ifrs update of standards and interpretations - ey ifrs update of standards and interpretations in...

30
IFRS Core Tools IFRS Update of standards and interpretations in issue at 31 December 2017

Upload: haminh

Post on 24-Apr-2018

244 views

Category:

Documents


9 download

TRANSCRIPT

Page 1: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

IFRS Core Tools

IFRS Update of standards and interpretations in issue at 31 December 2017

Page 2: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

1 IFRS Update of standards and interpretations in issue at 31 December 2017

Contents

Introduction 2

Section 1: New pronouncements issued as at 31 December 2017 4

Table of mandatory application 4

IFRS 9 Financial Instruments 6

IFRS 15 Revenue from Contracts with Customers 7

IFRS 16 Leases 9

IFRS 17 Insurance Contracts 10

IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration 11

IFRIC Interpretation 23 Uncertainty over Income Tax Treatments 11

IAS 7 Disclosure Initiative – Amendments to IAS 7 12

IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses – Amendments to IAS 12 12

IFRS 2 Classification and Measurement of Share-based Payment Transactions –Amendments to IFRS 2 13

Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts - Amendments to IFRS 4 14

Transfers of Investment Property – Amendments to IAS 40 15

IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or JointVenture – Amendments to IFRS 10 and IAS 28 15

Prepayment Features with Negative Compensation - Amendments to IFRS 9 16

Long-term Interests in Associates and Joint Ventures - Amendments to IAS 28 17

IFRS Practice Statement 2: Making Materiality Judgements 17

Improvements to International Financial Reporting Standards 18

Section 2: Items not taken onto the IFRS Interpretations Committee’s agenda in Q4 2017 20

Section 3: Active IASB projects 22

Page 3: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

IFRS Update of standards and interpretations in issue at 31 December 2017 2

Companies reporting under International Financial ReportingStandards (IFRS) continue to face a steady flow of new standardsand interpretations. The resulting changes range from significantamendments of fundamental principles to some minor changesfrom the annual improvements process (AIP). They will affectdifferent areas of accounting, such as recognition, measurement,presentation and disclosure.

Some of the changes have implications that go beyond mattersof accounting, also potentially impacting the information systemsof many 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 changesin standards and interpretations (pronouncements). It alsoprovides an update on selected active projects. It does notattempt to provide an in-depth analysis or discussion of thetopics. Rather, the objective is to highlight key aspects ofthese changes. Reference should be made to the text of thepronouncements before 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 December 2017 that will beeffective for the first-time for reporting periods ended at thatdate or thereafter. This overview provides a summary of thetransitional requirements and a brief discussion of the potentialimpact that the changes may have on an entity’s financialstatements.

1 The IFRIC Update is available on the IASB’s website at http://www.ifrs.org/news-and-events/updates/ifric-updates/

A table comparing mandatory application for different yearends is presented at the beginning of Section 1. In the table, thepronouncements are presented in order of their effective dates.Note that many pronouncements contain provisions that wouldallow entities to adopt in earlier periods.

Following the table, the discussion of the pronouncementsfollows the order in which the related standards are presentedin the IFRS bound volume (Red Book), except for the AIP which isdiscussed at the end of Section 1.

When a standard or interpretation has been issued, but has yetto be 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 helpfulin identifying the pronouncements that fall within the scope ofthis disclosure requirement.

Section 2 provides a summary of the agenda decisions publishedin the IFRIC Update1 since 1 October 2017. For agenda decisionspublished before 1 October 2017, please refer to previouseditions of IFRS Update. In some agenda decisions, the IFRS ICrefers to the existing pronouncements that provide adequateguidance. These agenda decisions provide a view on theapplication of the pronouncements and fall within ‘otheraccounting literature and accepted industry practices’ inparagraph 12 of IAS 8.

Section 3 summarises the key features of selected activeprojects of the IASB. The ‘Key projects’ addressed are thoseinitiated with the objective of issuing new standards andthose involving overarching considerations across a numberof standards. ‘Other projects’ include proposed amendmentswith narrower applicability. Generally, only those projects thathave reached the exposure draft stage are included, but, inselected cases, significant projects that have not yet reachedthe exposure draft stage are also highlighted.

Introduction

Page 4: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

3 IFRS Update of standards and interpretations in issue at 31 December 2017

IFRS Core ToolsEY’s IFRS Core Tools2 provide the starting point for assessing theimpact of changes to IFRS. Our IFRS Core Tools include a numberof practical building blocks that can help the user to navigatethe changing landscape of IFRS. In addition to IFRS Update,EY’s IFRS Core Tools include the publications described below.

International GAAP® Disclosure Checklist

Our 2017 edition of International GAAP® Disclosure Checklistcaptures disclosure requirements applicable to periods ended31 December 2017 or thereafter, and disclosures that arepermitted to be adopted early. These disclosure requirements arefor all pronouncements issued as at 31 August 2017. This toolassists preparers to comply with the presentation and disclosurerequirements of IFRS in their interim and year-end IFRS financialstatements. Previous editions of this tool for earlier period-endsare available on EY’s IFRS Core Tools webpage.

Good Group (International) Limited

Good Group (International) Limited is a set of illustrativefinancial statements, incorporating presentation and disclosurerequirements that are in issue as at 31 August 2017 andeffective for the year ended 31 December 2017. Good Group(International) Limited – Illustrative interim condensed financialstatements for the period ended 30 June 2017, based onIFRS in issue at 28 February 2017, supplements Good Group(International) Limited – Illustrative financial statements. Amongother things, these illustrative financial statements can assistin understanding the impact accounting changes may have onthe financial statements.

2 EY’s Core Tools are available onhttp://www.ey.com/GL/en/Issues/IFRS/Issues_GL_IFRS_NAV_Core-tools-library.3 These publications are available on http://www.ey.com/ifrs.

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

• Good Group (International) Limited – Alternative Format

• Good First-time Adopter (International) Limited

• Good Investment Fund Limited (Equity)

• Good Investment Fund Limited (Liability)

• Good Real Estate Group (International) Limited

• Good Mining (International) Limited

• Good Petroleum (International) Limited

• Good Insurance (International) Limited

• Good Bank (International) Limited

• Good Bank (International) Limited - Illustrative disclosuresfor IFRS 9 - impairment and transition (New)

Also available from EY:Other EY publications

References to other EY publications that contain further detailsand discussion on these topics are included throughout theIFRS Update, all of which can be downloaded from our website.3

International GAAP® 20184

Our International GAAP® 2018 is a comprehensive guide tointerpreting and implementing IFRS.5 It includes pronouncementsmentioned in this publication that were issued prior toSeptember 2017, and it provides examples that illustratehow the requirements of those pronouncements are applied.

4 International GAAP® is a registered trademark of Ernst & Young LLP (UK).5 http://www.igaap.info.

Page 5: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

IFRS Update of standards and interpretations in issue at 31 December 2017 4

Table of mandatory application

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

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

IAS 7 Disclosure Initiative - Amendments to IAS 7 12 1 Jan 2017 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2017

IAS 12 Recognition of Deferred Tax Assets forUnrealised Losses - Amendments to IAS 12 12 1 Jan 2017 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2017

AIP IFRS 12 Disclosure of Interests in Other Entities -Clarification of the scope of the disclosurerequirements in IFRS 12

18 1 Jan 2017 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2017

IFRS 15 Revenue from Contracts with Customers 7 1 Jan 2018 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2018

IFRS 9 Financial Instruments 6 1 Jan 2018 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2018

IFRS 2 Classification and Measurement of Share-based Payment Transactions - Amendments to IFRS 2 13 1 Jan 2018 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2018

Applying IFRS 9 Financial Instruments with IFRS 4Insurance Contracts - Amendments to IFRS 4 14 1 Jan 2018 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2018

Transfers of Investment Property - Amendments toIAS 40 15 1 Jan 2018 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2018

IFRIC Interpretation 22 Foreign CurrencyTransactions and Advance Consideration 11 1 Jan 2018 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2018

AIP IFRS 1 First-time Adoption of InternationalFinancial Reporting Standards - Deletion of short-term exemptions for first-time adopters

18 1 Jan 2018 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2018

AIP IAS 28 Investments in Associates and JointVentures - Clarification that measuring investees atfair value through profit or loss is an investment - by -investment choice

