IFRS 9 Financial Instruments Implementing IFRS 9 in SAP® BusinessObjects Financial Consolidation starter kit for IFRS January 2017
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TABLE OF CONTENTS
1- INTRODUCTION ............................................................................................................................... 3
2- CLASSIFICATION AND MEASUREMENT OF FINANCIAL ASSETS ............................................ 4 2.1 Classification of financial assets ................................................................................................... 4 2.2 Measurement of financial assets ................................................................................................... 6 2.3 Reclassification ............................................................................................................................... 9
3- CLASSIFICATION AND MEASUREMENT OF FINANCIAL LIABILITIES .................................... 10 3.1 Principles ........................................................................................................................................ 10 3.2 Impacts on starter kit .................................................................................................................... 10
4- HEDGE ACCOUNTING ................................................................................................................... 11 4.1 Principles ........................................................................................................................................ 11 4.2 Comparison with IAS 39 ................................................................................................................ 12 4.3 Impacts on starter kit .................................................................................................................... 14
5- AMENDMENTS TO IAS 1 ............................................................................................................... 15 5.1 What’s new? ................................................................................................................................... 15 5.2 Practical issues .............................................................................................................................. 15 5.3 Impacts on the starter kit .............................................................................................................. 16
6- SUMMARY OF IMPACTS ON THE STARTER KIT ....................................................................... 17 6.1 Chart of accounts .......................................................................................................................... 17 6.2 Accounting schemes ..................................................................................................................... 20 6.3 Financial statements ..................................................................................................................... 21 Appendix 1 – Example: time value of options ............................................................................................ 22 Appendix 2 – Chart of accounts ................................................................................................................... 23 Appendix 3 – Example : impairment on debt instruments at FVTOCI ..................................................... 25 Appendix 4 – Statement of OCI .................................................................................................................... 27
Implementing IFRS 9 in the starter kit for IFRS I 3
1- Introduction
In July 2014, the IASB (International Accounting Standards Board) published the fourth and final
version of IFRS 9 Financial Instruments. This is the conclusion of a major project started in 2002
as part of the Norwalk Agreement between the IASB and US Financial Accounting Standards Board
(FASB) to reform financial instruments accounting.
The objective of this document is to describe how SAP® BusinessObjects Financial Consolidation
starter kit for IFRS (International Financial Reporting Standards) should be updated to comply with
this new standard.
The starter kit for IFRS is a configuration of SAP® BusinessObjects Financial Consolidation – part of SAP solutions for EPM (Enterprise Performance Management) – designed to perform, validate and publish a statutory consolidation in accordance with IFRS.
IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement and becomes effective
for annual periods beginning on or after 1 January 2018. Earlier application is permitted. IFRS 9
has been officially adopted by the European Union in November 2016, so that European companies
can now apply it on a voluntary basis (mandatory date is 1 January 2018).
Though simpler than IAS39, IFRS 9 remains a long and complex standard. In this document we
limit our analysis to the requirements that may have an impact on the consolidation software
configuration. We first summarize the main changes introduced by IFRS 9, covering the following
topics:
classification of financial assets,
measurement of financial assets, including impairment,
classification and measurement of financial liabilities,
hedge accounting.
Then, we get back to the consequences of IFRS 9 on the presentation of financial statements
(amendments to IAS 1). The last part is dedicated to the proposed enhancements to the starter kit
for IFRS.
Implementing IFRS 9 in the starter kit for IFRS I 4
2- Classification and measurement of financial assets
2.1 Classification of financial assets
2.1.1 Classification process under IFRS 9
IFRS 9 applies one classification approach for all types of financial assets based on two criteria:
the contractual cash flow characteristics of the financial asset, and
the company’s business model for managing the financial assets.
Firstly, it should be determined whether contractual cash flows are solely payments of principal
and interest (SPPI). The assessment of whether a financial asset meets the SPPI criterion may be
difficult. We will not get into this question in depth, as it has not any impact on our configuration.
Financial assets that do not meet the SPPI criteria should be measured at fair value through profit or loss (FVTPL).
For financial assets that meet the SPPI criteria the second question relates to the entity’s business
model. Three business models have been identified depending on their objectives:
1) The objective is to hold assets in order to collect contractual cash flows only
For most non-financial corporates, trade receivables will fall into this category. Such assets are
measured at amortized cost.
2) The objective is achieved by both collecting contractual cash flows and selling assets
Compared to the previous business model, this one will typically involve greater frequency and
volume of sales of financial assets. This business model is usual for banks and insurance
companies but may also exist in non-financial corporates. For example, a company may manage
the overall return of long-term debt instruments by collecting the contractual cash flows and
selling assets to reinvest and get a higher return in order to fund capital expenditure in the short
to medium term.
Such financial assets are measured at fair value through other comprehensive income (FVTOCI).
3) Any other objective
Any financial assets that are not held in one of the two business models mentioned above are
measured at fair value through profit or loss. FVTPL is the residual category under IFRS 9.
In addition to these rules, two options are available:
FVTOCI for investments in equity instruments that are not held for trading;
FVTPL for any financial asset if doing so eliminates or significantly reduces a measurement or recognition inconsistency (accounting mismatch).
In both cases, the option is irrevocable and should be made at initial recognition.
The above requirements should be applied to an entire asset even if it contains an embedded
derivative. That is, in contrast with IAS 39, a derivative embedded within a hybrid contract
containing a financial asset host is not accounted for separately.
Implementing IFRS 9 in the starter kit for IFRS I 5
2.1.2 Comparison with IAS39
The comparison between IAS 39 and IFRS 9 regarding the classification of financial assets can be illustrated as follows:
Transition from IAS 39’s classification to IFRS 9’s one is not straightforward, even though it will be
far simpler for non-financial corporates than for banks or insurers:
Most financial assets measured at fair value through profit or loss under IAS 39 will fall into the same category (FVTPL) under IFRS 9.
Provided that they pass the SPPI criteria, held-to-maturity investments as well as loans and receivables will remain measured at amortized cost as they are held to collect cash-flows. However, because embedded derivatives are no more accounted for separately, some hybrid instruments (such as convertible bonds) may have to be classified into the FVTPL category.
The available-for-sale investments form the residual category according to IAS 39. Depending on their cash flow characteristics and the business model applied, they will be split into the different categories of IFRS 9.
Equity investments that are not held for trading are classified as available-for-sale under IAS 39.
They are therefore measured at fair value, with changes recognized in OCI and recycled to profit
or loss at derecognition (sale of the investment). Under IFRS 9, they fall into the FVTPL category,
which means that they should be measured at fair value with changes recognized through profit
or loss. If the option is elected, changes in fair value are recognized in OCI but, in contrast with
IAS 39, without any further recycling through profit or loss. In both cases, the transition to IFRS 9
will change the way they are accounted for.
