ANNEX
IMPROVEMENTS TO IFRSs
PART II
The amendments in Part II shall be applied for annual periods beginning on or after 1 January 2009. Earlier application is permitted.
Amendments to International Accounting Standard 8Accounting Policies, Changes in Accounting Estimates and Errors
Paragraphs 7, 9 and 11 are amended.
ACCOUNTING POLICIES
Selection and application of accounting policies
7When an IFRS specifically applies to a transaction, other event or condition, the accounting policy or policies applied to that item shall be determined by applying the IFRS.
9IFRSs are accompanied by guidance to assist entities in applying their requirements. All such guidance states whether it is an integral part of IFRSs. Guidance that is an integral part of IFRSs is mandatory. Guidance that is not an integral part of IFRSs does not contain requirements for financial statements.
11In making the judgement described in paragraph 10, management shall refer to, and consider the applicability of, the following sources in descending order:
(a)
the requirements in IFRSs dealing with similar and related issues; and
(b)
the definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the Framework.
Amendment to International Accounting Standard 10Events after the Reporting Period
Paragraph 13 is amended.
13If dividends are declared (ie the dividends are appropriately authorised and no longer at the discretion of the entity) after the reporting period but before the financial statements are authorised for issue, the dividends are not recognised as a liability at the end of the reporting period because no obligation exists at that time. Such dividends are disclosed in the notes in accordance with IAS 1 Presentation of Financial Statements.
Amendments to International Accounting Standard 20Accounting for Government Grants and Disclosure of Government Assistance
A footnote is added to the title of the Standard above paragraph 1, and paragraphs 2(b), 12–18, 20–22, 26, 27 and 32 are amended.
Footnote to title
*As part of Improvements to IFRSs issued in May 2008 the Board amended terminology used in this Standard to be consistent with other IFRSs as follows:
(a)
‘taxable income’ was amended to ‘taxable profit or tax loss’;
(b)
‘recognised as income/expense’ was amended to ‘recognised in profit or loss’;
(c)
‘credited directly to shareholders’ interests/equity' was amended to ‘recognised outside profit or loss’; and
(d)
‘revision to an accounting estimate’ was amended to ‘change in accounting estimate’.
SCOPE
2This Standard does not deal with:
(a)
the special problems … similar nature;
(b)
government assistance that is provided for an entity in the form of benefits that are available in determining taxable profit or tax loss, or are determined or limited on the basis of income tax liability. Examples of such benefits are income tax holidays, investment tax credits, accelerated depreciation allowances and reduced income tax rates;
(c)
government … the entity;
GOVERNMENT GRANTS
12Government grants shall be recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grants are intended to compensate.
13There are two broad approaches to the accounting for government grants: the capital approach, under which a grant is recognised outside profit or loss, and the income approach, under which a grant is recognised in profit or loss over one or more periods.
14Those in support of the capital approach argue as follows:
(a)
government grants are a financing device and should be dealt with as such in the statement of financial position rather than be recognised in profit or loss to offset the items of expense that they finance. Because no repayment is expected, such grants should be recognised outside profit or loss;
(b)
it is inappropriate to recognise government grants in profit or loss, because they are not earned but represent an incentive provided by government without related costs.
15Arguments in support of the income approach are as follows:
(a)
because government grants are receipts from a source other than shareholders, they should not be recognised directly in equity but should be recognised in profit or loss in appropriate periods;
(b)
government grants are rarely gratuitous. The entity earns them through compliance with their conditions and meeting the envisaged obligations. They should therefore be recognised in profit or loss over the periods in which the entity recognises as expenses the related costs for which the grant is intended to compensate;
(c)
because income and other taxes are expenses, it is logical to deal also with government grants, which are an extension of fiscal policies, in profit or loss.
16It is fundamental to the income approach that government grants should be recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grant is intended to compensate. Recognition of government grants in profit or loss on a receipts basis is not in accordance with the accrual accounting assumption (see IAS 1 Presentation of Financial Statements) and would be acceptable only if no basis existed for allocating a grant to periods other than the one in which it was received.
17In most cases the periods over which an entity recognises the costs or expenses related to a government grant are readily ascertainable. Thus grants in recognition of specific expenses are recognised in profit or loss in the same period as the relevant expenses. Similarly, grants related to depreciable assets are usually recognised in profit or loss over the periods and in the proportions in which depreciation expense on those assets is recognised.
