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Commission Regulation (EC) No 1126/2008Show full title

Commission Regulation (EC) No 1126/2008 of 3 November 2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council (Text with EEA relevance)

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[F1Appendix D

Textual Amendments

Exemptions from other IFRSs U.K.

This appendix is an integral part of the IFRS.

[F2D1 An entity may elect to use one or more of the following exemptions:] U.K.
(a)

[F3share-based payment transactions (paragraphs D2 and D3);]

(b)

insurance contracts (paragraph D4);

(c)

[F4deemed cost (paragraphs D5–D8 B);]

(d)

[F5leases (paragraphs D9 and D9A);]

(e)

[F6. . . . .]

(f)

cumulative translation differences (paragraphs D12 and D13);

(g)

investments in subsidiaries, [F2joint ventures] and associates (paragraphs D14 and D15);

(h)

assets and liabilities of subsidiaries, associates and joint ventures (paragraphs D16 and D17);

(i)

compound financial instruments (paragraph D18);

(j)

designation of previously recognised financial instruments (paragraph D19);

(k)

fair value measurement of financial assets or financial liabilities at initial recognition (paragraph D20);

(l)

[F5decommissioning liabilities included in the cost of property, plant and equipment (paragraphs D21 and D21A);]

(m)

[F3financial assets or intangible assets accounted for in accordance with IFRIC 12 Service Concession Arrangements (paragraph D22);

(n)

borrowing costs (paragraph D23);

(o)

transfers of assets from customers (paragraph D24);

(p)

[F2extinguishing financial liabilities with equity instruments (paragraph D25);

(q)

severe hyperinflation (paragraphs D26–D30);

(r)

joint arrangements (paragraph D31);]

(s)

stripping costs in the production phase of a surface mine (paragraph D32).]

Textual Amendments

An entity shall not apply these exemptions by analogy to other items.

Textual Amendments

Share-based payment transactions U.K.
D2 A first-time adopter is encouraged, but not required, to apply IFRS 2 Share-based Payment to equity instruments that were granted on or before 7 November 2002 . A first-time adopter is also encouraged, but not required, to apply IFRS 2 to equity instruments that were granted after 7 November 2002 and vested before the later of (a) the date of transition to IFRSs and (b) 1 January 2005 . However, if a first-time adopter elects to apply IFRS 2 to such equity instruments, it may do so only if the entity has disclosed publicly the fair value of those equity instruments, determined at the measurement date, as defined in IFRS 2. For all grants of equity instruments to which IFRS 2 has not been applied (eg equity instruments granted on or before 7 November 2002 ), a first-time adopter shall nevertheless disclose the information required by paragraphs 44 and 45 of IFRS 2. If a first-time adopter modifies the terms or conditions of a grant of equity instruments to which IFRS 2 has not been applied, the entity is not required to apply paragraphs 26–29 of IFRS 2 if the modification occurred before the date of transition to IFRSs. U.K.
D3 A first-time adopter is encouraged, but not required, to apply IFRS 2 to liabilities arising from share-based payment transactions that were settled before the date of transition to IFRSs. A first-time adopter is also encouraged, but not required, to apply IFRS 2 to liabilities that were settled before 1 January 2005 . For liabilities to which IFRS 2 is applied, a first-time adopter is not required to restate comparative information to the extent that the information relates to a period or date that is earlier than 7 November 2002 . U.K.
Insurance contracts U.K.
D4 A first-time adopter may apply the transitional provisions in IFRS 4 Insurance Contracts . IFRS 4 restricts changes in accounting policies for insurance contracts, including changes made by a first-time adopter. U.K.
Fair value or revaluation as deemed cost U.K.
D5 An entity may elect to measure an item of property, plant and equipment at the date of transition to IFRSs at its fair value and use that fair value as its deemed cost at that date. U.K.
D6 A first-time adopter may elect to use a previous GAAP revaluation of an item of property, plant and equipment at, or before, the date of transition to IFRSs as deemed cost at the date of the revaluation, if the revaluation was, at the date of the revaluation, broadly comparable to: U.K.
(a)

fair value; or

(b)

cost or depreciated cost in accordance with IFRSs, adjusted to reflect, for example, changes in a general or specific price index.

D7 The elections in paragraphs D5 and D6 are also available for: U.K.
(a)

investment property, if an entity elects to use the cost model in IAS 40 Investment Property and

(b)

intangible assets that meet:

(i)

the recognition criteria in IAS 38 (including reliable measurement of original cost); and

(ii)

the criteria in IAS 38 for revaluation (including the existence of an active market).

An entity shall not use these elections for other assets or for liabilities.

