning 1 January 2019. But let’s not forget there are other amendments that apply to periods beginning 1 January 2017 and hence apply to 31 December 2017 year-ends.
IAS 7 Statement of cash flows
The amendments require disclosure of cash and non-cash movements in liabilities arising from financing activities to allow users of the financial statements to evaluate changes in those liabilities. This may include the effects of obtaining or losing control of subsidiaries or other businesses, changes in foreign exchange rates and changes in fair values. One way of doing this will be a reconciliation of brought forward to carry forward amounts for each relevant item. It must be possible to link items included in the reconciliation to the statement of financial position and the statement of cash flow. Comparative information is also required. If the required disclosures are given in combination with disclosure of changes in other assets and liabilities (e.g. as part of a net debt reconciliation), the changes in liabilities arising from financing activities should be shown separately from changes in those other assets and liabilities.
The disclosure requirement also applies to changes in financial assets if cash flows from those financial assets are or have been included in cash flows from financing activities - for example, assets that hedge liabilities arising from financing activities.
IFRS 12 Disclosure of interests in Other Entities
These amendments clarify the IFRS 12 disclosure requirements in respect of interests held that are within the scope of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. In particular, except as described in IFRS 12 paragraph B17, the requirements in IFRS 12 apply to interests in entities within the scope of IFRS 5.
IAS 12 Income taxes
The amendments clarify the accounting for deferred tax assets related to debt instruments measured at fair value; specifically, that unrealised losses on debt instruments measured at fair value in the financial statements, but at cost for tax purposes, can give rise to deductible temporary differences.
IFRS 9, 15 and 16
We mentioned the big three at the start of this article and there are two key points relating to them for December 2017 year ends.
As noted in (Corporate reporting – where the FRC expects improvements) the FRC has found the level of detail in disclosures on the effect of IFRS 9, 15 and 16 to be generally disappointing. It expects “detailed quantitative disclosures” (which are tailored to company specific circumstances and transactions) regarding the effect of the adoption of major new standards to be included in the last accounts before the implementation date. This means that 31 December 2017 annual accounts should include detailed quantitative disclosures tailored as noted above on the future adoption of IFRS 9 and IFRS 15. Although the expected level of disclosure on the effects of IFRS 9 and IFRS 15 will be higher, companies should still consider the disclosures required in respect to IFRS 16.
Secondly (as noted in Business Edge November 2017), for an IFRS or FRS 101 adopting company with a 31 December year-end, the adoption of IFRS 9 and IFRS 15 will be relevant to determining the expected level of profits available for distribution from 1 January 2018 (assuming those standards are not adopted prior to their mandatory effective date).
Read more on reporting improvements expected by the FRC in:
Corporate reporting – where the FRC expects improvements
Corporate Reporting thematic reviews – FRC’s key findings and guidance
FRC announces 2018 thematic review topics
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