AASB approves IASB amendments to IFRS 9, IAS 28 and annual improvements (2015-2017 cycle)
The Australian Accounting Standards Board (AASB) recently approved some amendments to standards by the International Accounting Standards Board (IASB), meaning that these are now available for early adoption in Australia:
Prepayment features with negative compensation
Ordinarily, financial assets classified as either amortised cost or at fair value through other comprehensive income (FVTOCI) must meet the SPPI test (solely payments of principal and interest). Some financial assets with prepayment features fail the SPPI test only as a result of a prepayment feature.
The amendments to IFRS 9, which apply to annual periods beginning on or after 1 January 2019, permit entities to measure such financial assets at amortised cost or FVTOCI if they fail SPPI only as a result of a prepayment feature.
For more information - please read Accounting News article, Changes to IFRS 9 – Prepayment features with negative compensation to be considered SPPI (November 2017).
Impairment of long-term interests in associates and joint ventures (loans)
These changes to IAS 28 are likely to have a major impact on entities with investments in overseas exploration projects that are funded primarily through loans advanced to associates and joint ventures, rather than via equity funding. This is because such loans will in future:
- First be tested for impairment under IFRS 9 applying the ‘expected credit loss’ model, and
- Then be tested applying the IAS 28 impairment model, which requires objective evidence of impairment (which is not evident for E&E projects not yet being tested for impairment under IFRS 6 Exploration for and Evaluation of Mineral Resources).
This could result in impairment write-downs on such investments being incurred much earlier in future. The changes apply to annual periods beginning on or after 1 January 2019,
For more information - please read Accounting News article, ‘Expected credit loss’ model under IFRS 9 to be applied to loans advanced to associates and joint ventures (November 2017).
Annual improvements (2015 to 2017 cycle)
The annual improvements, which are minor or narrow in scope make amendments to IFRS 3 Business Combinations, IFRS 11 Joint Arrangements, IAS 12 Income Taxes and IAS 23 Borrowing Costs.
For more information - please read Accounting News article, ‘Annual improvements 2015-2017 cycle – changes to IFRS 3 Business Combinations, IFRS 11 Joint Arrangements, IAS 12 Income Taxes and IAS 23 Borrowing Costs’ (February 2018).