[F4D8 A first-time adopter may have established a deemed cost in accordance with previous GAAP for some or all of its assets and liabilities by measuring them at their fair value at one particular date because of an event such as a privatisation or initial public offering. U.K.
(a)

If the measurement date is at or before the date of transition to IFRSs, the entity may use such event-driven fair value measurements as deemed cost for IFRSs at the date of that measurement.

(b)

If the measurement date is after the date of transition to IFRSs, but during the period covered by the first IFRS financial statements, the event-driven fair value measurements may be used as deemed cost when the event occurs. An entity shall recognise the resulting adjustments directly in retained earnings (or if appropriate, another category of equity) at the measurement date. At the date of transition to IFRSs, the entity shall either establish the deemed cost by applying the criteria in paragraphs D5–D7 or measure assets and liabilities in accordance with the other requirements in this IFRS.]

[F7Deemed cost U.K.
D8A Under some national accounting requirements exploration and development costs for oil and gas properties in the development or production phases are accounted for in cost centres that include all properties in a large geographical area. A first-time adopter using such accounting under previous GAAP may elect to measure oil and gas assets at the date of transition to IFRSs on the following basis: U.K.
(a)

exploration and evaluation assets at the amount determined under the entity’s previous GAAP; and

(b)

assets in the development or production phases at the amount determined for the cost centre under the entity’s previous GAAP. The entity shall allocate this amount to the cost centre’s underlying assets pro rata using reserve volumes or reserve values as of that date.

The entity shall test exploration and evaluation assets and assets in the development and production phases for impairment at the date of transition to IFRSs in accordance with IFRS 6 Exploration for and Evaluation of Mineral Resources or IAS 36 respectively and, if necessary, reduce the amount determined in accordance with (a) or (b) above. For the purposes of this paragraph, oil and gas assets comprise only those assets used in the exploration, evaluation, development or production of oil and gas.

[F8D8B Some entities hold items of property, plant and equipment or intangible assets that are used, or were previously used, in operations subject to rate regulation. The carrying amount of such items might include amounts that were determined under previous GAAP but do not qualify for capitalisation in accordance with IFRSs. If this is the case, a first-time adopter may elect to use the previous GAAP carrying amount of such an item at the date of transition to IFRSs as deemed cost. If an entity applies this exemption to an item, it need not apply it to all items. At the date of transition to IFRSs, an entity shall test for impairment in accordance with IAS 36 each item for which this exemption is used. For the purposes of this paragraph, operations are subject to rate regulation if they provide goods or services to customers at prices (ie rates) established by an authorised body empowered to establish rates that bind the customers and that are designed to recover the specific costs the entity incurs in providing the regulated goods or services and to earn a specified return. The specified return could be a minimum or range and need not be a fixed or guaranteed return.] ] U.K.

Textual Amendments

Textual Amendments

Leases U.K.
D9 A first-time adopter may apply the transitional provisions in IFRIC 4 Determining whether an Arrangement contains a Lease . Therefore, a first-time adopter may determine whether an arrangement existing at the date of transition to IFRSs contains a lease on the basis of facts and circumstances existing at that date. U.K.
[F7D9A If a first-time adopter made the same determination of whether an arrangement contained a lease in accordance with previous GAAP as that required by IFRIC 4 but at a date other than that required by IFRIC 4, the first-time adopter need not reassess that determination when it adopts IFRSs. For an entity to have made the same determination of whether the arrangement contained a lease in accordance with previous GAAP, that determination would have to have given the same outcome as that resulting from applying IAS 17 Leases and IFRIC 4.] U.K.
F6 Employee benefits U.K.
F6D10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.
F6D11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.
Cumulative translation differences U.K.
D12 IAS 21 requires an entity: U.K.
(a)

to recognise some translation differences in other comprehensive income and accumulate these in a separate component of equity; and

(b)

on disposal of a foreign operation, to reclassify the cumulative translation difference for that foreign operation (including, if applicable, gains and losses on related hedges) from equity to profit or loss as part of the gain or loss on disposal.

D13 However, a first-time adopter need not comply with these requirements for cumulative translation differences that existed at the date of transition to IFRSs. If a first-time adopter uses this exemption: U.K.
(a)

the cumulative translation differences for all foreign operations are deemed to be zero at the date of transition to IFRSs; and

(b)

the gain or loss on a subsequent disposal of any foreign operation shall exclude translation differences that arose before the date of transition to IFRSs and shall include later translation differences.

Investments in subsidiaries, [F2joint ventures] and associates U.K.
D14 When an entity prepares separate financial statements, IAS 27 (as amended in 2008) requires it to account for its investments in subsidiaries, [F2joint ventures] and associates either: U.K.
(a)

at cost or

(b)

in accordance with IAS 39.