However, IFRS 9 does not apply to interests in subsidiaries, associates and joint-ventures. They are
accounted for in accordance with IAS 27 (in the holding’s separate statements). It means that those
equity investments can still be measured at cost or using the equity method in local accounts.
2.1.3 Impacts on starter kit
The new classification of financial assets under IFRS 9 makes it necessary to update the chart of
accounts delivered in the starter kit.
In the current configuration, accounts provided for financial assets fall under 3 categories:
Accounts corresponding to types of financial assets currently hold by companies (e.g. trade receivables)
Accounts needed to automatically calculate line items of the cash flow statement (e.g. accrued interests)
Accounts corresponding to categories of IAS 39 (e.g. available-for-sale financial assets) for financial assets that are not included in the previous categories.
Implementing IFRS 9 in the starter kit for IFRS I 6
In order to comply with IFRS 9 principles, new accounts will be added, corresponding to the new
categories of financial assets. More detail will be provided in section 6, taking into account all
impacts on the chart of accounts (including financial liabilities, OCI reserves in equity …).
2.2 Measurement of financial assets
2.2.1 Measurement principles
2.2.1.1 Amortized cost
Amortized cost is defined in the appendix A of IFRS 9 as being: “the amount at which the financial
asset or liability is measured at initial recognition minus the principal repayments, plus or minus
the cumulative amortization using the effective interest method of any difference between that
initial amount and the maturity amount and, for financial assets, adjusted for any loss allowance”.
The definition of amortized cost is unchanged from IAS 39. However, the amounts to be
recognized may differ because amortized cost is net of loss allowance and impairment rules have
been changed (see 2.2.2).
2.2.1.2 Debt instruments at FVTOCI
This category comprises financial assets which meet the SPPI criteria and which are held to collect
contractual cash flows and for sale.
The amounts that are recognized in profit or loss are the same as the amounts that would have
been recognized in profit or loss if the financial asset had been measured at amortized cost. It
means that interest revenue, foreign exchange gains and losses and impairment gains or losses are
recognized in profit or loss whereas other changes in the carrying amount are recognized in OCI.
Where the financial asset is derecognized, the cumulative gain or loss recognized in OCI is
reclassified to profit or loss.
2.2.1.3 Equity instruments at FVTOCI
Any equity instrument that is not held for trading may be, upon irrevocable option, measured at
FVTOCI. If this election is made, all fair value changes are recognized through OCI without any
further recycling to profit or loss (where the investment is sold for example). Cumulative gain or
loss may be transferred within equity.
2.2.1.4 Financial assets at FVTPL
This category comprises:
all financial assets that do not meet the SPPI criteria (except for the equity instruments for which the option for FVTOCI is elected)
any financial asset for which the option for FVTPL is elected, provided that this option eliminates or significantly reduces an accounting mismatch.
For financial assets classified in this category, any gain or loss, including changes in fair value, is
recognized in profit or loss.
Implementing IFRS 9 in the starter kit for IFRS I 7
2.2.2 Impairment
When addressing the impairment requirements, the main questions are:
which financial assets are concerned? (scope)
when should an impairment loss be recognized? (stages)
how to measure the loss allowance?
2.2.2.1 Scope
The impairment model applies to financial assets measured at amortized cost or at FVTOCI,
excluding equity investments1.
For financial assets measured at FVTOCI, the loss allowance should be recognized in OCI and
should not reduce the carrying amount in the statement of financial position. It means that the
impairment loss is recognized in profit or loss by transferring part of the changes in fair value
from OCI. This journal entry ensures that the carrying amount in the statement of financial
position always reflects the fair value at the reporting date.
2.2.2.2 Stages
As soon as a financial instrument is originated or purchased, 12-month expected credit losses are
recognized in profit or loss and a loss allowance is established. This serves as a proxy for the
initial expectations of credit losses (stage 1, as illustrated2).
12-month expected credit losses are a portion of
lifetime expected credit losses. It is not the expected
cash shortfalls over the next 12 months – instead, it is
the effect of the entire credit loss on an asset
weighted by the probability that this loss will occur in
the next 12 months.
If the credit risk increases significantly and the
resulting credit quality is not considered to be
low credit risk (stage 2), full lifetime expected
credit losses are recognized.
If the credit risk of a financial asset increases
to the point that is considered credit-impaired
(stage 3), interest revenue is calculated based on the amortized cost (ie the gross carrying amount
adjusted for the loss allowance).
2.2.2.3 Measurement
Credit losses are the present value of all cash shortfalls. Expected credit losses are an estimate of
credit losses over the life of the financial instrument. When measuring expected credit losses, an
entity should consider:
the probability-weighted outcome: expected credit losses should represent neither a best or worst-case scenario. Rather, the estimate should reflect the possibility that a credit loss occurs and the possibility that no credit loss occurs
the time value of money: expected credit losses should be discounted to the reporting date
reasonable and supportable information that is available without undue cost or effort.
1 Except for investments in subsidiaries, joint-ventures or associates measured in accordance with IAS 27 2 From: IFRS 9 Financial Instruments, Project Summary, July 2014 published by the IFRS Foundation
Implementing IFRS 9 in the starter kit for IFRS I 8
An entity should recognize in profit or loss, as an impairment gain or loss, the amount of expected
credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the
amount that is required to be recognized in accordance with this standard.
2.2.2.4 Simplified approach
Full lifetime expected credit losses should be recognized for trade receivables or contract assets
that do not contain a significant financing component.
For trade receivables or contract assets that constitute a financing transaction, as well as for lease
receivables, there is an accounting policy choice to apply the “full” impairment model or to
measure loss allowance equal to lifetime expected losses.
2.2.3 Comparison with IAS 39
Even though there are only 3 categories of financial assets in IFRS 9 (instead of 4 in IAS 39), there
are 4 measurement models in IFRS 9 (instead of 3 in IAS 39):
It should be noticed that the ‘FVTOCI model for equity investments’ has no equivalent in IAS 39.
Besides, the impairment model under IFRS 9 is quite different from the one existing in IAS 39.
Firstly, requirements relating to impairment eliminate the threshold that was in IAS 39 for the
recognition of credit losses. Under the impairment approach in IFRS 9 it is no longer necessary for
a credit event to have occurred before credit losses are recognized. Instead, an entity should
always account for expected credit losses and changes in those expected losses. It means that,
except for limited cases, all financial assets (provided that they are subject to impairment) will
carry a loss allowance. Secondly, equity investments are no longer tested for impairment as they
are measured either at FVTPL or FVTOCI with no further recycling to profit or loss. It means that
no impairment on such assets3 is ever recorded through P&L.
2.2.4 Impacts on starter kit
The measurement models determine the accounting schemes that should be configured in the
starter kit. Changes should be planned as regards financial assets measured at FVTOCI. On the
contrary, the accounting schemes used for assets at amortized cost or at FVTPL remain unchanged
from those in IAS 39.
There are two categories of financial assets at FVTOCI: debt instruments and equity investments.
