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for HR i have no idea you can check with some HR specialist but for finance following are the things about to change:
Financial reporting expert Steve Collings sifts through the latest IASB exposure draft containing amendments to11 standards.
On3 May2012, the International Accounting Standards Board (IASB) published an exposure draft of proposed amendments to11 IFRSs as part of its annual improvements project. Responses should be submitted to the IASB by5 September2012.
The assumed “effective from” date for all the amendments is for annual periods commencing on or after1 January2014, with the exception of the amendments to IFRS3 ‘Business Combinations’ and the consequential amendment to IFRS9, which are planned for annual periods commencing on or after1 January2015. Earlier adoption is permissible for all the amendments, but if this is the case financial statements should disclose the amendments have been adopted earlier than scheduled.
A summary of the project is as follows:
IFRS
Subject of amendment
IFRS2 ‘Share-based Payment’
Definition of ‘vesting condition’
IFRS3 ‘Business Combinations’
Accounting for contingent consideration in a business combination
IFRS8 ‘Operating Segments’
Aggregation of operating segments. Reconciliation of the total of the reportable segments’ assets to the entity’s assets
IFRS13 ‘Fair Value Measurement’
Short-term receivables and payables
IAS1 ‘Presentation of Financial Statements’
Current/non-current classification of liabilities
IAS12 ‘Income Taxes’
Recognition of deferred tax assets for unrealised losses
IAS7 ‘Statement of Cash Flows’
Interest paid that is capitalised
IAS16 ‘Property, Plant and Equipment’ and IAS38 ‘Intangible Assets’
Revaluation method – proportionate restatement of accumulated depreciation
IAS24 ‘Related Party Disclosures’
Key management personnel
IAS36 ‘Impairment of Assets’
Harmonisation of disclosures for value in use and fair value less costs of disposal
IFRS2 ‘Share-based Payment’
Currently IFRS2 does not define separate “performance condition” or “service condition”; instead the existing standard describes the two concepts within the definition of “vesting conditions”. A new paragraph63B refers to the effective date. The IASB also amended paragraphs15 and19 to IFRS2 and Appendix A, “Defined terms”. The proposals define performance condition and service condition separately as follows:
Performance condition: A vesting condition that requires:
(a) the counterparty to complete a specified period of service; and
(b) specified performance targets to be met while the counterparty is rendering the service required in (a).
A performance target is defined by reference to the entity’s own operations (or activities) or the price (or value) of its equity instruments (including shares and share options). A performance target might relate either to the performance of the entity as a whole or to some part of the entity, such as a division or an individual employee.
Service condition: A vesting condition that requires the counterparty to complete a specified period of service. If the counterparty, regardless of the reason, ceases to provide service during the vesting period, the counterparty has failed to satisfy the condition. A service condition does not require a performance target to be met.
The term “vesting condition” has also been amended and in Appendix A is proposed to be defined as:
Vesting conditions: A condition that determines whether the entity receives the services that entitle the counterparty to receive cash, other assets or equity instruments of the entity, under a share-based payment arrangement. A vesting condition is either a service condition or a performance condition. A performance condition might include a market condition.
IFRS3 ‘Business Combinations’
The impact of this proposed amendment is twofold. First the board will amend IFRS3 on the contingent consideration to be treated as a liability or an equity instrument when the contingent consideration is a financial instrument. This will have a direct consequential effect on IFRS9 ‘Financial Instruments’.
The IASB wants to clarify that contingent consideration is classified as either a liability or equity instrument only on the basis of the provisions contained in IAS32 ‘Financial Instruments: Presentation’. In its current form, IFRS3 refers to IAS32 and “other applicable IFRSs”. Deleting this phrase in paragraph40 will clear up any ambiguity.
The board also proposes to clarify that any contingent consideration that is not classified as an equity instrument should be measured at fair value, with any changes in fair value recognised in either profit or loss or other comprehensive income in accordance with IFRS9 requirements. Paragraph58 of IFRS3 currently does require subsequent measurement of contingent consideration at fair value, but in its present form the current IFRS3 introduces a contradiction by referring to other IFRSs in which fair value is not necessarily the subsequent measurement basis. The board plans to iron out the contradiction by deleting reference to IAS37 and “other IFRSs as appropriate” and amending IFRS9 to clarify that contingent consideration that is a financial asset or a financial liability can only be measured at fair value and any changes to fair value are to be recognised in either profit or loss or other comprehensive income depending on IFRS9 requirements.
