Main features of the IFRS standards 10
Main features of the IFRS standards 10: The reason in detailed below with detailed information.
- The new IFRS will be more far reaching than the 2005 IFRS and their impact will be felt across many parts of an insurance organization.
- When combined with Solvency II the reform will have a wider scope than accounting and regulation. This is a genuine non-discretionary business transformation and the way in which the requirements are implemented is key to manage the impact on the business
- The new IFRS Insurance include requirements on insurance liabilities (IFRS 4 Phase II), investments and hedging (IFRS 9), asset management revenues (new revenue standard), consolidation of funds (IFRS 10 and 12), treatment of joint ventures (IFRS 11) and leases (new leasing standard).
After IFRS 4 Phase II the adoption of IFRS 9 is the most pervasive reform of financial reporting rules.
- The new standard entirely replaces the current requirements through a three-phased approach:
– classification and measurement
– impairment of financial assets
– hedge accounting.
- To react to the late discovery of off-balance sheet structures during the 2008-09 crisis IFRS 10 and 12 refine the definition of control which will impact the extent insurers consolidate investment funds and special purpose vehicles. This change is the first of the new IFRS Insurance pronouncement to be implemented (from 1/1/13 or 1/1/14 depending on the insurer listing under US market rules or not) expected to lead to some material changes in their reported figures. For example, insurers will need to consolidate entities which were not previously considered part of the group.
An entity shall apply this Standard for annual periods beginning on or after 1 January 2005. Earlier application is encouraged. If an entity applies this Standard for a period beginning before 1 January 2005, it shall disclose that fact.
Details on Main features of the IFRS standards 10: This Standard shall be applied in the accounting for, and disclosure of, events after the reporting period.
Details on Main features of the IFRS standards 10: The objective of this Standard is to prescribe:
- when an entity should adjust its financial statements for events after the reporting period.
- the disclosures that an entity should give about the date when the financial statements were authorised for issue and about events after the reporting period.
The Standard also requires that an entity should not prepare its financial statements on a going concern basis if events after the reporting period indicate that the going concern assumption is not appropriate
Details on Main features of the IFRS standards 10
An entity shall adjust the amounts recognised in its financial statements to reflect adjusting events after the reporting period. 9 The following are examples of adjusting events after the reporting period that require an entity to adjust the amounts recognised in its financial statements, or to recognise items that were not previously recognised:
- The settlement after the reporting period of a court case that confirms that the entity had a present obligation at the end of the reporting period. The entity adjusts any previously recognised provision related to this court case in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets or recognises a new provision. The entity does not merely disclose a contingent liability because the settlement provides additional evidence that would be considered in accordance with paragraph 16 of IAS 37.
- The receipt of information after the reporting period indicating that an asset was impaired at the end of the reporting period, or that the amount of a previously recognised impairment loss for that asset needs to be adjusted.
- For example:
- The bankruptcy of a customer that occurs after the reporting period usually confirms that a loss existed at the end of the reporting period on a trade receivable and that the entity needs to adjust the carrying amount of the trade receivable; and
- The sale of inventories after the reporting period may give evidence about their net realisable value at the end of the reporting period.
- The determination after the reporting period of the cost of assets purchased, or the proceeds from assets sold, before the end of the reporting period.
- The determination after the reporting period of the amount of profit-sharing or bonus payments, if the entity had a present legal or constructive obligation at the end of the reporting period to make such payments as a result of events before that date (see IAS 19 Employee Benefits).
- The discovery of fraud or errors that show that the financial statements are incorrect.
Details on Main features of the IFRS standards 10: Non-adjusting events after the reporting period
An entity shall not adjust the amounts recognised in its financial statements to reflect non-adjusting events after the reporting period.
An example of a non-adjusting event after the reporting period is a decline in fair value of investments between the end of the reporting period and the date when the financial statements are authorised for issue. The decline in fair value does not normally relate to the condition of the investments at the end of the reporting period, but reflects circumstances that have arisen subsequently.
Therefore, an entity does not adjust the amounts recognised in its financial statements for the investments. Similarly, the entity does not update the amounts disclosed for the investments as at the end of the reporting period, although it may need to give additional disclosure.
Details on Main features of the IFRS standards 10: About IFRS
Details on Main features of the IFRS standards 10: The International Financial Reporting Standards, usually called the IFRS Standards, are standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB) to provide a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. They are a consequence of growing international shareholding and trade and are particularly important for companies that have dealings in several countries. They are progressively replacing the many different national accounting standards. They are the rules to be followed by accountants to maintain books of accounts which are comparable, understandable, reliable and relevant as per the users internal or external. IFRS, with the exception of IAS 29 Financial Reporting in Hyperinflationary Economies and IFRIC 7 Applying the Restatement Approach under IAS 29, are authorized in terms of the historical cost paradigm. IAS 29 and IFRIC 7 are authorized in terms of the units of constant purchasing power paradigm.
IFRS began as an attempt to harmonize accounting across the European Union but the value of harmonization quickly made the concept attractive around the world. However, it has been debated whether or not de facto harmonization has occurred. Standards that were issued by IASC (the predecessor of IASB) are still within use today and go by the name International Accounting Standards (IAS), while standards issued by IASB are called IFRS. IAS were issued between 1973 and 2001 by the Board of the International Accounting Standards Committee (IASC). On 1 April 2001, the new International Accounting Standards Board (IASB) took over from the IASC the responsibility for setting International Accounting Standards. During its first meeting the new Board adopted existing IAS and Standing Interpretations Committee standards (SICs).
Details on Main features of the IFRS standards 10
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