18Grants related to non-depreciable assets may also require the fulfilment of certain obligations and would then be recognised in profit or loss over the periods that bear the cost of meeting the obligations. As an example, a grant of land may be conditional upon the erection of a building on the site and it may be appropriate to recognise the grant in profit or loss over the life of the building.
20A government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs shall be recognised in profit or loss of the period in which it becomes receivable.
21In some circumstances, a government grant may be awarded for the purpose of giving immediate financial support to an entity rather than as an incentive to undertake specific expenditures. Such grants may be confined to a particular entity and may not be available to a whole class of beneficiaries. These circumstances may warrant recognising a grant in profit or loss of the period in which the entity qualifies to receive it, with disclosure to ensure that its effect is clearly understood.
22A government grant may become receivable by an entity as compensation for expenses or losses incurred in a previous period. Such a grant is recognised in profit or loss of the period in which it becomes receivable, with disclosure to ensure that its effect is clearly understood.
Presentation of grants related to assets
26One method recognises the grant as deferred income that is recognised in profit or loss on a systematic basis over the useful life of the asset.
27The other method deducts the grant in calculating the carrying amount of the asset. The grant is recognised in profit or loss over the life of a depreciable asset as a reduced depreciation expense.
Repayment of government grants
32A government grant that becomes repayable shall be accounted for as a change in accounting estimate (see IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors). Repayment of a grant related to income shall be applied first against any unamortised deferred credit recognised in respect of the grant. To the extent that the repayment exceeds any such deferred credit, or when no deferred credit exists, the repayment shall be recognised immediately in profit or loss. Repayment of a grant related to an asset shall be recognised by increasing the carrying amount of the asset or reducing the deferred income balance by the amount repayable. The cumulative additional depreciation that would have been recognised in profit or loss to date in the absence of the grant shall be recognised immediately in profit or loss.
Appendix to Amendments to IAS 20 Amendments to IAS 41
Entities shall apply the amendments to IAS 41 in this appendix when they apply the related amendments to terminology used in IAS 20.
IAS 41 Agriculture
Paragraphs 34-36 are amended.
GOVERNMENT GRANTS
34An unconditional government grant related to a biological asset measured at its fair value less costs to sell shall be recognised in profit or loss when, and only when, the government grant becomes receivable.
35If a government grant related to a biological asset measured at its fair value less costs to sell is conditional, including when a government grant requires an entity not to engage in specified agricultural activity, an entity shall recognise the government grant in profit or loss when, and only when, the conditions attaching to the government grant are met.
36Terms and conditions of government grants vary. For example, a grant may require an entity to farm in a particular location for five years and require the entity to return all of the grant if it farms for a period shorter than five years. In this case, the grant is not recognised in profit or loss until the five years have passed. However, if the terms of the grant allow part of it to be retained according to the time that has elapsed, the entity recognises that part in profit or loss as time passes.
Amendments to International Accounting Standard 29Financial Reporting in Hyperinflationary Economies
A footnote is added to the title of the Standard above paragraph 1, and paragraphs 8, 14, 20, 28 and 34 are amended.
Footnote to title
*As part of Improvements to IFRSs issued in May 2008, the Board changed terms used in IAS 29 to be consistent with other IFRSs as follows: (a) ‘market value’ was amended to ‘fair value’, and (b) ‘results of operations’ and ‘net income’ were amended to ‘profit or loss’.
THE RESTATEMENT OF FINANCIAL STATEMENTS
8The financial statements of an entity whose functional currency is the currency of a hyperinflationary economy, whether they are based on a historical cost approach or a current cost approach, shall be stated in terms of the measuring unit current at the end of the reporting period. The corresponding figures for the previous period required by IAS 1 Presentation of Financial Statements (as revised in 2007) and any information in respect of earlier periods shall also be stated in terms of the measuring unit current at the end of the reporting period. For the purpose of presenting comparative amounts in a different presentation currency, paragraphs 42(b) and 43 of IAS 21 The Effects of Changes in Foreign Exchange Rates apply.
Historical cost financial statements
Statement of financial position
14All other assets and liabilities are non-monetary. Some non-monetary items are carried at amounts current at the end of the reporting period, such as net realisable value and fair value, so they are not restated. All other non-monetary assets and liabilities are restated.
20An investee that is accounted for under the equity method may report in the currency of a hyperinflationary economy. The statement of financial position and statement of comprehensive income of such an investee are restated in accordance with this Standard in order to calculate the investor's share of its net assets and profit or loss. When the restated financial statements of the investee are expressed in a foreign currency they are translated at closing rates.