[F3D15 If a first-time adopter measures such an investment at cost in accordance with IAS 27, it shall measure that investment at one of the following amounts in its separate opening IFRS statement of financial position:] U.K.
(a)

cost determined in accordance with IAS 27 or

(b)

[F3deemed cost. The deemed cost of such an investment shall be its:

(i)

fair value at the entity’s date of transition to IFRSs in its separate financial statements; or]

(ii)

previous GAAP carrying amount at that date.

A first-time adopter may choose either (i) or (ii) above to measure its investment in each subsidiary, [F2joint venture] or associate that it elects to measure using a deemed cost.

Assets and liabilities of subsidiaries, associates and joint ventures U.K.
[F9D16 If a subsidiary becomes a first-time adopter later than its parent, the subsidiary shall, in its financial statements, measure its assets and liabilities at either: U.K.
(a)

the carrying amounts that would be included in the parent’s consolidated financial statements, based on the parent’s date of transition to IFRSs, if no adjustments were made for consolidation procedures and for the effects of the business combination in which the parent acquired the subsidiary (this election is not available to a subsidiary of an investment entity, as defined in IFRS 10, that is required to be measured at fair value through profit or loss); or]

(b)

the carrying amounts required by the rest of this IFRS, based on the subsidiary’s date of transition to IFRSs. These carrying amounts could differ from those described in (a):

(i)

when the exemptions in this IFRS result in measurements that depend on the date of transition to IFRSs.

(ii)

when the accounting policies used in the subsidiary’s financial statements differ from those in the consolidated financial statements. For example, the subsidiary may use as its accounting policy the cost model in IAS 16 Property, Plant and Equipment , whereas the group may use the revaluation model.

A similar election is available to an associate or joint venture that becomes a first-time adopter later than an entity that has significant influence or joint control over it.

Textual Amendments

[F9D17 However, if an entity becomes a first-time adopter later than its subsidiary (or associate or joint venture) the entity shall, in its consolidated financial statements, measure the assets and liabilities of the subsidiary (or associate or joint venture) at the same carrying amounts as in the financial statements of the subsidiary (or associate or joint venture), after adjusting for consolidation and equity accounting adjustments and for the effects of the business combination in which the entity acquired the subsidiary. Notwithstanding this requirement, a non-investment entity parent shall not apply the exception to consolidation that is used by any investment entity subsidiaries.] Similarly, if a parent becomes a first-time adopter for its separate financial statements earlier or later than for its consolidated financial statements, it shall measure its assets and liabilities at the same amounts in both financial statements, except for consolidation adjustments. U.K.
Compound financial instruments U.K.
D18 IAS 32 Financial Instruments: Presentation requires an entity to split a compound financial instrument at inception into separate liability and equity components. If the liability component is no longer outstanding, retrospective application of IAS 32 involves separating two portions of equity. The first portion is in retained earnings and represents the cumulative interest accreted on the liability component. The other portion represents the original equity component. However, in accordance with this IFRS, a first-time adopter need not separate these two portions if the liability component is no longer outstanding at the date of transition to IFRSs. U.K.
Designation of previously recognised financial instruments U.K.
D19 IAS 39 permits a financial asset to be designated on initial recognition as available for sale or a financial instrument (provided it meets certain criteria) to be designated as a financial asset or financial liability at fair value through profit or loss. Despite this requirement exceptions apply in the following circumstances: U.K.
(a)

an entity is permitted to make an available-for-sale designation at the date of transition to IFRSs.

(b)

an entity is permitted to designate, at the date of transition to IFRSs, any financial asset or financial liability as at fair value through profit or loss provided the asset or liability meets the criteria in paragraph 9(b)(i), 9(b)(ii) or 11A of IAS 39 at that date.

Fair value measurement of financial assets or financial liabilities at initial recognition U.K.
[F3D20 Notwithstanding the requirements of paragraphs 7 and 9, an entity may apply the requirements in paragraph AG76(a) of IAS 39, in either of the following ways:] U.K.
(a)

prospectively to transactions entered into after 25 October 2002 ; or

(b)

prospectively to transactions entered into after 1 January 2004 .

Decommissioning liabilities included in the cost of property, plant and equipment U.K.
D21 IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities requires specified changes in a decommissioning, restoration or similar liability to be added to or deducted from the cost of the asset to which it relates; the adjusted depreciable amount of the asset is then depreciated prospectively over its remaining useful life. A first-time adopter need not comply with these requirements for changes in such liabilities that occurred before the date of transition to IFRSs. If a first-time adopter uses this exemption, it shall: U.K.
(a)

measure the liability as at the date of transition to IFRSs in accordance with IAS 37;

(b)

to the extent that the liability is within the scope of IFRIC 1, estimate the amount that would have been included in the cost of the related asset when the liability first arose, by discounting the liability to that date using its best estimate of the historical risk-adjusted discount rate(s) that would have applied for that liability over the intervening period; and

(c)

calculate the accumulated depreciation on that amount, as at the date of transition to IFRSs, on the basis of the current estimate of the useful life of the asset, using the depreciation policy adopted by the entity in accordance with IFRSs.