18 1 Jan 2018 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2018

IFRS 16 Leases 9 1 Jan 2019 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2019

IFRIC Interpretation 23 Uncertainty over Income TaxTreatments 11 1 Jan 2019 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2019

Prepayment Features with Negative Compensation -Amendments to IFRS 9 16 1 Jan 2019 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2019

Long-term Interests in Associates and Joint Ventures- Amendments to IAS 28 17 1 Jan 2019 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2019

Section 1: New pronouncements issued as at 31 December 2017

Page 6: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

5 IFRS Update of standards and interpretations in issue at 31 December 2017

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

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

AIP IFRS 3 Business Combinations - Previously heldInterests in a joint operation 19 1 Jan 2019 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2019

AIP IFRS 11 Joint Arrangements - Previously heldInterests in a joint operation 19 1 Jan 2019 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2019

AIP IAS 12 Income Taxes - Income tax consequencesof payments on financial instruments classified asequity

19 1 Jan 2019 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2019

AIP IAS 23 Borrowing Costs - Borrowing costs eligiblefor capitalisation 19 1 Jan 2019 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2019

IFRS 17 Insurance Contracts 10 1 Jan 2021 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2021

IFRS 10 and IAS 28 Sale or Contribution of Assetsbetween an Investor and its Associate or JointVenture - Amendments to IFRS 10 and IAS 28

15 Note 1

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.Note 1: In December 2015, the IASB postponed the effective date of this amendment indefinitely pending the outcome of its research project on the equity method of accounting.

Page 7: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

IFRS Update of standards and interpretations in issue at 31 December 2017 6

IFRS 9 Financial InstrumentsEffective for annual periods beginning on or after1 January 2018.

Key requirements

Classification and measurement of financial assetsExcept for certain trade receivables, an entity initially measuresa financial asset at its fair value plus, in the case of a financialasset not at fair value through profit or loss, transaction costs.

Debt instruments are subsequently measured at fair valuethrough profit or loss (FVTPL), amortised cost, or fair valuethrough other comprehensive income (FVOCI), on the basisof their contractual cash flows and the business model underwhich 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-tradinginstruments in other comprehensive income (OCI) withoutsubsequent reclassification to profit or loss.

Classification and measurement of financial liabilitiesFor financial liabilities designated as FVTPL using the FVO,the amount of change in the fair value of such financial liabilitiesthat is attributable to changes in credit risk must be presentedin OCI. The remainder of the change in fair value is presented inprofit or loss, unless presentation in OCI of the fair value changein respect of the liability’s credit risk would create or enlarge anaccounting mismatch in profit or loss.

All other IAS 39 Financial Instruments: Recognition andMeasurement classification and measurement requirementsfor financial 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 Revenuefrom Contracts with Customers and lease receivables underIAS 17 Leases or IFRS 16 Leases.

Entities are generally required to recognise 12-month ECLon initial recognition (or when the commitment or guaranteewas entered into) and thereafter as long as there is no significantdeterioration in credit risk. However, if there has beena significant increase in credit risk on an individual or collectivebasis, then entities are required to recognise lifetime ECL. Fortrade receivables, a simplified approach may be applied wherebythe lifetime ECL are always recognised.

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

A risk component of a financial or non-financial instrumentmay be designated as the hedged item if the risk componentis separately 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 hedging instrument designation and can be accountedfor as costs of hedging.

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

Transition

Early application is permitted for reporting periods beginningafter the issue of IFRS 9 on 24 July 2014 by applying all ofthe requirements in this standard at the same time. Alternatively,entities may elect to early apply 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 the business model under whichthey are held. The impairment requirements will generallyresult in earlier recognition of credit losses. The new hedgingmodel may lead to more economic hedging strategies meetingthe requirements for hedge accounting. It will be importantfor entities to monitor the discussions of the IFRS TransitionResource Group for Impairment of Financial Instruments (ITG).

Page 8: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

7 IFRS Update of standards and interpretations in issue at 31 December 2017

Other EY publications

Applying IFRS: IFRS 9 for non-financial entities (March 2016)EYG no. AU3724

The Basel Committee Guidance on credit risk and accounting forexpected credit losses (January 2016) EYG no. AU3670

Applying IFRS: ITG discusses IFRS 9 impairment issues atDecember 2015 ITG meeting (December 2015) EYG no. AU3662

Applying IFRS: Classification of financial instruments under IFRS 9(May 2015) EYG no. AU3134

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

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

IFRS Developments Issue 130: IASB issues an amendment toIFRS 9 (October 2017) EYG No. 05831-173Gbl

IFRS Developments Issue 112: ITG discusses IFRS 9 impairmentissues (September 2015) EYG no. AU3429

IFRS Developments Issue 109: Next steps for the accounting fordynamic risk management project (May 2015) EYG no. AU3187

IFRS Developments Issue 105: The ITG discusses IFRS 9impairment implementation issues (April 2015) EYG no. AU3106

IFRS Developments Issue 100: Basel Committee proposesguidance on accounting for expected credit losses(February 2015) EYG no. AU2891

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

IFRS 15 Revenue from Contracts with CustomersEffective for annual periods beginning on or after 1 January 2018.

Key requirements

IFRS 15 replaces all existing revenue requirements in IFRS(IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13Customer Loyalty Programmes, IFRIC 15 Agreements for theConstruction of Real Estate, IFRIC 18 Transfers of Assets fromCustomers and SIC 31 Revenue – Barter Transactions InvolvingAdvertising Services) and applies to all revenue arising fromcontracts with customers, unless the contracts are in the scopeof other standards, such as IAS 17 Leases (or IFRS 16 Leases,once applied). Its requirements also provide a model for therecognition and measurement of gains and losses on disposalof certain non-financial assets, including property, plant andequipment and intangible assets.

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

The principles in IFRS 15 must 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 entitiesin applying its requirements to certain common arrangements,including licences of intellectual property, warranties, rightsof return, principal-versus-agent considerations, options foradditional goods or services and breakage.

Page 9: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

IFRS Update of standards and interpretations in issue at 31 December 2017 8

Clarifications to IFRS 15

In April 2016, the IASB issued amendments to IFRS 15 toaddress several implementation issues discussed by the JointTransition Resource Group for Revenue Recognition. As such,the amendments:

• Clarify when a promised good or service is distinct withinthe context of the contract

• Clarify how to apply the principal versus agent applicationguidance, including the unit of account for the assessment,how to apply the control principle in service transactionsand reframe the indicators

• Clarify when an entity’s activities significantly affect theintellectual property (IP) to which the customer has rights,which is a factor in determining whether the entityrecognises revenue for licences over time or at a pointin time

• Clarify the scope of the exception for sales-based andusage-based royalties related to licences of IP (the royaltyconstraint) when there are other promised goods orservices in the contract

• Add two practical expedients to the transition requirementsof IFRS 15 for: (a) completed contracts under the fullretrospective transition approach; and (b) contractmodifications at transition

The amendments have an effective date of 1 January 2018,which is the effective date of IFRS 15. Entities are required toapply these amendments retrospectively. The amendments areintended to clarify the requirements in IFRS 15, not to changethe standard.

Transition

Entities can choose to apply the standard using either a fullretrospective approach or a modified retrospective approach,with some limited relief provided under either approach. Earlyapplication is permitted and must be disclosed.

Impact

IFRS 15 is more prescriptive than the current IFRS requirementsfor revenue recognition and provides more application guidance.The disclosure requirements are also more extensive. Thestandard will affect entities across all industries. Adoption will bea significant undertaking for most entities with potential changesto their current accounting, systems and processes. Therefore,a successful implementation will require an assessment of anda plan for managing the change.

6 In January 2016, the IASB indicated it did not plan to schedule further meetings ofthe IFRS constituents of the TRG. The FASB TRG had its last scheduled meeting inNovember 2016. However, further FASB TRG meetings could be scheduled if theFASB receives enough broadly applicable questions.