For debt instruments, the accounting schemes provided in the current starter kit comply with IFRS
9, except for impairment. As regards equity investments, the FVTOCI model for those assets is
3 Except for investments in subsidiaries, joint-ventures or associates measured in accordance with IAS 27
Implementing IFRS 9 in the starter kit for IFRS I 9
different from the one existing in the starter kit, as the accumulated OCI resulting from changes in
fair value will never be recycled through P&L. More detail is provided in section 6.
2.3 Reclassification
2.3.1 Principles
Reclassification from one category to another is possible for financial assets when and only when
an entity changes its business model for managing such assets. Such changes are expected to be
very infrequent.
Practical consequences are listed below.
2.3.2 Impacts on starter kit
A dedicated reclassification flow (F50) is available in the starter kit for all balance sheet accounts.
However, the reclassification principles as described in IFRS 9 may raise some issues: when the
reclassification implies a change in the carrying amount of the asset, the corresponding increase
or decrease has a different counterpart depending on the originated and destination categories.
Furthermore, when it affects accumulated OCI in equity, it may be – or not – a reclassification
adjustment in the statement of comprehensive income.
The existing accounting schemes in the starter kit can be used as follows:
Implementing IFRS 9 in the starter kit for IFRS I 10
3- Classification and measurement of financial liabilities
3.1 Principles
Most of the requirements have been carried forward unchanged from IAS 39. As a result, most
financial liabilities are measured at amortized cost. The exceptions are the following:
financial liabilities that are held for trading (for non-financial corporates: mainly derivatives), which are measured at fair value through profit or loss (FVTPL)
financial liabilities that are designated as at FVTPL on initial recognition. This option is subject to some criteria.
As regards the fair value option, changes have been made to address issues related to own credit
risk. The fair value of an entity’s own debt is affected by changes in the entity’s credit risk (own
credit). When an entity’s credit quality declines, the fair value of its liabilities fall (because they are
discounted using a higher interest rate), and if those liabilities are measured at fair value a gain is
recognized in profit or loss under IAS 39, which is counterintuitive. To avoid this, IFRS 9 now
requires the amount of the change in fair value due to changes in the entity’s own credit risk to be
presented in OCI, without any further recycling in profit or loss.
3.2 Impacts on starter kit
In the current version of the starter kit, all financial liabilities accounts can be measured either at
amortized cost or at fair value. This principle will remain unchanged.
However, the accounting schemes should be modified to take into account the new principles
regarding own credit risk. In the current version of the starter kit, the counterpart of fair value
changes in financial liabilities is a P&L account. Under IFRS 9, some fair value changes will have to
be recorded in OCI which means against an equity account. These amounts are not recyclable to
P&L even when the liability is derecognized and the amounts are realized.
It will therefore be necessary to provide a new equity account for non-recyclable OCI (see section
6).
Implementing IFRS 9 in the starter kit for IFRS I 11
4- Hedge accounting
4.1 Principles
To keep it simple, hedge accounting allows for offsetting P&L effects of both hedging instrument
and hedged item in the same accounting period. Only hedging relationships that meet the
qualifying criteria listed in IFRS 9 can benefit from hedge accounting.
There are three types of hedging relationships:
fair value hedge: a hedge of the exposure to changes in fair value of a recognized asset or liability or an unrecognized firm commitment
example: interest rate swap hedging a fixed rate borrowing
cash flow hedge: a hedge of the exposure to variability in cash flows of a recognized asset or liability or a highly probable forecast transaction
example: interest rate swap hedging a variable rate borrowing
hedge of a net investment in a foreign operation as defined in IAS21
4.1.1 Fair value hedges
As long as a fair value hedge meets the qualifying criteria, the hedging relationship should be
accounted for as follows:
the gain or loss on the hedging instrument should be recognized in profit or loss (or OCI if the hedged item is an equity instrument for which an entity has elected to present changes in fair value in OCI)
the hedging gain or loss on the hedged item should be recognized in profit or loss even though the hedged item is a financial asset measured at FVTOCI. However, if the hedged item is an equity instrument for which an entity has elected to present changes in fair value in OCI, those amounts should remain in OCI. When a hedged item is an unrecognized firm commitment, the cumulative change in fair value of the hedged item subsequent to its designation is recognized as an asset or a liability with a corresponding gain or loss recognized in profit or loss.
When a hedged item is a firm commitment to acquire an asset or a liability, the initial carrying
amount of the asset or the liability that results from the entity meeting the firm commitment is
adjusted to include the cumulative change in the fair value of the hedged item that was recognized
in the statement of financial position.
4.1.2 Cash flow hedges
As long as a cash flow hedge meets the qualifying criteria, the hedging relationship should be
accounted for as follows:
(a) the separate component of equity associated with the hedged item (cash flow hedge reserve) is adjusted to the lower of the following (in absolute amounts):
the cumulative gain or loss on the hedging instrument
the cumulative change in fair value of the hedged item
(b) the portion of the gain or loss on hedging instrument that is determined to be an effective hedge (ie the portion that is offset by the change in the cash flow hedge reserve calculated in accordance with (a)) should be recognized in OCI
(c) any remaining gain or loss on the hedging instrument (or any gain or loss required to balance the change in the cash flow hedge reserve calculated in accordance with a)) is hedge ineffectiveness that should be recognized in profit or loss
Implementing IFRS 9 in the starter kit for IFRS I 12
The amount accumulated in the cash flow hedge reserve is subsequently accounted for as follows,
depending on the nature of the underlying hedged transaction:
If it results in the recognition of a non-financial item, the amount accumulated in equity is removed from the separate component of equity and included in the initial cost of the hedged asset or liability. This accounting entry, sometimes referred to as ‘basis adjustment’, does not affect OCI of the period.
The same accounting treatment applies where a hedged forecast transaction of a non-financial item subsequently becomes a firm commitment for which fair value hedge accounting is applied
For any other cash flow hedges, the amount accumulated in equity is reclassified to profit or loss as a reclassification adjustment in the same period or periods during which the hedged cash flows affect profit or loss. This accounting entry does affect OCI of the period.
If cash flow hedge accounting is discontinued, the amount that has been accumulated in OCI
should:
remain in accumulated OCI if the hedged future cash flows are still expected to occur;
be immediately reclassified to profit or loss as a reclassification adjustment if the hedged future cash flows are no longer expected to occur.
After discontinuation, once the hedged cash flow occurs, any amount remaining in accumulated
OCI should be accounted for depending on the nature of the underlying transaction (as described
above).
4.1.3 Hedges of a net investment in a foreign operation
Hedges of a net investment in a foreign operation, including a hedge of a monetary item that is
accounted for as part of the net investment, should be accounted for similarly to cash flow
hedges:
the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognized in OCI and
the ineffective portion is recognized in profit or loss.
The cumulative gain or loss on the hedging instrument relating to the effective portion of the
hedge that has been accumulated in the foreign currency translation reserve should be reclassified
from equity to profit or loss as a reclassification adjustment on the disposal of the foreign
operation.