[F7D21A An entity that uses the exemption in paragraph D8A(b) (for oil and gas assets in the development or production phases accounted for in cost centres that include all properties in a large geographical area under previous GAAP) shall, instead of applying paragraph D21 or IFRIC 1: U.K.
(a)

measure decommissioning, restoration and similar liabilities as at the date of transition to IFRSs in accordance with IAS 37; and

(b)

recognise directly in retained earnings any difference between that amount and the carrying amount of those liabilities at the date of transition to IFRSs determined under the entity’s previous GAAP]

Financial assets or intangible assets accounted for in accordance with IFRIC 12 U.K.
D22 A first-time adopter may apply the transitional provisions in IFRIC 12. U.K.
Borrowing costs U.K.
[F10D23 A first-time adopter can elect to apply the requirements of IAS 23 from the date of transition or from an earlier date as permitted by paragraph 28 of IAS 23. From the date on which an entity that applies this exemption begins to apply IAS 23, the entity: U.K.
(a)

shall not restate the borrowing cost component that was capitalised under previous GAAP and that was included in the carrying amount of assets at that date; and

(b)

shall account for borrowing costs incurred on or after that date in accordance with IAS 23, including those borrowing costs incurred on or after that date on qualifying assets already under construction.]

Textual Amendments

[F11Transfers of assets from customers U.K.
D24 A first-time adopter may apply the transitional provisions set out in paragraph 22 of IFRIC 18 Transfers of Assets from Customers . In that paragraph, reference to the effective date shall be interpreted as 1 July 2009 or the date of transition to IFRSs, whichever is later. In addition, a first-time adopter may designate any date before the date of transition to IFRSs and apply IFRIC 18 to all transfers of assets from customers received on or after that date.] U.K.

Textual Amendments

[F12Extinguishing financial liabilities with equity instruments U.K.
D25 A first-time adopter may apply the transitional provisions in IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments .] U.K.

Textual Amendments

[F13Severe hyperinflation U.K.
D26 If an entity has a functional currency that was, or is, the currency of a hyperinflationary economy, it shall determine whether it was subject to severe hyperinflation before the date of transition to IFRSs. This applies to entities that are adopting IFRSs for the first time, as well as entities that have previously applied IFRSs. U.K.
D27 The currency of a hyperinflationary economy is subject to severe hyperinflation if it has both of the following characteristics: U.K.
(a)

a reliable general price index is not available to all entities with transactions and balances in the currency.

(b)

exchangeability between the currency and a relatively stable foreign currency does not exist.

D28 The functional currency of an entity ceases to be subject to severe hyperinflation on the functional currency normalisation date. That is the date when the functional currency no longer has either, or both, of the characteristics in paragraph D27, or when there is a change in the entity’s functional currency to a currency that is not subject to severe hyperinflation. U.K.
D29 When an entity’s date of transition to IFRSs is on, or after, the functional currency normalisation date, the entity may elect to measure all assets and liabilities held before the functional currency normalisation date at fair value on the date of transition to IFRSs. The entity may use that fair value as the deemed cost of those assets and liabilities in the opening IFRS statement of financial position. U.K.
D30 When the functional currency normalisation date falls within a 12-month comparative period, the comparative period may be less than 12 months, provided that a complete set of financial statements (as required by paragraph 10 of IAS 1) is provided for that shorter period.] U.K.

Textual Amendments

[F14Joint arrangements U.K.
D31 A first-time adopter may apply the transition provisions in IFRS 11 with the following exceptions: U.K.
(a)

When applying the transition provisions in IFRS 11, a first-time adopter shall apply these provisions at the date of transition to IFRS.

(b)

When changing from proportionate consolidation to the equity method, a first-time adopter shall test for impairment the investment in accordance with IAS 36 as at the date of transition to IFRS, regardless of whether there is any indication that the investment may be impaired. Any resulting impairment shall be recognised as an adjustment to retained earnings at the date of transition to IFRS]

Textual Amendments

[F13Stripping costs in the production phase of a surface mine U.K.
D32 A first-time adopter may apply the transitional provisions set out in paragraphs A1 to A4 of IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine . In that paragraph, reference to the effective date shall be interpreted as 1 January 2013 or the beginning of the first IFRS reporting period, whichever is later.] ] U.K.

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