In addition, it is important that entities monitor the discussions ofthe IASB, the US Financial Accounting Standards Board (FASB)and the TRG (including separate discussions of the US GAAPconstituents of the TRG). 6

Other EY publications

Applying IFRS: A closer look at the new revenue recognitionstandard (Updated October 2017) EYG No. 5860-173 Gbl

Applying IFRS: Presentation and disclosure requirements ofIFRS 15 (October 2017) EYG No. 05832-173Gbl

Applying IFRS: Joint Transition Resource Group for RevenueRecognition items of general agreement (Updated December2016) EYG No. 04453-163Gbl

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

IFRS Developments Issue 126: Are you ready to quantify theeffect of adopting IFRS 15? (May 2017) EYG no. 03036-173Gbl

IFRS Developments Issue 119: IASB issues clarifications toIFRS 15 (April 2016) EYG No. 00479-163Gbl

Sector publications are also available on ey.com/ifrs coveringthe following:

• Asset management

• Automotive

• Engineering and construction

• Insurance

• Life sciences

• Mining and metals

• Oil and gas

• Power and utilities

• Real estate

• Retail and consumer products

• Technology

• Software and cloud services

• Telecommunications

Page 10: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

9 IFRS Update of standards and interpretations in issue at 31 December 2017

IFRS 16 LeasesEffective for annual periods beginning on or after 1 January2019.

Key requirements

The scope of IFRS 16 includes leases of all assets, with certainexceptions. A lease is defined as a contract, or part of a contract,that conveys the right to use an asset (the underlying asset) fora period of time in exchange for consideration.

IFRS 16 requires lessees to account for all leases under a singleon-balance sheet model in a similar way to finance leases underIAS 17. The standard includes two recognition exemptions forlessees – leases of ’low-value’ assets (e.g., personal computers)and short-term leases (i.e., leases with a lease term of 12 monthsor less). At the commencement date of a lease, a lessee willrecognise a liability to make lease payments (i.e., the leaseliability) and an asset representing the right to use the underlyingasset during the lease term (i.e., the right-of-use asset).

Lessees will be required to separately recognise the interestexpense on the lease liability and the depreciation expense onthe right-of-use asset.

Lessees will be required to remeasure the lease liability uponthe occurrence of certain events (e.g., a change in the lease term,a change in future lease payments resulting from a change inan index or rate used to determine those payments). The lesseewill generally recognise the amount of the remeasurement ofthe lease liability as an adjustment to the right-of-use asset.

Lessor accounting is substantially unchanged from today’saccounting under IAS 17. Lessors will continue to classify allleases using the same classification principle as in IAS 17 anddistinguish between two types of leases: operating and financeleases.

Transition

A lessee can choose to apply the standard using either a fullretrospective or a modified retrospective approach. Thestandard’s transition provisions permit certain reliefs. Earlyapplication is permitted, but not before an entity applies IFRS 15.

Impact

The lease expense recognition pattern for lessees will generallybe accelerated as compared to today. Key balance sheet metricssuch as leverage and finance ratios, debt covenants and incomestatement metrics, such as earnings before interest, taxes,depreciation and amortisation (EBITDA), could be impacted.Also, the cash flow statement for lessees could be affected aspayments for the principal portion of the lease liability will bepresented within financing activities. Lessor accounting willresult in little change compared to today’s lessor accounting.

The standard requires lessees and lessors to make moreextensive disclosures than under IAS 17.

Given the significant accounting implications, lessees will haveto carefully consider the contracts they enter into to identifyany that are, or contain, leases. This evaluation will alsobe important for lessors to determine which contracts (orportions of contracts) are subject to the new revenuerecognition standard.

Other EY publications

Applying IFRS: A closer look at the new leases standard (August2016) EYG No. 02173-163Gbl

IFRS Developments Issue 117: IASB issues new leases standard(January 2016) EYG No. AU3676

IFRS Practical Matters: Leases make their way onto the balancesheet - Navigating the journey for a smooth landing (February2016) EYG No. AU3725

Sector publications are also available on ey.com/ifrs coveringthe following:

• Consumer products and retail

• Telecommunications

• Financial services

• Real estate

• Mining and metals

• Engineering and construction

• Oilfield services

• Oil and gas

• Tank terminals

Page 11: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

IFRS Update of standards and interpretations in issue at 31 December 2017 10

IFRS 17 Insurance ContractsEffective for annual periods beginning on or after1 January 2021.

BackgroundIn May 2017, the IASB issued IFRS 17 Insurance Contracts(IFRS 17), a comprehensive new accounting standard forinsurance contracts covering recognition and measurement,presentation and disclosure. Once effective, IFRS 17 willreplace IFRS 4 Insurance Contracts (IFRS 4) that was issued in2005. In September 2017, the Board established a TransitionResource Group (TRG) for IFRS 17 that will be tasked withanalysing implementation-related questions on IFRS 17.

ScopeIFRS 17 applies to all types of insurance contracts (i.e., life,non-life, direct insurance and re-insurance), regardless ofthe type of entities that issue them, as well as to certainguarantees and financial instruments with discretionaryparticipation features. A few scope exceptions will apply.

Key requirementsThe overall objective of IFRS 17 is to provide an accountingmodel for insurance contracts that is more useful and consistentfor insurers.

In contrast to the requirements in IFRS 4, which are largelybased on grandfathering previous local accounting policies,IFRS 17 provides a comprehensive model for insurancecontracts, covering all relevant accounting aspects. Thecore of IFRS 17 is the general model, supplemented by:• A specific adaptation for contracts with direct participation

features (the variable fee approach)• A simplified approach (the premium allocation approach)

mainly for short-duration contracts

The main features of the new accounting model for insurancecontracts are, as follows:• The measurement of the present value of future cash

flows, incorporating an explicit risk adjustment,remeasured every reporting period (the fulfilment cashflows)

• A Contractual Service Margin (CSM) that is equal andopposite to any day one gain in the fulfilment cash flowsof a group of contracts, representing the unearned profit ofthe insurance contracts to be recognised in profit or lossover the service period (i.e., coverage period)

• Certain changes in the expected present value of futurecash flows are adjusted against the CSM and therebyrecognised in profit or loss over the remaining contractualservice period

• The effect of changes in discount rates will be reportedin either profit or loss or other comprehensive income,determined by an accounting policy choice

• The presentation of insurance revenue and insuranceservice expenses in the statement of comprehensiveincome based on the concept of services provided duringthe period

• Amounts that the policyholder will always receive,regardless of whether an insured event happens (non-distinct investment components) are not presented inthe income statement, but are recognised directly onthe balance sheet

• Insurance services results (earned revenue less incurredclaims) are presented separately from the insurancefinance income or expense

• Extensive disclosures to provide information on therecognised amounts from insurance contracts and thenature and extent of risks arising from these contracts

TransitionIFRS 17 is effective for reporting periods starting on or after1 January 2021, with comparative figures required. Earlyapplication is permitted, provided the entity also applies IFRS 9and IFRS 15 on or before the date it first applies IFRS 17.The Board decided on a retrospective approach for estimatingthe CSM on the transition date. However, if full retrospectiveapplication, as defined by IAS 8 for a group of insurancecontracts, is impracticable, an entity is required to choose oneof the following two alternatives:• Modified retrospective approach - based on reasonable and

supportable information available without undue cost andeffort to the entity, certain modifications are applied to theextent full retrospective application is not possible, but stillwith the objective to achieve the closest possible outcometo retrospective application

• Fair value approach - the CSM is determined as the positivedifference between the fair value determined in accordancewith IFRS 13 Fair Value Measurement and the fulfilmentcash flows (any negative difference would be recognisedin retained earnings at the transition date)

Both the modified retrospective approach and the fair valueapproach provide transitional reliefs for determining thegrouping of contracts. If an entity cannot obtain reasonableand supportable information necessary to apply the modifiedretrospective approach, it is required to apply the fair valueapproach.

ImpactIFRS 17, together with IFRS 9, will result in a profound changeto the accounting in IFRS financial statements for insurancecompanies. This will have a significant impact on data, systemsand processes used to produce information for financialreporting purposes. The new model is likely to have a significantimpact on the profit and total equity of some insurance entities,resulting in increased volatility compared to today’s models.Key performance indicators will also likely be affected.

Other EY publicationsInsurance Accounting Alert (May 2017) EYG no. 3253-173Gbl

Page 12: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

11 IFRS Update of standards and interpretations in issue at 31 December 2017

IFRIC Interpretation 22 Foreign CurrencyTransactions and Advance ConsiderationEffective for annual periods beginning on or after1 January 2018.

Key requirementsThe interpretation clarifies that in determining the spotexchange rate to use on initial recognition of the related asset,expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advanceconsideration, the date of the transaction is the date on whichan entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. Ifthere are multiple payments or receipts in advance, thenthe entity must determine a date of the transactions foreach payment or receipt of advance consideration.