4.2 Comparison with IAS 39
IFRS 9 broadens the application of hedge accounting by allowing more hedging instruments and
hedged items to qualify for hedge accounting. For example, IAS 39 allowed components of
financial items to be hedged but not components of non-financial items, though risk managers
often hedge risk components for non-financial items (e.g. oil price component of jet fuel price
exposure). IFRS 9 eliminates this distinction.
Furthermore, the hedge effectiveness testing has been simplified including the removal of the 80-
125% threshold.
IFRS 9 does not change the way the three categories of hedges (fair value, cash flow and net
investment in foreign operation) are accounted for, except for the following:
hedges of forecast transactions that result in the recognition of a non-financial item,
the accounting for the time value of options,
and the accounting for the forward element of forward contracts.
Implementing IFRS 9 in the starter kit for IFRS I 13
4.2.1 Hedges of forecast transactions
When a hedged forecast transaction results in the recognition of a non-financial item (e.g.
inventory), IAS 39 provided an accounting policy choice to account for the amount accumulated in
equity either as a basis adjustment or as a reclassification adjustment.
IFRS 9 now requires the amount accumulated in equity to be included in the initial carrying
amount of the hedged item (basis adjustment).
4.2.2 Time value of options
Unchanged from IAS 39, an option can be designated as a hedging instrument in its entirety or
only for the part corresponding to its intrinsic value.
As a reminder, the fair value of an option can be separated into two components: the intrinsic value (being
the difference between the current value of the underlying asset and the exercise price) and the time value
(which can be defined as the premium a rational investor would pay over its current exercise value, based on
the probability it will increase in value before expiry). For example, an entity pays CU 150 a call option to buy
gold at CU 1,000 when the spot price for gold is CU 1,100. The intrinsic value of the option is 100 (1,100 –
1,000); therefore, its time value is CU 50 (150 – 100).
If the option is designated in its entirety as a hedging instrument, changes in the portion of fair
value attributable to the time value result in ineffectiveness and are recognized in profit or loss
(same as IAS 39).
If only the intrinsic value is designated as the hedging instrument, IFRS 9 now requires the change
in fair value of the time value to be recognized in OCI and accumulated in a separate component
of equity (whereas the time value was accounted for at FVTPL under IAS 39). The subsequent
treatment of this accumulated amount depends on the nature of the hedged item.
In case of a transaction related hedged item, the accumulated OCI is removed in the same way as
the accumulated amounts in the cash flow hedge reserve: basis adjustment or recycling to P&L
depending on the result of the transaction (see. 4.1.2).
In case of a time-period related hedged item (e.g. a cap that protects against increases in interest
expenses on a floating rate bond), the accumulated OCI should be amortized on a systematic and
rational basis to P&L as a reclassification adjustment.
An example is presented in appendix 1.
4.2.3 Forward element of forward contracts
Forward contracts have a spot component and a forward component. For example, in a currency
forward contract, the forward rate (being the expected exchange rate at maturity) is based on the
spot rate (exchange rate at contracting date) and the difference between the interest rate of the
two currencies.
A forward contract may be designated as a hedging instrument in its entirety or only for the part
corresponding to the spot element. Under IAS 39, if only the spot component is designated as the
hedging instrument, the forward component is accounted for at FVTPL. When the forward contract
is designated as a hedging instrument in its entirety, the hedged item can be measured using the
forward rate instead of the spot rate.
IFRS 9 introduces a new optional treatment when the hedging instrument is the spot element only.
It is then possible to recognize the changes in fair value of the forward element in OCI in a
separate component of equity. The subsequent treatment is similar to the one described above for
time value of options.
Implementing IFRS 9 in the starter kit for IFRS I 14
4.3 Impacts on starter kit
Fair value hedge does not call for particular comment as changes in fair value of both hedging and
hedged item are recognized in profit or loss, which is a common accounting entry.
As regards cash flow hedges, the current starter kit already provides a dedicated account in equity
(E1540 Hedging reserve). However, changes are necessary to comply with the new IFRS 9
requirements:
Basis adjustment (where the amount accumulated in OCI is removed and included in the initial cost of an asset or liability) should be presented as a change in equity and not as a reclassification adjustment in the statement of comprehensive income.
The creation of a new dedicated account in equity for deferred costs of hedging (time value of options, forward element …) should be considered.
IFRS 9 does not bring any change regarding hedges of net investments in foreign operations. The
current starter kit is therefore compliant.
Implementing IFRS 9 in the starter kit for IFRS I 15
5- Amendments to IAS 1
5.1 What’s new?
IFRS 9 amends IAS 1 (Presentation of Financial Statements) to require the following line items to
be presented in the statement of profit or loss (or in the profit or loss section of the statement of
comprehensive income):
Revenue, presenting separately interest revenue calculated using the effective interest method;
Impairment losses (including reversals) determined in accordance with IFRS 9;
Gains or losses arising from the derecognition of financial assets measured at amortized cost;
Gains or losses arising on reclassification of a financial asset out of the amortized cost category into the FVTPL category;
If a financial asset is reclassified out of the FVTOCI category into the FVTPL category, any cumulative gain or loss previously recognized in OCI that is reclassified to profit or loss.
These last three items relate to infrequent operations.
5.2 Practical issues
5.2.1 Interest revenue
As presented in IAS 1 (§82), interest revenue calculated using the effective interest method is part
of revenue (operating). This presentation is relevant for financial industries but not for non-
financial ones. For those entities, interest revenue is usually of limited amount and included in
finance income.
5.2.2 Impairment losses
Impairment losses, including reversals of impairment losses or impairment gains, are presented
after finance costs in IAS 1 (§82).
However, some impairment losses, such as those recognized on trade receivables, may be
classified in operating activities.
5.2.3 Specific events
i) Gains or losses arising from the derecognition of financial assets measured at amortized cost
Financial assets measured at amortized cost are supposed to be held to collect contractual cash
flows. Therefore, gains or losses on disposal of such assets should be infrequent.
ii) Gains or losses on reclassification of financial assets
As explained previously in 2.3, reclassifications of financial assets between categories only occur
when an entity changes its business model. Such changes are then expected to be very infrequent.
Therefore, gains or losses arising on reclassification (from AC to FVTPL or from FVTOCI to FVTPL)
will rarely be recognized.
Implementing IFRS 9 in the starter kit for IFRS I 16
5.3 Impacts on the starter kit
It should be firstly reminded that the principle of materiality applies. IAS 1 (§31) specifies: “An
entity need not provide a specific disclosure required by an IFRS if the information resulting from
that disclosure is not material. This is the case even if the IFRS contains a list of specific
requirements or describes them as minimum requirements.”
It means that these new requirements included in IAS 1 should not be regarded as strictly
mandatory.
