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BASIS FOR CONCLUSIONS ON IFRS 10 EFFECTIVE DATE AND TRANSITION

BASIS FOR CONCLUSIONS ON IFRS 10 EFFECTIVE DATE AND TRANSITION

BASIS FOR CONCLUSIONS ON IFRS 10 EFFECTIVE DATE AND TRANSITION

Effective date of IFRS

The IASB issued Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance on 28 June 2012.

The standard amends the following standards:

  • IFRS 10 Consolidated Financial Statements
  • IFRS 11 Joint Arrangements
  • IFRS 12 Disclosure of Interests in Other Entities

Consequential amendments are also made to IFRS 1 First-time Adoption of International Financial Reporting Standards.

The amendments are applicable to annual periods beginning on or after 1 January 2013.

BASIS FOR CONCLUSIONS ON IFRS 10 EFFECTIVE DATE AND TRANSITION

IDENTIFYING THE RELEVANT ACTIVITIES OF THE INVESTEE

Relevant activities’ is a new concept which is integral to the control model as it assists in determining whether an investor has power over an investee

Definition of ‘relevant activities’ – these are activities of the investee that SIGNIFICANTLY affect the investee’s returns

Examples of relevant activities include, but are not limited to:

• Selling and purchasing of goods or services

• Managing financial assets during their life

• Selecting, acquiring and disposing of assets

• Researching and developing new products or processes

• Determining a funding structure or obtaining funding

BASIS FOR CONCLUSIONS ON IFRS 10 EFFECTIVE DATE AND TRANSITION

Date of initial application

The IASB (the Board) decided to clarify the meaning of ‘the date of initial application’ in response to feedback from constituents that stated that this term is not defined and therefore means different things in different IFRSs. In its deliberations, the Board noted that the intention in IFRS 10 was to use the date of initial application as a reference point to determine which interests must be accounted for in terms of IFRS 10, i.e., the point at which the control assessment must be made. To this end, ’the date of initial application’ is defined as ‘the beginning of the annual reporting period in which IFRS 10 is applied for the first time’.

An entity should, therefore, assess whether the consolidation conclusion is the same or different under IAS 27 Consolidated and Separate Financial Statements / SIC-12 Consolidation—Special Purpose Entities and IFRS 10 at the date of initial application, and to apply the principles of IFRS 10 accordingly, taking into account the amendments below

BASIS FOR CONCLUSIONS ON IFRS 10 EFFECTIVE DATE AND TRANSITION

When the consolidation conclusion at the date of initial application is the same under IAS 27/SIC-12 and IFRS 10

The amendments clarify that an entity is not required to make adjustments to the previous accounting for its involvement with entities if the consolidation conclusion reached at the date of initial application is the same when applying IAS 27/SIC-12 and when applying IFRS 10. As a result, the Board has confirmed that relief from retrospective application of IFRS 10 would also apply to an investor’s interests in investees that were disposed of during a comparative period, such that consolidation would not occur in accordance with either IAS 27/SIC-12 or IFRS 10 at the date of initial application.

BASIS FOR CONCLUSIONS ON IFRS 10 EFFECTIVE DATE AND TRANSITION

Highlights

On 28 June 2012 the International Accounting Standards Board (IASB) issued amendments to IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities. The amendments change the transition guidance to provide further relief from full retrospective application. This publication summarises the amendments and highlights the potential implications for entities.

BASIS FOR CONCLUSIONS ON IFRS 10 EFFECTIVE DATE AND TRANSITION

The International Financial Reporting Standards Foundation, or IFRS Foundation, is a nonprofit accounting organization. Its main objectives include the development and promotion of the International Financial Reporting Standards (IFRSs) through the International Accounting Standards Board (IASB), which it oversees.[1][3]

The foundation was formerly named the International Accounting Standards Committee (IASC) Foundation until a renaming on 1 July 2010, and as of 2012 is governed by a board of 22 trustees.

The IFRS Foundation also develops and maintains the IFRS Taxonomy, which is the representation of the IFRSs in eXtensible Business Reporting Language (XBRL), via its XBRL team. The team is supported by the XBRL Advisory Council and the XBRL Quality Review Team, which respectively provide strategic advice and reviews developed taxonomies.Additionally, in 2012 the foundation issued a call for industry participants in a project to develop “common industry practice concepts” for the taxonomy.

XBRL provides a “common, electronic format for business and financial reporting”, which will contribute to the global convergence of accounting standards towards IFRS; the director of XBRL activities at the IFRS Foundation, Olivier Servais, hopes that “everybody will be using it” in future.As of March 2012, the IFRS Taxonomies have “considerably fewer” tags than GAAP taxonomies, and the Security and Exchange Commission has not approved the IFRS Taxonomy for use in XBRL filings in the United States.

BASIS FOR CONCLUSIONS ON IFRS 10 EFFECTIVE DATE AND TRANSITION

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