TransitionEntities may apply the amendments on a fully retrospectivebasis. Alternatively, an entity may apply the interpretationprospectively to all assets, expenses and income in its scopethat are initially recognised on or after:(i) The beginning of the reporting period in which the entity

first applies the interpretationOr

(ii) The beginning of a prior reporting period presented ascomparative information in the financial statements ofthe reporting period in which the entity first applies theinterpretation.

Early application of interpretation is permitted and must bedisclosed.

First-time adopters of IFRS are also permitted to apply theinterpretation prospectively to all assets, expenses and incomeinitially recognised on or after the date of transition to IFRS.

Impact

The amendments are intended to eliminate diversity in practice,when recognising the related asset, expense or income (or partof it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration receivedor paid in a foreign currency.

IFRIC Interpretation 23 Uncertainty over IncomeTax TreatmentsEffective for annual periods beginning on or after1 January 2019.

In June 2017, the IASB issued IFRIC Interpretation 23Uncertainty over Income Tax Treatments which clarifiesapplication of the recognition and measurement requirementsin IAS 12 Income Taxes when there is uncertainty over incometax treatments.

Scope

The interpretation addresses the accounting for incometaxes when tax treatments involve uncertainty that affectsthe application of IAS 12. The interpretation does not applyto taxes or levies outside the scope of IAS 12, nor does itspecifically include requirements relating to interest andpenalties associated with uncertain tax treatments.

Key requirements

The interpretation specifically addresses the following:• Whether an entity considers uncertain tax treatments

separately• The assumptions an entity makes about the examination

of tax treatments by taxation authorities• How an entity determines taxable profit (tax loss), tax

bases, unused tax losses, unused tax credits and taxrates

• How an entity considers changes in facts andcircumstances

An entity has to determine whether to consider each uncertaintax treatment separately or together with one or more otheruncertain tax treatments. The approach that better predictsthe resolution of the uncertainty should be followed.

Effective date and transition

The interpretation is effective for annual reporting periodsbeginning on or after 1 January 2019, but certain transitionreliefs are available.

Impact

Applying the interpretation could be challenging for entities,particularly those that operate in more complex multinationaltax environments. Entities may also need to evaluate whetherthey have established appropriate processes and procedures toobtain information on a timely basis that is necessary to applythe requirements in the interpretation and make the requireddisclosures.

Other EY publications

Applying IFRS: Uncertainty over income tax treatments(November 2017), EYG no. 06358-173Gbl

Page 13: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

IFRS Update of standards and interpretations in issue at 31 December 2017 12

IAS 7 Disclosure Initiative – Amendments to IAS 7Effective for annual periods beginning on or after1 January 2017.

Key requirements

The amendments to IAS 7 Statement of Cash Flows are partof the IASB’s Disclosure Initiative and help users of financialstatements better understand changes in an entity’s debt.The amendments require entities to provide disclosures aboutchanges in their liabilities arising from financing activities,including both changes arising from cash flows and non-cashchanges (such as foreign exchange gains or losses).

Transition

On initial application of the amendment, entities are not requiredto provide comparative information for preceding periods. Earlyapplication is permitted.

Impact

The amendments are intended to provide information to helpinvestors better understand changes in an entity’s debt.

IAS 12 Recognition of Deferred Tax Assets forUnrealised Losses – Amendments to IAS 12Effective for annual periods beginning on or after1 January 2017.

Key requirements

The IASB issued the amendments to IAS 12 Income Taxes toclarify the accounting for deferred tax assets for unrealisedlosses on debt instruments measured at fair value.

The amendments clarify that an entity needs to consider whethertax law restricts the sources of taxable profits against whichit may make deductions on the reversal of that deductibletemporary difference. Furthermore, the amendments provideguidance on how an entity should determine future taxableprofits and explain the circumstances in which taxable profit mayinclude the recovery of some assets for more than their carryingamount.

Transition

Entities are required to apply the amendments retrospectively.However, on initial application of the amendments, the changein the opening equity of the earliest comparative period maybe recognised in opening retained earnings (or in anothercomponent of equity, as appropriate), without allocatingthe change between opening retained earnings and othercomponents of equity. Entities applying this relief must disclosethat fact.

Early application is permitted. If an entity applies theamendments for an earlier period, it must disclose that fact.

Impact

The amendments are intended to remove existing divergence inpractice in recognising deferred tax assets for unrealised losses.

Page 14: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

13 IFRS Update of standards and interpretations in issue at 31 December 2017

IFRS 2 Classification and Measurement of Share-based Payment Transactions – Amendments toIFRS 2Effective for annual periods beginning on or after1 January 2018.

Key requirementsThe IASB issued amendments to IFRS 2 Share-based Payment inrelation to the classification and measurement of share-basedpayment transactions. The amendments address three mainareas:• The effects of vesting conditions on the measurement

of a cash-settled share-based payment transaction. Theamendments clarify that the approach used to account forvesting conditions when measuring equity-settled share-based payments also applies to cash-settled share-basedpayments.

• The classification of a share-based payment transactionwith net settlement features for withholding tax obligations.This amendment adds an exception to address the narrowsituation where the net settlement arrangement isdesigned to meet an entity's obligation under tax laws orregulations to withhold a certain amount in order to meetthe employee's tax obligation associated with the share-based payment. This amount is then transferred, normallyin cash, to the tax authorities on the employee’s behalf. Tofulfil this obligation, the terms of the share-based paymentarrangement may permit or require the entity to withholdthe number of equity instruments that are equal to themonetary value of the employee’s tax obligation fromthe total number of equity instruments that otherwisewould have been issued to the employee upon exercise (orvesting) of the share-based payment (‘net share settlementfeature’). Where transactions meet the criteria, they arenot divided into two components but are classified intheir entirety as equity-settled share-based paymenttransactions, if they would have been so classified inthe absence of the net share settlement feature.

• The accounting where a modification to the termsand conditions of a share-based payment transactionchanges its classification from cash-settled to equity-settled. The amendment clarifies that, if the termsand conditions of a cash-settled share-based paymenttransaction are modified, with the result that it becomesan equity-settled share-based payment transaction,the transaction is accounted for as an equity-settledtransaction from the date of the modification. Anydifference (whether a debit or a credit) between thecarrying amount of the liability derecognised and theamount recognised in equity on the modification dateis recognised immediately in profit or loss.

Transition

On adoption, entities are required to apply the amendmentswithout restating prior periods, but retrospective application ispermitted if elected for all three amendments and other criteriaare met. Early application is permitted.

Impact

The amendments are intended to eliminate diversity in practice,but are narrow in scope and address specific areas ofclassification and measurement.

Other EY publications

IFRS Developments Issue 121: IASB issues amendments to IFRS 2(June 2016) EYG no. 01519-163Gbl

Page 15: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

IFRS Update of standards and interpretations in issue at 31 December 2017 14

Applying IFRS 9 Financial Instruments with IFRS 4Insurance Contracts - Amendments to IFRS 4Effective for annual periods beginning on or after1 January 2018.

Key requirements

The amendments address concerns arising from implementingthe new financial instruments standard, IFRS 9, beforeimplementing IFRS 17 Insurance Contracts, which replacesIFRS 4. The amendments introduce two options for entitiesissuing insurance contracts: a temporary exemption fromapplying IFRS 9 and an overlay approach.

Temporary exemption from IFRS 9

The optional temporary exemption from IFRS 9 is available toentities whose activities are predominantly connected withinsurance. The temporary exemption permits such entitiesto continue to apply IAS 39 Financial Instruments: Recognitionand Measurement while they defer the application of IFRS 9 until1 January 2021 at the latest.

Predominance must be initially assessed at the annual reportingdate that immediately precedes 1 April 2016 and before IFRS 9is implemented. Also the evaluation of predominance can onlybe reassessed in rare cases. Entities applying the temporaryexemption will be required to make additional disclosures.

The overlay approach

The overlay approach is an option for entities that adopt IFRS 9and issue insurance contracts, to adjust profit or loss for eligiblefinancial assets; effectively resulting in IAS 39 accounting forthose designated financial assets. The adjustment eliminatesaccounting volatility that may arise from applying IFRS 9 withoutthe new insurance contracts standard. Under this approach, anentity is permitted to reclassify amounts between profit or lossand other comprehensive income for designated financial assets.An entity must present a separate line item for the amount ofthe overlay adjustment in profit or loss, as well as a separate lineitem for the corresponding adjustment in other comprehensiveincome.