5.3.1 Interest revenue
The P&L account P2120 Interest income already exists in the current starter kit. However, it is
classified as part of finance income whereas IAS 1 amended includes it in operating revenue.
Besides, interest revenue forms part of financial result and is not a line item in the statement of
profit or loss.
Therefore, the question arises whether the starter kit should be modified to (i) classify interest
income in operating revenues and to (ii) present interest revenue as a separate line item in the
statement of profit or loss.
5.3.2 Impairment losses
In the current starter kit, there is only one dedicated P&L account for impairment losses that
regards equity investments (P2210 Allowances – reversals – for provisions on shares).
IFRS 9 introduces new rules for impairment recognition. In particular, equity investments are no
longer subject to impairment, except for those that are classified as subsidiaries, associates or
joint ventures. The account P2210 will therefore continue to be used but will systematically be
written down to zero at consolidated level (elimination of internal gains or losses).
For impairment on other financial assets, the question remains whether to provide new accounts
in the starter kit (operating? financial?) and even to add a dedicated line item in the P&L statement.
5.3.3 Specific events
As explained previously (§ 5.2.3), these gains and losses, whose amounts should be displayed
according to IAS 1 amended, will be very infrequent in practice.
The question then arises whether to create new accounts in the starter kit and even new line items
in the P&L statement.
All these questions are discussed below in section 6.
Implementing IFRS 9 in the starter kit for IFRS I 17
6- Summary of impacts on the starter kit
IFRS 9 will become mandatory for annual periods beginning on or after 1 January 2018. Until this
date, some starter kit users will still refer to IAS 39 whereas others will adopt IFRS 9.
Besides, on adoption of IFRS 9, an entity should disclose reconciliations between closing balances
under IAS 39 and closing balances under IFRS 9 regarding some key data (as required by IAS 7
amended).
Therefore, it is necessary to provide a configuration compliant with both IAS 39 and IFRS 9,
instead of directly switching to IFRS 9 principles.
6.1 Chart of accounts
The chart of accounts should be modified to take into account:
the new classification of financial assets (see 2.1.3),
the changes made to the measurement models for FVTOCI assets (see 2.2.4),
the new accounting scheme regarding own credit risk when a financial liability is measured at fair value (see 3.2),
the changes brought to hedge accounting (see 4.2),
the amendments to IAS 1 as regards the statement of profit and loss (see 5.2).
6.1.1 Financial assets and liabilities
As regards financial assets, new accounts should be added to comply with the new classification.
The question remains whether to provide dedicated accounts for impairment recognition. In the
current starter kit, as presented in appendix 2, dedicated loss allowance accounts are available for
financial assets that have characteristics of receivables For other types of financial assets, such as
available-for-sale, the same account is used for all accounting entries including impairment.
This principle is not questioned by IFRS 9 and will, therefore, be maintained in the next version of
starter kit. In this respect, 4 existing accounts need to be updated and 2 new accounts should be
added. Details are provided in appendix 2.
Regarding financial liabilities, the current chart of accounts already complies with IFRS9.
6.1.2 Equity accounts
In the current starter kit, there are 8 accounts in equity that are specifically designed for financial
instruments accounting:
E1540, E1541, E2040 and E2041 (hedging reserves) are used for cash flow hedges (respectively for before tax / tax related amounts and group’s share / non-controlling interests’ (NCI) share)
E1550, E1551, E2050 and E2051 (fair value reserves) relate to available-for-sale financial assets.
Some accounting schemes associated to hedge accounting need to be updated. It may make it
necessary to enhance the chart of accounts (see below).
As regards fair value reserves currently used for measuring AFS at fair value, they can be used
after transition to IFRS 9 as counterparts when measuring debt instruments at fair value (FVTOCI
category).
Implementing IFRS 9 in the starter kit for IFRS I 18
Lastly the new accounting rules regarding, on one hand, the equity investments measured at
FVTOCI and, on the other hand, the impact of changes in own credit risk for financial liabilities
measured at fair value may have consequences on the chart of accounts.
6.1.2.1 Hedge accounting
Depending on the nature of the hedged item, the amounts accumulated in the cash flow hedge
reserve can be subsequently reclassified to profit or loss or removed from equity and included in
the initial cost of the hedged asset or liability. In the first case, the recycling through P&L is part of
OCI (reclassification adjustment) whereas, in the second case, the amount transferred should be
presented as a movement in equity.
As a reminder, IAS 1 (§ 82A) requires to present separately items of other comprehensive income
that will be reclassified to profit or loss from those that will not.
Given that the accounting schemes are quite complex, it seems preferable to provide different
equity accounts to separate recyclable from non-recyclable items, rather than adding new flows.
Therefore we suggest that the existing 4 accounts of hedging reserves are split into 8 in order to
separate recyclable from non-recyclable accumulated amounts.
Besides, the question of providing dedicated accounts for deferred costs of hedging (cf. § 4.2.2
and § 4.2.3) is worth considering because it would highlight a change from IAS 39. However, it
would result in 16 equity accounts dedicated to hedge accounting, which seems quite a lot for
non-corporate financials. Moreover, deferred costs of hedging are accounted for following the
same principles as the accumulated amounts in the cash flow reserve. Therefore, we suggest using
the same equity accounts and keeping the current wording (i.e. hedging reserves) rather than the
new one used in IFRS 9 (cash flow hedge reserve) which seems more restrictive.
6.1.2.2 Equity investments at FVTOCI
The existing “fair value reserve” account is currently used for AFS financial assets. It cannot be
used as a counterpart for fair value measurement of equity investments at FVTOCI because it
represents a recyclable amount in OCI.
Therefore, it seems necessary to provide new equity accounts for non-recyclable fair value reserve
(4 accounts: before tax/ tax related amounts; group/NCI).
6.1.2.3 Own credit risk
As explained in section 3, the amount of the change in a financial liability’s fair value due to
changes in the entity’s own credit risk should be recognized in OCI without any further recycling
through P&L. It is therefore necessary to provide an appropriate equity account.
The question is whether the one needed for equity investments measured at FVTOCI (see above)
could also be used for own credit risk impact or if a new dedicated equity account would be
preferable.
On one hand, the option for fair value measurement of financial liabilities is not frequent within
non-financial corporates. On the other hand, using the same equity account than for fair value
measurement of equity investments would prevent us from presenting separately the impacts in
the statement of comprehensive income. Given that the corresponding accumulated amounts in
equity are of a very different nature, we believe it is worth providing dedicated equity accounts for
own credit risk impact.
The list of new equity accounts to be added in the starter kit is presented in appendix 2.
Implementing IFRS 9 in the starter kit for IFRS I 19
6.1.3 Profit or loss accounts
As explained in section 5, the amendments to IAS 1 have added mandatory line items in the
statement of profit or loss. Therefore, the question arises whether the starter kit should be
updated to comply with this requirements and to what extent.
6.1.3.1 Interest revenue
As regards interest revenue (see § 5.3.1), the corresponding account already exists in the current
starter kit. However, it is classified as a financial result component whereas interest income is part
of revenue in IAS 1 presentation.
