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New PFRSs for 2016

01 Feb 2016

This series of articles will outline the new standards and interpretations under Philippine Financial Reporting Standards (PFRS) that will come into effect for 2016 year ends. Part one will cover Annual Improvements to PFRSs 2012-2014 Cycle.

The annual improvements project provides a streamlined process for dealing efficiently with a collection of amendments to IFRSs/PFRSs. The primary objective of the process is to enhance the quality of standards, by amending existing IFRSs/PFRSs to clarify guidance and wording, or to correct for relatively minor unintended consequences, conflicts or oversights. Amendments are made through the annual improvements process when the amendment is considered non-urgent but necessary.

The table identifies the more significant changes to the standards arising from the 2012 to 2014 annual improvements project and the implications for management.

Standard/Interpretation Amendment Effective date
PFRS 5, ‘Non-current assets held for sale and discontinued operations’ regarding methods of disposal The amendment clarifies that, when an asset (or disposal group) is reclassified from ‘held for sale’ to ‘held for distribution’, or vice versa, this does not constitute a change to a plan of sale or distribution, and does not have to be accounted for as such. This means that the asset (or disposal group) does not need to be reinstated in the financial statements as if it had never been classified as ‘held for sale’ or ‘held for distribution’ simply because the manner of disposal has changed. The amendment also rectifies an omission in the standard by explaining that the guidance on changes in a plan of sale should be applied to an asset (or disposal group) which ceases to be held for distribution but is not reclassified as ‘held for sale’. Annual periods beginning on or after 1 January 2016.
PFRS 7, ‘Financial instruments: Disclosures’

There are two amendments to PFRS 7.

  • Servicing contracts.

    If an entity transfers a financial asset to a third party under conditions which allow the transferor to derecognize the asset, PFRS 7 requires disclosure of all types of continuing involvement that the entity might still have in the transferred assets. PFRS 7 provides guidance on what is meant by continuing involvement in this context. The amendment adds specific guidance to help management determine whether the terms of an arrangement to service a financial asset which has been transferred constitute continuing involvement. The amendment is prospective with an option to apply retrospectively. A consequential amendment to PFRS 1 is included to give the same relief to first-time adopters.
  • Interim financial statements.

    The amendment clarifies that the additional disclosure required by the amendments to PFRS 7, ‘Disclosure - Offsetting financial assets and financial liabilities’ is not specifically required for all interim periods, unless required by PAS 34. The amendment is retrospective.
Annual periods beginning on or after 1 January 2016.
PAS 19, ‘Employee benefits’ The amendment clarifies that, when determining the discount rate for post- employment benefit obligations, it is the currency that the liabilities are denominated in that is important, and not the country where they arise. The assessment of whether there is a deep market in high-quality corporate bonds is based on corporate bonds in that currency, not corporate bonds in a particular country. Similarly, where there is no deep market in high-quality corporate bonds in that currency, government bonds in the relevant currency should be used. The amendment is retrospective but limited to the beginning of the earliest period presented.
Annual periods beginning on or after 1 January 2016.
PAS 34, ‘Interim financial reporting’ The amendment clarifies what is meant by the reference in the standard to ‘information disclosed elsewhere in the interim financial report’. The amendment further amends PAS 34 to require a cross-reference from the interim financial statements to the location of that information. The amendment is retrospective. Annual periods beginning on or after 1 January 2016.

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