Transition

The temporary exemption is first applied for reporting periodsbeginning on or after 1 January 2018.

An entity may elect the overlay approach when it first appliesIFRS 9 and apply that approach retrospectively to financialassets designated on transition to IFRS 9. The entity restatescomparative information reflecting the overlay approach if,and only if, the entity restates comparative information whenapplying IFRS 9.

Impact

The overlay approach requires an entity to remove from profitor loss additional volatility that may arise if IFRS 9 is appliedwith IFRS 4.

When applying the temporary exemption, entities must stillprovide extensive disclosure required in other aspects of IFRS 9.

Other EY publications

Insurance Accounting Alert (September 2016) EYG no. 02745-163G6

Page 16: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

15 IFRS Update of standards and interpretations in issue at 31 December 2017

Transfers of Investment Property – Amendmentsto IAS 40Effective for annual periods beginning on or after1 January 2018.

Key requirements

The amendments clarify when an entity should transfer property,including property under construction or development into, orout of investment property. The amendments state that a changein use occurs when the property meets, or ceases to meet, thedefinition of investment property and there is evidence of thechange in use. A mere change in management’s intentions forthe use of a property does not provide evidence of a change inuse.

Transition

Entities should apply the amendments prospectively to changesin use that occur on or after the beginning of the annualreporting period in which the entity first applies the amendments.An entity should reassess the classification of property heldat that date and, if applicable, reclassify property to reflectthe conditions that exist at that date.

Retrospective application in accordance with IAS 8 is onlypermitted if that is possible without the use of hindsight.

Early application of the amendments is permitted and must bedisclosed.

Impact

The amendments will eliminate diversity in practice.

IFRS 10 and IAS 28 Sale or Contribution of Assetsbetween an Investor and its Associate or JointVenture – Amendments to IFRS 10 and IAS 28In December 2015, the IASB decided to defer the effectivedate of the amendments until such time as it has finalised anyamendments that result from its research project on the equitymethod. Early application of the amendments is still permitted.

Key requirements

The amendments address the conflict between IFRS 10Consolidated Financial Statements and IAS 28 Investments inAssociates and Joint Ventures in dealing with the loss of controlof a subsidiary that is sold or contributed to an associate or jointventure.

The amendments clarify that a full gain or loss is recognisedwhen a transfer to an associate or joint venture involvesa business as defined in IFRS 3 Business Combinations. Anygain or loss resulting from the sale or contribution of assets thatdoes not constitute a business, however, is recognised only tothe extent of unrelated investors’ interests in the associate orjoint venture.

Transition

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

Impact

The amendments are intended to eliminate diversity in practiceand give preparers a consistent set of principles to apply forsuch transactions. However, the application of the definitionof a business is judgemental and entities need to considerthe definition carefully in such transactions.

Page 17: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

IFRS Update of standards and interpretations in issue at 31 December 2017 16

Prepayment Features with Negative Compensation- Amendments to IFRS 9Effective for annual periods beginning on or after1 January 2019.

Key requirements

Under IFRS 9, a debt instrument can be measured at amortisedcost or at fair value through other comprehensive income,provided that the contractual cash flows are ‘solely payments ofprincipal and interest on the principal amount outstanding’ (theSPPI criterion) and the instrument is held within the appropriatebusiness model for that classification. The amendments to IFRS 9clarify that a financial asset passes the SPPI criterion regardlessof the event or circumstance that causes the early terminationof the contract and irrespective of which party pays or receivesreasonable compensation for the early termination of thecontract.

The basis for conclusions to the amendments clarified that theearly termination can result from a contractual term or from anevent outside the control of the parties to the contract, such as achange in law or regulation leading to the early termination of thecontract.

Transition

The amendments must be applied retrospectively; earlierapplication is permitted. The amendment provides specifictransition provisions if it is only applied in 2019 rather than in2018 with the remainder of IFRS 9.

Impact

The amendments are intended to apply where the prepaymentamount approximates to unpaid amounts of principal and interestplus or minus an amount that reflects the change in a benchmarkinterest rate. This implies that prepayments at current fair valueor at an amount that includes the fair value of the cost toterminate an associated hedging instrument, will normally satisfythe SPPI criterion only if other elements of the change in fairvalue, such as the effects of credit risk or liquidity, are small.Most likely, the costs to terminate a ‘plain vanilla’ interest rateswap that is collateralised, so as to minimise the credit risks forthe parties to the swap, will meet this requirement.

Modification or exchange of a financial liability that does notresult in derecognition

In the basis for conclusions to the amendments, the IASB alsoclarified that the requirements in IFRS 9 for adjusting theamortised cost of a financial liability, when a modification (orexchange) does not result in derecognition, are consistent withthose applied to the modification of a financial asset that doesnot result in derecognition.

This means that the gain or loss arising on modification of afinancial liability that does not result in derecognition, calculated

by discounting the change in contractual cash flows at theoriginal effective interest rate, is immediately recognised in profitor loss.

The IASB made this comment in the basis for conclusions to theamendments as it believes that the existing requirements inIFRS 9 provided an adequate basis for entities to account formodifications and exchanges of financial liabilities and that noformal amendment to IFRS 9 was needed in respect of this issue.

Impact

The IASB stated specifically that this clarification relates to theapplication of IFRS 9. As such, it would appear that thisclarification does not need to be applied to the accounting formodification of liabilities under IAS 39 Financial Instruments:Recognition and Measurement. Any entities that have not appliedthis accounting under IAS 39 are therefore likely to have achange of accounting on transition. As there is no specific relief,this change needs to be made retrospectively.

Other EY publicationsIFRS Developments Issue 130: IASB issues an Amendment toIFRS 9 (October 2017) EYG no. 05831-173Gbl

Page 18: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

17 IFRS Update of standards and interpretations in issue at 31 December 2017

Long-term interests in associates and jointventures - Amendments to IAS 28Effective for annual periods beginning on or after1 January 2019.

Key requirements

The amendments clarify that an entity applies IFRS 9 FinancialInstruments to long-term interests in an associate or jointventure to which the equity method is not applied but that, insubstance, form part of the net investment in the associate orjoint venture (long-term interests). This clarification is relevantbecause it implies that the expected credit loss model in IFRS 9applies to such long-term interests.

The Board also clarified that, in applying IFRS 9, an entity doesnot take account of any losses of the associate or joint venture,or any impairment losses on the net investment, recognised asadjustments to the net investment in the associate or jointventure that arise from applying IAS 28 Investments inAssociates and Joint Ventures.

To illustrate how entities apply the requirements in IAS 28 andIFRS 9 with respect to long-term interests, the Board alsopublished an illustrative example when it issued the amendments.

Transition

Entities must apply the amendments retrospectively, with certainexceptions. Early application of the amendments is permitted andmust be disclosed.

Impact

The amendments will eliminate ambiguity in the wording of thestandard.

IFRS Practice Statement 2: Making MaterialityJudgementsCompanies are permitted to apply the guidance in the PracticeStatement (PS) to financial statements prepared any time after14 September 2017.

Purpose

The PS contains non-mandatory guidance to help entities makingmateriality judgements when preparing general purpose IFRSfinancial statements. The PS may also help users of financialstatements to understand how an entity makes materialityjudgements in preparing such financial statements.

Key provisions

The PS comprises guidance in three main areas:

• General characteristics of materiality• A four-step process that may be applied in making

materiality judgements when preparing financialstatements. This process describes how an entity couldassess whether information is material for the purposesof recognition, measurement, presentation and disclosure.

• How to make materiality judgements in specificcircumstances, namely, prior period information, errorsand covenants and in the context of interim reporting.

Furthermore, the PS discusses the interaction between themateriality judgements an entity is required to make and locallaws and regulations.

The PS includes examples illustrating how an entity might applythe guidance.

Impact

Since the PS is a non-mandatory document, it does not changeor introduce any requirements in IFRS. However, the PS provideshelpful guidance for entities making materiality judgements andthus may improve the communication effectiveness of financialstatements.

