A practical guide to new IFRSs for 2014

A group of five new and revised standards were published in May 2011 and effective 1 January 2013 but endorsed for  EU entities for annual periods starting on or after 1 January 2014. IFRS 10, ‘Consolidated financial statements’, changes the definition of control; IFRS 11, ‘Joint arrangements’, reduces the types of joint arrangement to joint operations and joint ventures, and prohibits the use of proportional consolidation. IFRS 12, ‘Disclosure of interests in other entities’, brings together in one standard the disclosure requirements that apply to investments in subsidiaries, associates, joint ventures, structured entities and unconsolidated structured entities. As part of this overhaul of the consolidation standards, IAS 27 (revised) now deals only with separate financial statements, and IAS 28 (revised) covers equity accounting for joint ventures as well as associates. These new standards have to be implemented together. A further   amendment to these standards sets out the accounting for investment entities and this comes into effect from 1  January 2014.

IFRS 9, ‘Financial instruments’, was reissued in 2010 and includes guidance on the classification and measurement of   financial assets and financial liabilities and the de-recognition of financial instruments. In November 2013 an amendment to IFRS 9 was issued on hedge accounting which includes a substantial overhaul of hedge accounting that will allow entities to better reflect their risk management activities in the financial statements and also removed the 1 January 2015 effective date. The effective date is yet to be determined and the standard will not be endorsed until the rest of IFRS 9 is released, although IFRS 9 can be adopted early by non EU entities.

IFRS 14, ‘Regulatory deferral accounts’, has been issued and is effective 1 January 2016 subject to EU endorsement for EU entities. IFRS 14 permits first–time adopters to continue to recognise amounts related to rate regulation in  accordance with their previous GAAP requirements when they adopt IFRS.

A few narrow scope amendments to existing standards have also been issued and are effective for annual periods beginning on or after 1 January 2014. Firstly an amendment to IAS 32, ‘Financial instruments: Presentation’ regarding the offsetting of financial assets and financial liabilities. Secondly an amendment to IAS 36, ‘Impairment of assets’ regarding recoverable amount disclosures for non-financial assets and finally an amendment to IAS 39, ‘Financial instruments; Recognition and measurement’ regarding the novation of derivatives and continuation of hedge accounting.

In addition an amendment to IAS 19, ‘Employee benefits’, concerning defined benefit plans that require employees orthird parties to contribute towards the costs of benefits, was issued in December 2013 and is effective annual periods on or after 1 July 2014 subject to EU endorsement for EU entities.

The 2012 improvements project containing seven amendments and the 2013 improvements project containing four amendments were issued in December 2013 and all the amendments are effective for annual periods beginning on or after 1 July 2014 subject to EU endorsement for EU entities.

One interpretation − IFRIC 21, ‘Levies’, was published in 2013 in relation to IAS 37, ‘Provisions, contingent liabilities and contingent assets’. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the  entity to have a present obligation as a result of a past event (known as an obligating event). The interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy and is effective 1 January 2014 subject to EU endorsement for EU entities.