IFRS3 will also have paragraph a new64G included that refers to the “effective from” date; the revised IFRS3 is intended to take effect for business combinations occurring on or after1 January2015 (this effective date is one year later than the other planned amendments), though earlier adoption is permitted. Early adoption must be disclosed and the revised versions of IFRS3 and IFRS9 should be applied at the same time.
In the revised IFRS9, paragraph4.1.2 (c) will be included which says: “The asset is not a contingent consideration to which IFRS3 Business Combinations applies.” Paragraph4.2.1(e) will also be included which says: “Contingent consideration in a business combination (see IFRS3 Business Combinations). Such financial liabilities shall be subsequently measured at fair value with changes in the fair value of the financial liabilities being presented in accordance with paragraphs5.7.7-5.7.8 as if they had been designated at fair value through profit or loss at initial recognition.”
The effective date of the revised IFRS9 is consistent with the revised IFRS3 which is for business combinations for which the acquisition date is on or after1 January2015.
IFRS8 ‘Operating segments’
The board is proposing to amend paragraph22 to IFRS8 to require reporting entities to disclose the factors used to identify their reportable segments when operating segments have been aggregated. In addition, the IASB is planning to amend paragraph28(c) to clarify that a reconciliation of the total of the reportable segments’ assets to the entity’s assets should be disclosed when that amount is regularly provided to the chief operating decision maker so as to be consistent with the requirements of paragraph23 to IFRS8.
IFRS13 ‘Fair Value Measurement’
The board will amend IFRS13 ‘Basis for Conclusions’ in respect of short-term receivables (debtors) and payables (creditors).
The provisions in IFRS13 removed paragraphs B5.4.12 in IFRS9 ‘Financial Instruments’ and paragraph AG79 of IAS39 ‘Financial Instruments: Recognition and Measurement’. The IASB became aware that deleting these two paragraphs could be interpreted as removing the ability for an entity to measure short-term receivables and payables with no stated interest rate at invoice amounts without discounting to present date values, when the effect of not discounting to present day values is immaterial. The board’s intention was not to change the way in which short-term receivables and payables are measured in the financial statements. Instead, the IASB will amend the Basis for Conclusions in IFRS13 with the heading “Short-term receivables and payables” at paragraph BC138A to emphasise that short-term receivables and payables can be measured at invoice amounts without discounting when the effects of discounting is immaterial. The paragraph also confirms paragraph B5.4.12 in IFRS9 and paragraph AG79 in IAS39 were not needed, citing IFRS13 present value techniques and IAS8 provisions relating to materiality issues.
IAS1 ‘Presentation of Financial Statements’
When an entity has an obligation to refinance or “roll over” an obligation for at least12 months after the reporting date, the amended IAS1 will require the liability to be classified as non-current if the entity expects (and has the discretion) to refinance or roll over such an obligation with the same lender, on the same or similar terms. This proposal will amend paragraph73 currently in IAS1 by including the text “with the same lender, on the same or similar terms”.
Paragraph139L will be added to IAS1 which will contain the “effective from” date which is for annual periods commencing on or after1 January2014, with earlier adoption permitted. This amendment will not need to be applied to comparative information.
IAS7 ‘Statement of Cash Flows’
The amendments to IAS7 relate to interest paid which is capitalised as part of the cost of an asset in the statement of financial position (balance sheet). There appears to be confusion in the application of paragraph16 to IAS7, which some interpret as classifying paid interest that has been capitalised in the statement of financial position (balance sheet) as an investing cash flow in the statement of cash flows. This is not consistent with the requirements in paragraphs32 and33, both of which require interest paid to be classified only as an operating, or financing, cash flow.
Interest capitalised as part of the cost of an asset should be classified as an investing activity (as per paragraph16) because it results in an asset that has been recognised in an entity’s statement of financial position (balance sheet). Also, IAS23 ‘Borrowing Costs’ requires interest that is capitalised to be shown within the entity’s statement of cash flows. The confusion surrounds the fact that neither IAS7, nor IAS23 specify where in the statement of cash flows such capitalised interest should be classified.