Other EY publications

IFRS Developments Issue 129: Disclosure Initiative – updates onthe Materiality Project (September 2017) EYG no. 05342-173Gbl

Page 19: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

IFRS Update of standards and interpretations in issue at 31 December 2017 18

Improvements to International Financial Reporting StandardsKey requirements

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

2014-2016 cycle (issued in December 2016)

Following is a summary of the amendments from the 2014-2016 annual improvements cycle.

IFRS 1 First-time Adoption ofInternational Financial ReportingStandards

Deletion of short-term exemptions for first-time adopters

• Short-term exemptions in paragraphs E3–E7 of IFRS 1 were deleted because they have nowserved their intended purpose.

• The amendment is effective from 1 January 2018.

IAS 28 Investments inAssociates and Joint Ventures

Clarification that measuring investees at fair value through profit or loss is an investment-by-investment choice

• The amendments clarify that:

u An entity that is a venture capital organisation, or other qualifying entity, may elect, atinitial recognition on an investment-by-investment basis, to measure its investments inassociates and joint ventures at fair value through profit or loss.

u If an entity that is not itself an investment entity has an interest in an associate or jointventure that is an investment entity, the entity may, when applying the equity method,elect to retain the fair value measurement applied by that investment entity associateor joint venture to the investment entity associate’s or joint venture’s interests insubsidiaries. This election is made separately for each investment entity associateor joint venture, at the later of the date on which (a) the investment entity associateor joint venture is initially recognised; (b) the associate or joint venture becomes aninvestment entity; and (c) the investment entity associate or joint venture firstbecomes a parent.

• The amendments should be applied retrospectively and are effective from 1 January 2018,with earlier application permitted. If an entity applies those amendments for an earlierperiod, it must disclose that fact.

IFRS 12 Disclosure of Interestsin Other Entities

Clarification of the scope of the disclosure requirements in IFRS 12

• The amendments clarify that the disclosure requirements in IFRS 12, other than those inparagraphs B10–B16, apply to an entity’s interest in a subsidiary, a joint venture or anassociate (or a portion of its interest in a joint venture or an associate) that is classified(or included in a disposal group that is classified) as held for sale.

• The amendments are effective from 1 January 2017 and must be applied retrospectively.

Page 20: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

19 IFRS Update of standards and interpretations in issue at 31 December 2017

2015-2017 cycle (issued in December 2017)

Following is a summary of the amendments from the 2015-2017 annual improvements cycle:

IFRS 3 Business Combinations Previously held Interests in a joint operation

• The amendments clarify that, when an entity obtains control of a business that is a jointoperation, it applies the requirements for a business combination achieved in stages,including remeasuring previously held interests in the assets and liabilities of the jointoperation at fair value.

• In doing so, the acquirer remeasures its entire previously held interest in the joint operation.

• An entity applies those amendments to business combinations for which the acquisition dateis on or after the beginning of the first annual reporting period beginning on or after 1January 2019. Earlier application is permitted.

IFRS 11 Joint Arrangements Previously held Interests in a joint operation

• A party that participates in, but does not have joint control of, a joint operation might obtainjoint control of the joint operation in which the activity of the joint operation constitutesa business as defined in IFRS 3. The amendments clarify that the previously held interestsin that joint operation are not remeasured.

• An entity applies those amendments to transactions in which it obtains joint control onor after the beginning of the first annual reporting period beginning on or after 1 January2019. Earlier application is permitted.

IAS 12 Income Taxes Income tax consequences of payments on financial instruments classified as equity

• The amendments clarify that the income tax consequences of dividends are linked moredirectly to past transactions or events that generated distributable profits than todistributions to owners. Therefore, an entity recognises the income tax consequencesof dividends in profit or loss, other comprehensive income or equity according to wherethe entity originally recognised those past transactions or events.

• An entity applies those amendments for annual reporting periods beginning on or after1 January 2019. Earlier application is permitted. When an entity first applies thoseamendments, it applies them to the income tax consequences of dividends recognisedon or after the beginning of the earliest comparative period.

IAS 23 Borrowing Costs Borrowing costs eligible for capitalisation

• The amendments clarify that an entity treats as part of general borrowings any borrowingoriginally made to develop a qualifying asset when substantially all of the activitiesnecessary to prepare that asset for its intended use or sale are complete.

• An entity applies those amendments to borrowing costs incurred on or after the beginningof the annual reporting period in which the entity first applies those amendments.

• An entity applies those amendments for annual reporting periods beginning on or after1 January 2019. Earlier application is permitted.

Page 21: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

IFRS Update of standards and interpretations in issue at 31 December 2017 20

Section 2: Items not taken onto the IFRSInterpretations Committee’s agenda in Q4 2017

Certain items deliberated by the IFRS IC are published within the ‘Interpretations Committee agenda decisions’ section of the IASB’sIFRIC Update. Agenda decisions are issues that the IFRS IC decides not to add to its agenda and include the reasons for not doing so.For some of these items, the IFRS IC includes further information about how the standards should be applied. This guidance does notconstitute an interpretation, but rather, provides additional information on the issues raised and the IFRS IC’s views on how the standardsand 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 October 2017 (since ourprevious edition of IFRS Update) to 31 December 2017 and contains highlights from the agenda decisions. For agenda decisionspublished before 1 October 2017, please refer to previous editions of IFRS Update. All items considered by the IFRS IC during itsmeetings, as well as the full text of its conclusions, can be found in the IFRIC Update on the IASB’s website.7

Final date considered Issue Summary of reasons given for not adding the issue to the IFRS IC’s agenda

November 2017 IFRS 3 BusinessCombinations -Acquisition of a Groupof Assets

The IFRS IC received a request asking how an entity accounts for the acquisitionof a group of assets that does not constitute a business (the group). Morespecifically, the submitter asked how to allocate the transaction price tothe identifiable assets acquired and liabilities assumed when:

• The sum of the individual fair values of the identifiable assets and liabilitiesis different from the transaction price

• The group includes identifiable assets and liabilities initially measured bothat cost and at an amount other than cost

Paragraph 2(b) of IFRS 3 requires an entity to do the following on acquisition ofa group of assets:

• Identify and recognise the individual identifiable assets acquired andliabilities assumed

• Allocate the cost of the group to the individual identifiable assets andliabilities based on their relative fair values at the date of the acquisition

Other IFRS standards include initial measurement requirements for particularassets and liabilities (for example, IFRS 9 Financial Instruments for financialinstruments).

The IFRS IC observed that if an entity initially considers that there might bea difference between the transaction price for the group and the sum of theindividual fair values of the identifiable assets and liabilities, the entity firstreviews the procedures it has used to determine those individual fair values toassess whether such a difference truly exists before allocating the transactionprice.

The IFRS IC then considered two possible ways of accounting for the acquisitionof the group.

Applying the first approach, an entity accounts for the acquisition of the group,as follows:

• Identify the individual identifiable assets acquired and liabilities assumedthat it recognises at the date of the acquisition

• Determine the individual transaction price for each identifiable asset andliability by allocating the cost of the group based on the relative fair valuesof those assets and liabilities at the date of the acquisition

7 The IFRIC Update is available at http://www.ifrs.org/news-and-events/updates/ifric-updates/ .

Page 22: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

21 IFRS Update of standards and interpretations in issue at 31 December 2017

Final date considered Issue Summary of reasons given for not adding the issue to the IFRS IC’s agenda

• Apply the initial measurement requirements in applicable standards toeach identifiable asset acquired and liability assumed. The entity accountsfor any difference between the amount at which the asset or liability isinitially measured and its individual transaction price applying the relevantrequirements

Applying the second approach, for any identifiable asset or liability initiallymeasured at an amount other than cost, an entity initially measures that assetor liability at the amount specified in the applicable IFRS standard. The entitydeducts from the transaction price of the group the amounts allocated to theassets and liabilities initially measured at an amount other than cost, and thenallocates the residual transaction price to the remaining identifiable assets andliabilities based on their relative fair values at the date of the acquisition.

The IFRS IC concluded that a reasonable reading of the requirements inparagraph 2(b) of IFRS 3 on the acquisition of a group of assets that doesnot constitute a business results in one of the two approaches outlined in theagenda decision. The IFRS IC observed that an entity would apply its reading ofthe requirements consistently to all acquisitions of a group of assets that doesnot constitute a business. An entity would also disclose the selected approachapplying paragraphs 117–124 of IAS 1 Presentation of Financial Statements ifthat disclosure would assist users of financial statements in understanding howthose transactions are reflected in reported financial performance and financialposition.