We do not believe it will be appropriate to classify interest income as part of operating activities as
our starter kit is designed for non-financial corporates. The existing account (P2120 Interest
income) will therefore remain unchanged.
6.1.3.2 Impairment losses
Impairment losses on trade and other operating receivables are usually recognized in operating
result in non-financial corporates’ statements. In the current starter kit, there is not any dedicated
account as accounting schemes may vary from one company to another. The amendments brought
to IAS 1 suggest that it may be preferable to provide this kind of account. Therefore, a new
account P1670 “Operating impairment losses” will be added.
Impairment losses on other financial assets are usually classified as financial result items. The
existing account in the starter kit (P2210 Allowances – reversals – for provisions on shares) is
dedicated to equity investments classified as investments in subsidiaries, joint-ventures and
associates. Controls are configured in local packages between this account and the corresponding
balance sheet flows (F25/F35 entered on account A1812). It does not seem appropriate to include
in this account impairment losses on other financial assets. We rather suggest to add a new
account P2215 “Impairment losses on other financial assets”.
6.1.3.3 Specific events
As explained previously (§ 5.3.3), gains and losses arising from derecognition of financial assets
measured at amortized cost and gains or losses on reclassification of financial assets, whose
amounts should be separately displayed according to IAS 1 amended, will be very infrequent in
practice. The question then arises whether to create new accounts in the starter that would rarely
be used.
However, the addition of new P&L accounts has little impact on the configuration as they are only
associated to one flow (Y99).
Therefore, we suggest that 3 new accounts are made available in the starter kit:
P2310 “Gains or losses arising from the derecognition of financial assets measured at amortized cost”
P2320 “Gains or losses arising on reclassification of a financial asset from the amortized cost category into the FVTPL category”
P2330 “Gains or losses arising on reclassification of a financial asset from the FVTOCI category into the FVTPL category”
The question of whether those amounts should be presented on separate line items in the
statement of profit or loss is discussed in § 6.3.
Implementing IFRS 9 in the starter kit for IFRS I 20
6.2 Accounting schemes
The new accounting schemes introduced by IFRS 9 relate to:
impairment recognition on debt instruments measured at FVTOCI (see 2.2.2),
fair value measurement of equity investments when it is recognized in OCI (see 2.2.1.3),
impact of own credit risk on fair value measurement of financial liabilities (see 3.1).
6.2.1 Impairment of debt instruments measured at FVTOCI
IFRS 9 now clearly states that loss allowances recognized on debt instruments measured at
FVTOCI should not reduce the carrying amount in the statement of financial position. An example
is given in IFRS 9 implementation guidance (example 13).
For entities using dedicated loss allowance accounts in the balance sheet, this principle gives rise
to counterintuitive accounting entries as it is necessary to increase the gross value as shown in the
example below.
Based on the example 13 of IFRS 9 IG: purchase price: 1,000; fair value at closing: 950; impairment loss: 30
Balance sheet at closing if the entity does not use loss allowance accounts
Balance sheet at closing if the entity uses loss allowance accounts
In the starter kit, loss allowances may be recognized directly in the gross value account or in
dedicated accounts depending on the financial asset’s nature and the accounting policy applied.
Use of dedicated flows (F25 for impairment, F55 for change in fair value) is necessary to ensure
that the statement of cash flows line items are correctly calculated. The example of IFRS 9 IG has
been illustrated in the starter kit in appendix 3.
As regards changes in configuration, account families defined in the category scenario should be
carefully reviewed to ensure that impairment and fair value flows are available for all accounts
that may include financial assets at FVTOCI.
6.2.2 Equity investments at FVTOCI
The measurement model for equity investments at FVTOCI differs from the ones existing in the
current starter kit because the accumulated fair value reserve is never recycled through P&L.
As detailed before (§ 6.1.2.2), new equity accounts will be made available. These accounts,
associated to flows F55 (fair value changes during the period) and F50 (reclassification within
equity if needed when the investment is sold), will enable the new version of starter kit to comply
with these new requirements.
Financial asset 950 Equity (OCI) (20)
Profit or loss (30)
Debt on purchase 1 000
950 950
Financial asset - gross value 980 Equity (OCI) (20)
Financial asset - loss allowance (30) Profit or loss (30)
Debt on purchase 1 000
950 950
Implementing IFRS 9 in the starter kit for IFRS I 21
6.2.3 Own credit risk
The principles explained before for equity investments at FVTOCI also apply to own credit risk
impact. The new equity accounts associated to appropriate flows will ensure the starter kit’s
compliance.
6.3 Financial statements
6.3.1 Statement of profit or loss
The amendments to IAS 1 introduce 5 new line items in the statement of profit or loss (see §5.1).
As discussed in § 6.1.3, these changes make it necessary to add new accounts in the starter kit.
The question now remains whether new separate line items should be added in the statement of
profit or loss delivered within the starter kit.
Firstly, it should be noticed that the corresponding amounts (interest income, impairment losses,
gains or losses on reclassification …) are rarely material in case of non-financial corporates.
Secondly, the statement of profit or loss delivered within the starter kit currently presents 11 line
items only (totals and subtotals not included), which correspond to the mandatory line items of
IAS 1 (with limited exceptions) and the most frequent items observed in companies’ financial
reports. In that context, adding 5 new line items seems disproportionate. Lastly, the IASB has
launched a major project named “better communication” which aims to rebuild the entire financial
information including primary financial statements.
Based on these arguments, we believe that the statement of profit or loss delivered within the
starter kit should remain unchanged for the moment.
6.3.2 Statement of other comprehensive income
IFRS 9 indirectly introduces new line items in the statement of other comprehensive income:
changes in the fair value of debt investments at FVTOCI,
changes in the fair value of equity investments at FVTOCI,
changes in the fair value of liabilities designated at FVTPL due to changes in the company’s own credit risk.
On the other hand, the line items relating to available-for-sale investments will not be used any
more after transition to IFRS 9.
Lastly, IFRS 9 clarifies the subsequent treatment of accumulated hedging reserves: basis
adjustments (where the hedging reserve is removed and included in the initial cost of hedged
items) are not part of OCI whereas reclassification adjustments are part of it.
The statement of other comprehensive income delivered within the starter kit should be updated.
Changes, which are significant in the “non-recyclable” part, are presented in appendix 4.
Implementing IFRS 9 in the starter kit for IFRS I 22
Appendix 1 – Example: time value of options4
Entity X, a copper producer, wants to hedge sales that are forecast to take place on 30 September
20X4. On 1 January 20X4 it enters into a put option to sell 1,000 tonnes of copper for CU50/t. The
put option expires on 30 September 20X4. The copper spot price on 1 January 20X4 is CU50/t.