The IASB will amend paragraphs16(a) and33 and insert a new paragraph33A to clarify that the classification of paid interest that an entity capitalises in the balance sheet will follow the same classification as the underlying asset into which the payments were capitalised. The amendment will be applied for annual periods commencing on or after1 January2014.
IAS12 ‘Income Taxes’
IAS12 will be amended on the recognition of deferred tax assets for unrealised losses. The board proposes that:
Entities assess whether to recognise the tax effect of a deductible temporary difference as a deferred tax asset in combination with other deferred tax assets.
Taxable profit (which the reporting entity assesses a deferred tax asset for recognition) is the amount prior to any reversal of deductible temporary differences.
A tax planning opportunity will only occur if the opportunity creates or increases taxable profit. Simply reversing existing deductible temporary differences is not a tax planning opportunity in itself.
To achieve the proposals, paragraphs29 and30 of IAS12 will be amended with new paragraphs27A,30A and98C and extra examples after paragraphs29 and30A.
Paragraph27A requires an entity to consider whether tax legislation restricts the sources of taxable profit that it can use to make deductions on the reversal of that deductible temporary difference. When legislation imposes no such restrictions, the reporting entity assesses a deductible temporary difference in combination with all its other deductible temporary differences. Conversely, where tax law does place a restriction on the utilisation of losses to deduction against certain specified income, a deductible temporary difference is assessed in combination only with other deductible temporary differences of the appropriate type.
The amended sections of Paragraph29 (a) (i) will require an entity to compare the deductible temporary differences with future taxable profit before deducting the amounts resulting from reversing those deductible temporary differences. This comparison will show the extent to which future taxable profits are sufficient to let the reporting entity deduct the amounts resulting from the reversal of those deductible temporary differences.
IAS12 paragraph30 will refer to taxable “profit” as opposed to taxable “income”, and the new paragraph30A will clarify that a tax planning opportunity does not arise if the action does not create or increase taxable profit.
Entities must apply the amended IAS12 for annual periods commencing on or after1 January2014, with earlier adoption permitted.
IAS16 ‘Property, Plant and Equipment’ and IAS38 ‘Intangible Assets’
In both IAS16 and IAS38, the IASB wants to clarify the current revaluation method to alleviate concerns regarding the calculation of accumulated depreciation at the date the revaluation occurs. The board wishes proposes that:
Determining accumulated depreciation will not depend on the valuation technique selected; and
Accumulated depreciation is calculated as the difference between the gross and net carrying amounts. As a consequence, when the residual value, the useful economic life, or the depreciation method has been re-estimated prior to revaluation, the restatement of the accumulated depreciation is not proportionate to the change in the gross carrying amount of the asset.
The amended IAS16 and IAS38 will be applied for accounting periods commencing on or after1 January2014, with earlier adoption permitted.
IAS24 ‘Related Party Disclosures’
Amendments to IAS24 are proposed regarding “key management personnel” as follows:
The definition of a related party will be extended so as to include management entities (this will be achieved by amending paragraph9 to extend the scope);
Key management personnel compensation provided to an entity’s own employees by a management entity is excluded from the disclosure requirements contained in paragraph17 to avoid duplication (this will be achieved by the inclusion of paragraph17A); and
Paragraph18 which refers to the disclosure requirements in IAS24 will be extended to require separate disclosure of transactions for the provisions of key management personnel services (this will be achieved by the addition of paragraph18A).
The ‘effective from’ date will apply to annual periods commencing on or after1 January2014, with earlier adoption permitted.
IAS36 ‘Impairment of Assets’
The disclosure requirements in IAS36 will be amended to clarify that the rules relating to value in use are also applicable to fair value less costs of disposal in instances where there has been a material impairment loss, or reversal of a previously recognised impairment loss, in the period.
This amendment will be achieved by extending paragraph130(f) to require the discount rate(s) to be disclosed if fair value less costs to sell are measured using a present value method both in the current measurement and previous measurement (if any). The amended paragraph130(f) does not require an entity to provide the disclosures required by IFRS13.
The revised IAS36 will apply to annual periods commencing on or after1 January2014, with earlier adoption permitted.