The IFRS IC observed that the forthcoming amendment to the definition ofa business in IFRS 3 (see page 25) is likely to increase the population oftransactions that constitute the acquisition of a group of assets. Accordingly,this matter will be monitored after the forthcoming amendments to IFRS 3become effective.

Page 23: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

IFRS Update of standards and interpretations in issue at 31 December 2017 22

The ability to stay current on the IASB’s standard-setting activities is critical in a sea of change. The following pages summarise keyfeatures of selected active projects of the IASB, along with potential implications of the proposed standards. The ‘Key projects’ arethose initiated with the objective of issuing new standards or that involve overarching considerations across a number of standards.‘Other projects’ include proposed amendments with narrower applicability. Generally, only those projects that have reached theexposure draft stage are included, but in selected cases, projects that have not yet reached the exposure draft stage are alsocommented on.

Key projects

Conceptual Framework

Key developments to dateBackground

The objective of the Conceptual Framework project is to improvefinancial reporting by providing a more complete, clear andupdated set of concepts.

To achieve this, the IASB is building on the existing ConceptualFramework, while updating it, improving it and filling in the gaps,instead of fundamentally reconsidering all aspects of theConceptual Framework.

Scope and key features

The Exposure Draft (ED) that was issued in May 2015 proposesto:

• Revise the definitions of elements in the financialstatements

• Include new guidance on the recognition criteria andderecognition principles

• Describe the various measurement bases and factors toconsider when selecting an appropriate measurement basis

• Include the principles for when items of income andexpense are reported in OCI or profit or loss

• Describe high-level concepts for presentation anddisclosure of information

The comment period for the ED ended on 25 November 2015.

The Board is currently deliberating the comments received onthe ED. In November 2016, the IASB issued a staff paper, Effectof Board Redeliberations on the Exposure Draft ConceptualFramework for Financial Reporting, that compares the proposalsin the ED with the results of the Board’s deliberations up to15 November 2016. The final version of the ConceptualFramework is expected to be issued in March 2018.

Impact

The proposed changes to the Conceptual Framework may impactthe application of IFRS in situations in which no standard appliesto a particular transaction or event, or when a standard allowsa choice of accounting policies.

Other EY publications

Applying IFRS: IASB issues the Conceptual Framework exposuredraft (June 2015) EYG no. AU3242

Section 3: Active IASB projects

Page 24: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

23 IFRS Update of standards and interpretations in issue at 31 December 2017

Better communication in financial reporting

Key developments to dateBackground

The IASB is undertaking a broad-based initiative to explorehow disclosures in IFRS financial reporting can be improved.The Board has identified implementation and research projectsthat will support better communication.

In December 2014 and January 2016, amendments to IAS 1 andIAS 7 were issued respectively. Furthermore, the IASB releasedthe IFRS Practice Statement 2: Making Materiality Judgement(PS) in September 2017. For further details regarding the PS,please refer to page 17 in Section 1: New pronouncements issuedas at 31 December 2017.

In addition, the Better Communication in Financial Reportinginitiative comprises the following projects:

Primary financial statements

The project aims to improve the structure and content of theprimary financial statements, with a focus on the statement(s)of financial performance.

The Board will continue its discussions and publish eithera discussion paper or an exposure draft in the Q2 2018.

Definition of material

In the ED Definition of Material, the IASB proposes amendmentsto IAS 1 and IAS 8 to clarify the definition of material. Theproposed amendments intend to improve the understandingof the existing requirements rather than to significantly impactan entity’s materiality judgements.

Any changes made to the definition of material in IAS 1 and IAS 8as a result of the proposals in the ED will result in consequentialamendments to Practice Statement 2: Making MaterialityJudgements and the forthcoming revised Conceptual Framework.Comments are due by 15 January 2018. Exposure DraftFeedback is expected in March 2018.

Principles of disclosure

The objective of this project is to identify and better understanddisclosure issues and either develop a set of new disclosureprinciples, or clarify the existing principles.

The IASB published a Discussion Paper (DP) in March 2017 whichfocuses on the general disclosure requirements in IAS 1 andconcepts being developed in the project to revise the existingConceptual Framework.

Some specific suggestions in the Discussion Paper include:

• Seven principles of effective communication, which couldbe included in a general disclosure standard or describedin non-mandatory guidance

• Possible approaches to improve disclosure objectives andrequirements in IFRS standards

• Principles of fair presentation and disclosure ofperformance measures and non-IFRS information infinancial statements, to ensure that such informationis not misleading.

Discussion Paper Feedback is expected in March 2018.

IFRS taxonomy

The Better Communication in Financial Reporting initiative willalso consider the IFRS Taxonomy. The Taxonomy enables taggingof electronic financial information and allows computers toidentify, read and extract the information. This facilitates analysisand comparison. Users may create tailored reports to meet theirinformation needs.

Impact

The impact of the different projects is unknown. However, theobjective is to improve disclosure effectiveness by providingguidance on how to enhance the structure of financialstatements, make disclosures entity-specific, and apply themateriality concept. These projects have the potential to provideclarifications and guidance to help entities prepare more tailoredand effective disclosures.

Other EY publications

Applying IFRS: Enhancing communication effectiveness (February2017) EYG no. 000662-173Gbl

IFRS Developments Issue 129: Disclosure Initiative – Updates onthe Materiality Project (September 2017) EYG no. 05342-173Gbl

IFRS Developments Issue 124: Disclosure Initiative – Principles ofDisclosure (April 2017) EYG no. 01608-173Gbl

Page 25: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

IFRS Update of standards and interpretations in issue at 31 December 2017 24

Other projectsThe IASB has a number of projects on its work plan to amend existing standards and interpretations for specific matters. Following is a brief summary of selected projects.Refer to the IASB’s website for its work plan, which includes the current status of all projects.

Other projects Status/next steps

Financial Instruments – Accounting for Dynamic Risk Management

• The objective of this project is to address the specific accounting for risk management strategies relatingto open portfolios rather than individual contracts. The hedge accounting requirements in IAS 39 andIFRS 9 do not provide specific solutions to the issues associated with macro hedging

• The IASB intends to develop the accounting model for dynamic risk management (DRM) using cash flowhedge mechanics as a starting point in the following two phases:

u The first phase will focus on developing the ‘core areas’ that are central to the model that arecomprised of: (i) target profile; (ii) asset profile; (iii) DRM derivative instruments; and(iv) performance assessment and recycling, to shape the fundamentals of the DRM accountingmodel.

u The second phase will address non-core areas that are extensions of concepts developed during thefirst phase.

• The IASB intends to gather external feedback when a core model developed in the first phase beforeprogressing on to the second phase.

• The DP was issued in April 2014; re-deliberations are ongoing; a seconddiscussion paper is expected in 2019.

Plan Amendment, Curtailment or Settlement (Amendments to IAS 19) and Availability of a Refund (Amendmentsto IFRIC 14)

• The proposed amendments to IAS 19 specify that, in the event of a plan amendment, curtailment orsettlement during a reporting period, an entity is required to use updated information to determinecurrent service cost and net interest for the period following such an event.

• The proposed amendments to IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum FundingRequirements and their Interaction address whether the powers of other parties affect an entity’s right toa refund of a surplus from the plan.

• The ED was issued in June 2015

• At the September 2017 meeting, the Board tentatively decided tofinalise the amendments to IAS 19 separately from the amendments toIFRIC 14.

• The amendments to IAS 19 are expected in January 2018 and the Boardtentatively decided to require entities to apply these amendments toannual periods beginning on or after 1 January 2019, with earlierapplication permitted.

• In respect of the amendments to IFRIC 14, the Board tentatively decidedto perform further work to assess whether it can establish a moreprinciples-based approach for an entity to assess the availability of arefund of a surplus.

• The amendments to IFRIC 14 are expected in Q2 2018.

Page 26: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

25 IFRS Update of standards and interpretations in issue at 31 December 2017

Other projects Status/next steps

Classification of Liabilities (Proposed amendments to IAS 1)

• The proposed amendments to IAS 1 aim to improve presentation in financial statementsby clarifying the criteria for the classification of a liability as either current or non-current.

