Media Industry Accounting Group Annual conference 2017 · financing activities 35,325 (2,150) 300...

Media IndustryAccounting GroupAnnual conference 2017

www.pwc.com/miag

London

15 June 2017

PwCMIAG Annual conference 2017

Slide 2PwC

General accounting update

Katie Woods

PwC UK

E: [email protected]

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What’s new in 2017?

Not much … again!

3MIAG Annual conference 2017

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IAS 7 – Statement of Cash FlowsRequirement to prepare a debt reconciliation1 Effective date: Jan 2017

EU Endorsed: Not yet Q2 2017

Amended StandardsEffective for years commencing after 1 January 2017

20X1 Cash flows Non-cash changes 20X2

AcquisitionForeign

exchangemovement

Fair valuechanges

Long-term borrowings 22,000 (1,000) – – – 21,000Short-term borrowings 10,000 (500) – 200 – 9,700Lease liabilities 4,000 (800) 300 – – 3,500Assets held to hedge long-term borrowings

-675 150 – – (25) (550)

Total liabilities fromfinancing activities

35,325 (2,150) 300 200 (25) 33,650


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IAS 12 – Income TaxesClarification of deferred tax on unrealised losses2 Effective date: Jan 2017


Amended StandardsEffective for years commencing after 1 January 2017

Annual Improvements 2014 - 2016Minor amendments to IFRS 12 – Disclosure of interests inother entities. Clarifies disclosure on interest held for sale3

Effective date: Jan 2017



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A useful publication


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IFRS 16 – Leases

7

MIAG Annual conference 2017

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Lessee has to recognise a right-of-use asset and a leaseliability for almost all leasecontracts

Exemptions for short-termand small ticket leases

Overview

Lessor accounting staysthe same as undercurrent guidance

New leasestandards areexpected to bepublished by theend of 2015

Effective date 1January 2019

Still differences between IFRSand US GAAP

Enhanceddisclosurerequirements


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High level description – lessee

IASB

Incomestatement

Balance sheetRight-of-use asset/

Lease liability

Type A(financing)

Type B(operating)

Amortization(Right-of-use asset)

Lease expense

Dual Approach

FASB

Single Approach

Interest expense(Lease liability)

Amortization

Interest expense

(same as IASB)


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High level description – lessor

IASB

ClassificationDistinction based onrisk and rewards

Underlying asset

FASB

Lease receiveable(net investment in lease)

Finance lease

Operatinglease

No change compared to current guidance

(same as IASB)

(same as IASB)

(same as IASB)


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Example - Capacity sharing arrangements underIFRS 16Capacity sharing agreements are increasingly common, particularly in relation to digital capacity. The following factorsshould be considered when determining if such agreements should be accounted for as a lease:

• Is the asset physically distinct?

• If the asset is not physically distinct, does it represent substantially all of the capacity of the asset and hence theright to obtain substantially all of the economic benefit?


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Example - Set-top box


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3. Project status – where are we now?

March 2009:Discussion paper

August 2010:Exposure Draft

May 2013:Revisedexposure draft

• Effective date: 1 January 2019

• EU-Endorsement (IFRS): [H2 2017]

January 2016:Final standard

July 1996:G4+1 - Leases:Implementation of aNew Approach


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IFRS 9 – Financial instruments

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MIAG Annual conference 2017

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IFRS 9 – Financial instrumentsProject objective

One Standard – 3 components

Effective for annual periods beginning on or after 1 January 2018

Classification and measurement

1

Impairment2

Hedging

3

Responding to need forclearer guidance and

earlier impairment - IAS39 considered ‘too little, too

late’


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What has changed?An overview

IAS 39

Rules based approach toclassification

Liabilities at FVPL – gains / losses inown credit in P&L

Incurred loss impairment model

IFRS 9

Uncommercial hedging guidance

Bifurcation of embedded derivatives

Principals based approach toclassification

Liabilities at FVPL – gains/losses inown credit in OCI, w/out recycling

Expected loss impairment model

Risk management aligned hedgingguidance

No bifurcation for assets – one unitof account


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What has changed?Classification and measurement

Debt investments Equity investments

What is the objective of the business model that thefinancial assets are held in?

All equity assumed for trading –measured at FVPL

2–part classification test for all debtinvestments in entirety (no bifurcation)

1

Are the contractual cash flows of the financial assetsolely payments of principal and interest?

2

Designation at FVPL still exists

If not trading, designation possible atFVOCI without recycling

Simplified equityclassification – no more

AFS


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IFRS 9 – Financial instrumentsClassification and Measurement

FVPL

Assess the business model

FVOCI(debt)

Amortisedcost (AC)

FVOCI(equity)

Debt or equity? (IAS 32)

Are cash flows solely payments of principal andinterest?

FVOCI option?(irrevocable choice by

instrument)

N0 Yes

Yes

Hold to collect Hold to collectand sell

Debt Equity

N0

Hold to sell


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What has changedImpairment

IAS 39 incurred loss model vs IFRS 9 expected lossmodel impact to impairment calculation:

IAS 39: Incurred loss inputs

How much of this are welikely to lose?

What is our exposuretoday?

What is the probability that acounterparty has defaulted?

Loss givendefault (LGD)

Exposure atDefault (EAD)

Probability ofDefault (PD)

How much of this are welikely to lose?

What will be our exposure atthis point in time?

What is the probability that acounterparty will default?

IFRS 9: Expected loss inputs

Inputs are: forward-looking, considering multiple economic scenarios


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Interplay between IFRS 9, IFRS 15 and IFRS 16Standards cannot be considered in isolation

IFRS 16

IFRS 15IFRS 9

Sale & leaseback:

Sale (15)

No sale (9)

Leaseback (16)

Equipment &service:

Sale vs lease (15)

Impairment (9)


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Interplay between IFRS 9, IFRS 15 and IFRS 16Examples of issues to consider

IFRS 16 versus IFRS 9

• Legal form of a lease - financing transaction (scope of IFRS 16)

• Provisions on finance lease receivables

• “Failed” sale and leaseback – financing in IFRS 9?


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• Lease or service – scope of IFRS 16

• Lease versus sale accounting – consistency for similararrangements/products between IFRS 15 and IFRS 16

• Part of the lease or separate performance obligation - separating ofcomponents: lease versus service – is this the same as a separateperformance obligation

• Repurchase agreements: Forward/options – repurchase price <original selling price

• Repurchase agreements: Put options – significant economicincentive with repurchase price < original selling price


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• Repurchase agreements: Forward/options – repurchase price +or > than original selling price

• Repurchase agreements: Put options – significant economicincentive with repurchase price + or > than original selling price

• Consideration receivable – when is this in IFRS 9? [Contractasset versus receivable]

• Impairment provisions

• Timing of impairment provisions for lease receivables – only oncommencement of the lease


This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in thispublication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in thispublication, and, to the extent permitted by law, PwC does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act,in reliance on the information contained in this publication or for any decision based on it.

© 2017 PwC. All rights reserved. “PwC” refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure forfurther details.

Media Industry Accounting Group Annual conference 2017 · financing activities 35,325 (2,150) 300...

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