Entity X pays CU2,000 for the put option → Initial time value is CU2,000 (intrinsic value is nil as
the exercise price (CU50/tonne) equals the spot price)
1 January 20X4: To recognize the purchase of the option
Dr Option CU2,000
Cr Cash CU2,000
Subsequently, on 31 March 20X4:
The fair value of the option is CU5,000
The copper spot price is CU46/tonne
→ Intrinsic value is CU4,000 [i.e. (CU50-CU46) x 1,000 tonnes)] and time value is CU1,000 [i.e.
CU5,000 – CU4,000].
31 March 20X4: To recognize the change in fair value of the option, taking the change in the intrinsic component (the hedging instrument) to the CFH reserve, and recognizing the change in time value to the option time value reserve
Dr Option CU3,000 Dr OCI – Option time value reserve CU1,000
Cr OCI – Cash flow hedge (CFH) reserve CU4,000
Subsequently, on 30 September 20X4:
The fair value of the option is CU10,000
The copper spot price is CU40/tonne
Time value of the option is CU0 (maturity date)
1,000 tonnes of copper is sold at the spot rate.
30 September 20X4: To recognize sales of 1,000 tonnes of copper at spot rate
Dr Trade receivables CU40,000
Cr Sales revenue CU40,000
30 September 20X4: To recognize the change in fair value of the option
Dr Option CU5,000 Dr OCI – Option time value reserve CU1,000
Cr OCI – CFH reserve CU6,000
30 September 20X4: To reclassify the amount in the CFH reserve and the option time value reserve against sales revenue
Dr OCI – CFH reserve CU10,000 Dr Sales CU2,000 Cr Sales CU10,000
Cr OCI – Option time value reserve CU2,000
Calculation of copper sales revenue:
Copper sales at spot rate CU40,000
Gain or loss recycled from CFH reserve CU10,000
Initial time value of option CU(2,000)
Total CU48,000
4 This example is extract from BDO publication ‘Need to know – Hedge Accounting’
Implementing IFRS 9 in the starter kit for IFRS I 23
Appendix 2 – Chart of accounts Financial assets
Current starter kit
Account Classification IAS39 IFRS 9 Loss allowance
FVTPL HTM L&R AFS FVTPL FVTOCI AC
A1610 - Loans and cash advances, NC, Gross X X X X A1612
A1620 to A1624 – Receivables on disposal of PPE, intangible assets, investments in subsidiaries, investments in other entities, other assets
X X X X A1642 (1)
A1630 - Other receivables, NC, Gross X X X X A1642
A1810 - Investments in subsidiaries, JV and assoc. X X A1812 (2)
A1820 - Available-for-sale financial assets, NC X NA NA NA NA (3)
A1830 - Derivatives, NC X X NA
A1840 - Financial assets at FVTPL, NC X X NA
A1850 - Other financial assets, NC X X X X -
A2210 - Trade receivables, Gross X X X X A2212
A2220 to A2224 – Receivables on disposal of PPE, intangible assets, investments in subsidiaries, investments in other entities, other assets
X X X X A2262 (1)
A2230 - Dividends receivable X X X A2262 (1)
A2240 - Other receivables, Current, Gross X X X X A2262
A2250 - Accrued interests on receivables X X X X A2262 (1)
A2410 - Available-for-sale financial assets, Current X NA NA NA NA (3)
A2420 - Derivatives, Current X X NA
A2430 - Financial assets at FVTPL, Current X X NA
A2440 - Loans and cash advances, Current, Gross X X X X A2442
A2450 - Other financial assets, Current X X X X -
A2620 - Short-term deposits and other cash equivalents
X X X X X -
NC: Non-current NA: not applicable
(1) These accounts are needed to automatically calculate line items of the cash flow statement (2) Only for non-consolidated investments; consolidated investments are out of IFRS 9 scope and usually measured at cost or using the equity method (dedicated account: A1815) (3) Financial assets included in the “available-for-sale” accounts should be reclassified at transition date
Accounts to be renamed
Code Current description Modified description
A1840 Financial assets at FVTPL, NC Other financial assets at FVTPL, NC
A1850 Other financial assets, NC Other financial assets at amortized cost, NC
A2430 Financial assets at FVTPL, Current Other financial assets at FVTPL, Current
A2450 Other financial assets, Current Other financial assets at amortized cost, Current
Implementing IFRS 9 in the starter kit for IFRS I 24
New accounts
Code Description
A1860 Other financial assets at FVTOCI, NC
A2460 Other financial assets at FVTOCI, Current
Equity5
Description Current Code Comment
Group’s share
NCI6’s share
Hedging reserve, before tax E1540 E2040 To be renamed: Recyclable hedging reserve
Income tax on hedging reserve E1541 E2041 To be renamed: Income tax on recyclable hedging reserve
Fair value reserve E1550 E2050 To be renamed: Recyclable fair value reserve
Income tax on fair value reserve E1551 E2051 To be renamed: Income tax on recyclable fair value reserve
Non-recyclable hedging reserve, before tax
(*) (*) New account
Income tax on non-recyclable hedging reserve
(*) (*) New account
Non-recyclable fair value reserve (*) (*) New account
Income tax on non-recyclable fair value reserve
(*) (*) New account
Impact of own credit risk reserve (*) (*) New account
Income tax on own credit risk reserve
(*) (*) New account
(*) Codification principles may be reviewed to clearly separate recyclable amounts (e.g. E14xx) from non-
recyclable ones (E15xx)
5 Only equity accounts that are used in accounting for financial instruments are listed in the table. 6 NCI : non-controlling interests
Implementing IFRS 9 in the starter kit for IFRS I 25
Appendix 3 – Example : impairment on debt instruments at FVTOCI
This example is based on the example 13 included in IFRS 9 Implementation Guidance.
At acquisition date - Extract from IFRS 9
An entity purchases a debt instrument with a fair value of CU1,000 on 15 December 20X0 and
measures the debt instrument at FVTOCI. The instrument has an interest rate of 5 per cent over
the contractual term of 10 years, and has a 5 per cent effective interest rate. At initial recognition
the entity determines that the asset is not purchased or originated credit-impaired.
Debit Credit
Financial asset—FVTOCI CU1,000 Cash CU1,000
(To recognize the debt instrument measured at its fair value)
At acquisition date – In the starter kit7
Flow Debit Credit
A1630 – Other receivables, NC, Gross F20 1,000 or A1860 – Other financial asset at FVTOCI, NC8 F20 1,000 A2610 – Cash on hand F15 1,000
At closing date - Extract from IFRS 9
On 31 December 20X0 (the reporting date), the fair value of the debt instrument has decreased to
CU950 as a result of changes in market interest rates. The entity determines that there has not
been a significant increase in credit risk since initial recognition and that expected credit losses
should be measured at an amount equal to 12-month expected credit losses, which amounts to
CU30. For simplicity, journal entries for the receipt of interest revenue are not provided.
Debit Credit
Impairment loss (profit or loss) CU30 Other comprehensive income(a) CU20 Financial asset—FVTOCI CU50
(To recognize 12-month expected credit losses and other fair value changes on the debt instrument)
The cumulative loss in other comprehensive income at the reporting date was CU20. That amount
consists of the total fair value change of CU50 (ie CU1,000 – CU950) offset by the change in the
accumulated impairment amount representing 12-month expected credit losses that was
recognized (CU30).
At closing date – In the starter kit
The accounting entries are different depending on whether an allowance account is used or not.
1st solution (without allowance account)
Flow Debit Credit
P2215 – Impairment losses on other financial assets Y99 30 A1860 – Other financial asset at FVTOCI, NC F259 30 E1550 – Recyclable fair value reserve F55 20 A1860 – Other financial asset at FVOCI, NC F55 20
7 For simplicity, the amount is not split between current and non-current portion 8 To illustrate both cases: single account or two accounts, one for gross amount, another for loss allowance 9 Use of flow F25 is required for an appropriate classification in the statement of cash flows (adjustment for impairment losses)
Implementing IFRS 9 in the starter kit for IFRS I 26
2nd solution (with an allowance account)
Flow Debit Credit
P2215 – Impairment losses on other financial assets Y99 30 A1642 – Receivables, NC, Allowance F25 30 E1550 – Recyclable fair value reserve F55 20 A1630 – Other receivables, NC, Gross F55 20
Sale of the debt instrument - Extract from IFRS 9
On 1 January 20X1, the entity decides to sell the debt instrument for CU950, which is its fair value
at that date.
Debit Credit
Cash CU950 Financial asset—FVTOCI CU950 Loss (profit or loss) CU20 Other comprehensive income CU20
(To derecognize the fair value through other comprehensive income asset and recycle amounts accumulated in
other comprehensive income to profit or loss)
Sale of the debt instrument – In the starter kit
1st solution (without allowance account)
Flow Debit Credit
A2610 – Cash on hand F15 950 A1860 – Other financial asset at FVTOCI, NC F30 950 P1614 – Gains or losses on sale of other assets Y9910 20 E1550 – Recyclable fair value reserve F3011 20
2nd solution (with an allowance account)
Flow Debit Credit
A2610 – Cash on hand F15 950 A1642 – Receivables, NC, Allowance F30 30 A1630 – Other receivables, NC, Gross F30 980 P1614 – Gains or losses on sale of other assets Y99 20 E1550 – Recyclable fair value reserve F30 20
10 This P&L account has the same destination in the statement of cash flows as the pair E1550 / F30, so that this non-cash accounting entry will be neutralized. 11 Use of flow F30 is required for an appropriate classification in the statement of comprehensive income (reclassification adjustment)
Implementing IFRS 9 in the starter kit for IFRS I 27
Appendix 4 – Statement of OCI
CURRENT STARTER KIT STARTER KIT AFTER PROPOSED ENHANCEMENTS
Profit (loss) for the period Profit (loss) for the period
Gains (losses) on revaluation, before tax Gains (losses) on revaluation, before tax
Income tax relating to gains (losses) on revaluation Income tax relating to gains (losses) on revaluation
Other comprehensive income, net of tax, gains (losses) on revaluation Other comprehensive income, net of tax, gains (losses) on revaluation
Remeasurements of defined benefit plans Remeasurements of defined benefit plans
Income tax relating to remeasurements of defined benefit plans Income tax relating to remeasurements of defined benefit plans
Other comprehensive income, net of tax, remeasurements of defined
benefit plans
Other comprehensive income, net of tax, remeasurements of defined
benefit plans
Non-recyclable gains (losses) on cash flow hedges, before tax
Income tax relating to non-recyclable gains (losses) on cash flow hedges
Other comprehensive income, net of tax, non-recyclable, cash flow
hedges
Gains (losses) on remeasuring equity investments at FVTOCI, before tax
Income tax relating to gains (losses) on equity investments at FVTOCI
Other comprehensive income, net of tax, equity investments at FVTOCI
Impact of own credit risk on fair value of liabilities at FVTPL, before tax
Income tax relating to the impact of own credit risk on fair value of
liabilities at FVTPL, before tax
Other comprehensive income, net of tax, own credit risk impact on
liabilities at FVTPL, net of tax
Share of OCI of associates and JV accounted for using equity method that
will not be reclassified to P&L
Share of OCI of associates and JV accounted for using equity method that
will not be reclassified to P&L
Total other comprehensive income that will not be reclassified to
profit or loss
Total other comprehensive income that will not be reclassified to
profit or loss
Gains (losses) on exchange differences on translation, before tax Gains (losses) on exchange differences on translation, before tax
Income tax relating to gains (losses) on exchange differences Income tax relating to gains (losses) on exchange differences
Reclassification adjustments on exchange differences on translation,
before tax
Reclassification adjustments on exchange differences on translation,
before tax
Income tax relating to reclassification adjustments on exchange
differences
Income tax relating to reclassification adjustments on exchange
differences
Other comprehensive income, net of tax, exchange differences on
translation
Other comprehensive income, net of tax, exchange differences on
translation
Gains (losses) on remeasuring available-for-sale financial assets, before
tax
Gains (losses) on remeasuring financial assets at FVTOCI, before tax
Income tax relating to gains (losses) on AFS Income tax relating to gains (losses) on financial assets at FVTOCI
Reclassification adjustments on available-for-sale financial assets, before
tax Reclassification adjustments on financial assets at FVTOCI, before tax
Income tax relating to reclassification adjustments on AFS Income tax relating to reclassification adjustments on financial assets at
FVTOCI
Other comprehensive income, net of tax, available-for-sale financial
assets
Other comprehensive income, net of tax, financial assets at FVTOCI
Gains (losses) on cash flow hedges, before tax Gains (losses) on cash flow hedges, before tax
Income tax relating to gains (losses) on cash flow hedges Income tax relating to gains (losses) on cash flow hedges
Reclassification adjustments on cash flow hedges, before tax Reclassification adjustments on cash flow hedges, before tax
Income tax relating to reclassification adjustments on cash flow hedges Income tax relating to reclassification adjustments on cash flow hedges
Amounts transferred to initial carrying amount of hedged items
Income tax relating to transfer to initial carrying amount of hedged asset
Other comprehensive income, net of tax, cash flow hedges Other comprehensive income, net of tax, cash flow hedges
Share of OCI of associates and JV accounted for using equity method that
may be reclassified to P&L
Share of OCI of associates and JV accounted for using equity method that
may be reclassified to P&L
Total other comprehensive income that may be reclassified
subsequently to profit or loss
Total other comprehensive income that may be reclassified
subsequently to profit or loss
Other comprehensive income, net of tax Other comprehensive income, net of tax
Total comprehensive income Total comprehensive income
Comprehensive income, attributable to owners of parent Comprehensive income, attributable to owners of parent
Comprehensive income, attributable to non-controlling interests Comprehensive income, attributable to non-controlling interests
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