• The ED proposes to:

• Clarify that the classification of a liability as either current or non-current is based onthe entity’s rights at the end of the reporting period

• Clarify the link between the settlement of the liability and the outflow of resources fromthe entity

• The ED was issued in Q1 2015

• Amendments are expected in H2 2018

Definition of a Business (Proposed amendments to IFRS 3)

• The proposed amendments aim to address issues related to the application of the definitionof a business. In summary, the ED proposes the following clarifications to the definition of a business:

u To clarify that to be considered a business, an acquired set of activities and assets (a set) mustinclude, at a minimum, an input and a substantive process that together have the ability tocontribute to the creation of outputs

u To remove the statement that a set of activities and assets is a business if market participants canreplace the missing elements and continue to produce outputs

u To revise the definition of outputs to focus on goods and services provided to customersand to remove the reference to the ability to reduce costs

u To consider a set of activities and assets not to be a business if, at the transaction date, substantiallyall of the fair value of the gross assets acquired is concentrated in a single identifiable asset or groupof similar identifiable assets (‘screening test’)

u To add guidance to help determine whether a substantive process has been acquired

• The ED was issued in Q2 2016; comments were due by 31 October2016

• At its October 2017 meeting; the Board tentatively decided to:

u Clarify the description of the screening test as follows:

• An entity is permitted, but not required, to carry out thescreening test

• If the screening test identifies an asset purchase, no furtherassessment is needed (although the entity is not prohibitedfrom carrying out such further assessment)

• If the screening test does not identify an asset purchase, theentity must carry out a further assessment (if the entity electednot to apply the screening test, it must carry out that sameassessment)

u Remove the proposed Illustrative Example J Acquisition of oil andgas operations

u Specify that the gross assets considered in the screening testexclude cash and cash equivalents acquired, and confirm theBoard’s tentative decision in April 2017 that those gross assetsalso exclude:

• Goodwill resulting from the effects of deferred tax liabilities

• Deferred tax assets

u Confirm all the other tentative decisions made at its April and June2017 meetings.

Page 27: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

IFRS Update of standards and interpretations in issue at 31 December 2017 26

Other projects Status/next steps

• The Board also tentatively decided:

u Not to re-expose the amendments to IFRS 3

u That the amendments to IFRS 3 should apply for businesscombinations for which the acquisition date is on or after thebeginning of the first annual reporting period beginning or after 1January 2020, with earlier application permitted

• Amendments to IFRS 3 are expected in Q2 2018

Improvements to IFRS 8 Operating Segments (Amendments to IFRS 8 and IAS 34)

• The proposed amendments, which follow on from a Post-implementation Review (PIR) of IFRS 8, includeamendments to:

u Clarify and emphasise the criteria that must be met before two operating segments maybe aggregated

u Require entities to disclose the title and role of the person or group that performs the function of thechief operating decision maker

u Require entities to provide information in the notes to the financial statements if segments in thefinancial statements differ from segments reported elsewhere in the annual report and inaccompanying materials

• The Board has also proposed to amend IAS 34 Interim Financial Reporting to require entities that changetheir segments to provide restated segment information for prior interim periods earlier than theycurrently do.

• The ED was issued in March 2017; comments were due by 31 July 2017

• At its November 2017 meeting the Board discussed a summary ofcomments on the ED and will decide on the project's direction at a futuremeeting

• Expected date of decision is January 2018

Property, Plant and Equipment— Proceeds before Intended Use (Proposed amendments to IAS 16)

• The proposed amendments aim to prohibit deducting from the cost of an item of property,plant and equipment, any proceeds from selling items produced while bringing that asset tothe location and condition necessary for it to be capable of operating in the manner intendedby management. Instead, an entity would recognise the proceeds from selling such items, and the costs ofproducing those items, in profit or loss.

• ED was issued in June 2017; comments were due by 19 October 2017

• At its December 2017 meeting, the Board discussed a summary of thefeedback

Post-implementation Review IFRS 13 Fair Value Measurement

• The Board is conducting a Post-implementation Review of IFRS 13 Fair Value Measurement to assess theeffect of the standard on financial reporting. The purpose of a post-implementation review is to evaluatewhether the standard is working as the Board intended.

• Request for Information (RFI) was issued in June 2017; submissionswere due by 22 September 2017

• RFI Feedback is expected in January 2018

Page 28: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

27 IFRS Update of standards and interpretations in issue at 31 December 2017

Other projects Status/next steps

• The Board has issued a Request for Information that focuses on disclosures about fair valuemeasurements; prioritising Level 1 inputs or the unit of account; application of the concept of the highestand best use when measuring the fair value of non-financial assets; and application of judgement inspecific areas. In addition, this RFI also explores whether there is a need for further guidance, such aseducation material, on measuring the fair value of biological assets and unquoted equity instruments.

Accounting Policies and Accounting Estimates (Proposed amendments to IAS 8)

• The IASB issued an exposure draft proposing narrow-scope amendments to IAS 8 that are intended tohelp companies distinguish accounting policies from accounting estimates.

• This distinction is relevant because IAS 8 contains different requirements for changes in accountingpolicies and for changes in accounting estimates.

• The proposed amendments explain that an accounting policy is the overall objective and the accountingestimates are inputs used in achieving that objective. Furthermore, the proposed amendments include adefinition of accounting estimate and clarify that selecting an estimation technique or valuation techniquewhen an item in the financial statements cannot be measured with precision, constitutes selecting anaccounting estimate whereas selecting a cost formula (i.e., first-in, first-out (FIFO) or weighted averagecost) in applying IAS 2 Inventories constitutes selecting an accounting policy.

• The ED was issued in September 2017; comments are due by 15January 2018

• ED Feedback is expected in March 2018

Page 29: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

IFRS Update of standards and interpretations in issue at 31 December 2017 28

The table below sets out the estimated timeline for the remaining projects on the IASB’s agenda as at the end of December 2017.

IASB projects Next milestone Expected date

Research projects

Business Combinations under Common Control Discussion paper H2 2018

Financial Instruments with Characteristics of Equity Discussion paper Q2 2018

Goodwill and Impairment Discussion paper orexposure draft

Q2 2018

Discount Rates Research summary Q2 2018

Share-based Payment Research summary Q2 2018

Standard-setting and related projects

Rate-regulated Activities Discussion paper orexposure draft

2019

Management Commentary Exposure draft (updateof the ManagementCommentary PracticeStatement)

-

Maintenance projects

Accounting Policy Changes (Amendments to IAS 8) Exposure draft March 2018

Fees in the ‘10 Per Cent’ Test for Derecognition (Amendments to IFRS 9) Exposure Draft -*

*The timing of publication of the proposed amendments depends on the identification of other matters for inclusion in the annualimprovements process.

Page 30: IFRS Update of standards and interpretations - EY IFRS Update of standards and interpretations in issue at 31 December 2017 Contents Introduction 2 Section 1: New pronouncements issued

EY | Assurance | Tax | Transactions | Advisory

About EYEY is a global leader in assurance, tax, transaction and advisory services.The insights and quality services we deliver help build trust and confidencein the capital markets and in economies the world over. We developoutstanding leaders who team to deliver on our promises to all ofour stakeholders. In so doing, we play a critical role in building a betterworking world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, ofthe member firms of Ernst & Young Global Limited, each of which is aseparate legal entity. Ernst & Young Global Limited, a UK company limitedby guarantee, does not provide services to clients. For more informationabout our organization, please visit ey.com.

About EY’s International Financial Reporting Standards GroupA global set of accounting standards provides the global economy withone measure to assess and compare the performance of companies. Forcompanies applying or transitioning to International Financial ReportingStandards (IFRS), authoritative and timely guidance is essential as thestandards continue to change. The impact stretches beyond accountingand reporting to the key business decisions you make. We have developedextensive global resources — people and knowledge — to support ourclients applying IFRS and to help our client teams. Because we understandthat you need a tailored service as much as consistent methodologies, wework to give you the benefit of our deep subject matter knowledge, ourbroad sector experience and the latest insights from our work worldwide.

© 2018 EYGM Limited.All Rights Reserved.

EYG No. 00157-183Gbl

EY-000052279.indd (UK) 01/18.Artwork by Creative Services Group London.

ED None

In line with EY’s commitment to minimize its impact on the environment, this document has been printed on paper with a high recycled content.

This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice.

ey.com