Gain or loss on net monetary position
28The gain or loss on the net monetary position is included in profit or loss. The adjustment to those assets and liabilities linked by agreement to changes in prices made in accordance with paragraph 13 is offset against the gain or loss on net monetary position. Other income and expense items, such as interest income and expense, and foreign exchange differences related to invested or borrowed funds, are also associated with the net monetary position. Although such items are separately disclosed, it may be helpful if they are presented together with the gain or loss on net monetary position in the statement of comprehensive income.
Corresponding figures
34Corresponding figures for the previous reporting period, whether they were based on a historical cost approach or a current cost approach, are restated by applying a general price index so that the comparative financial statements are presented in terms of the measuring unit current at the end of the reporting period. Information that is disclosed in respect of earlier periods is also expressed in terms of the measuring unit current at the end of the reporting period. For the purpose of presenting comparative amounts in a different presentation currency, paragraphs 42(b) and 43 of IAS 21 apply.
Amendment to International Accounting Standard 34Interim Financial Reporting
Paragraph 11 is amended and a footnote is added.
FORM AND CONTENT OF INTERIM FINANCIAL STATEMENTS
11In the statement that presents the components of profit or loss for an interim period, an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of IAS 33 Earnings per Share ().
Amendments to International Accounting Standard 40Investment Property
Paragraphs 31 and 50 are amended.
MEASUREMENT AFTER RECOGNITION
Accounting policy
31IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors states that a voluntary change in accounting policy shall be made only if the change results in the financial statements providing reliable and more relevant information about the effects of transactions, other events or conditions on the entity's financial position, financial performance or cash flows. It is highly unlikely that a change from the fair value model to the cost model will result in a more relevant presentation.
Fair value model
50In determining the carrying amount of investment property under the fair value model, an entity does not double-count assets or liabilities that are recognised as separate assets or liabilities. For example:
(d)
the fair value of investment property held under a lease reflects expected cash flows (including contingent rent that is expected to become payable). Accordingly, if a valuation obtained for a property is net of all payments expected to be made, it will be necessary to add back any recognised lease liability, to arrive at the carrying amount of the investment property using the fair value model.
Amendments to International Accounting Standard 41Agriculture
Paragraphs 4 and 5 are amended and paragraph 14 is deleted. The terms ‘estimated point-of-sale costs’ and ‘point-of-sale costs’ are replaced by ‘costs to sell’ where they appear as follows:
Standard (paragraphs 12, 13, 26-28, 30-32, 34, 35, 38, 40, 48, 50 and 51)
SCOPE
4The table below provides examples of biological assets, agricultural produce, and products that are the result of processing after harvest:
| Biological assets | Agricultural produce | Products that are the result of processing after harvest |
|---|
| … | | |
| Trees in a plantation forest | Felled trees | Logs, lumber |
| … | | |
DEFINITIONS
Agriculture-related definitions
5The following terms are used in this Standard with the meanings specified:
…
Costs to sell are the incremental costs directly attributable to the disposal of an asset, excluding finance costs and income taxes.
RECOGNITION AND MEASUREMENT
14[Deleted]
Appendix to Amendments to IAS 41 Amendments to other IFRSs
Entities shall apply these amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, IAS 2 Inventories, and IAS 36 Impairment of Assets when they apply the related amendments to IAS 41.
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
Paragraph 5 is amended.
SCOPE
5The measurement provisions of this IFRS() do not apply to the following assets, which are covered by the IFRSs listed, either as individual assets or as part of a disposal group:
(e)
non-current assets that are measured at fair value less costs to sell in accordance with IAS 41 Agriculture;
IAS 2 Inventories
Paragraph 20 is amended.
20In accordance with IAS 41 Agriculture inventories comprising agricultural produce that an entity has harvested from its biological assets are measured on initial recognition at their fair value less costs to sell at the point of harvest. This is the cost of the inventories at that date for application of this Standard.
IAS 36 Impairment of Assets
Paragraphs 2 and 5 are amended.
SCOPE
2This Standard shall be applied in accounting for the impairment of all assets, other than:
(g)
biological assets related to agricultural activity that are measured at fair value less costs to sell (see IAS 41 Agriculture);
5This Standard does not apply to financial assets within the scope of IAS 39, investment property measured at fair value in accordance with IAS 40, or biological assets related to agricultural activity measured at fair value less costs to sell in accordance with IAS 41. However, this Standard applies to assets that are carried at revalued amount (ie fair value) in accordance with other IFRSs, such as the revaluation model in IAS 16 Property, Plant and Equipment. Identifying whether a revalued asset may be impaired depends on the basis used to determine fair value: