14. May 2020

IASB publish several Narrow-Scope Amendments to IFRSs

Today, the IASB has issued several Narrow-Scope Amendments to different IFRSs. These amendments comprise the Annual Improvements (2018-2020 cycle) as well as amendments to IAS 16, to IAS 37, and to IFRS 3.

The Annual Improvements relate to the following standards and issues:

  •  IFRS 1 – Subsidiary as a first-time adopter later than its parent: The amendment provides a relief in respect of the accounting for cumulative translation differences in case of a subsidiary becoming a first-time adopter of IFRS later than its parent
  • IFRS 9 – Fees included in the ’10 per cent’ test for derecognition of financial liabilities: The amendment clarifies which fees an entity includes in the ‘10 per cent’ test in deciding whether to derecognise a financial liability that has been modified or exchanged.
  • Illustrative Examples accompanying IFRS 16 – Lease incentives: The amendment deletes some of the wording in IE5 which potentially led to confusion about the appropriate accounting treatment of lease incentives.
  • IAS 41 – Relevance of taxation in fair value measurements: The amendment clarifies how taxation shall be included in determining the fair value.

The Amendment to IAS 16 relates to proceeds from sales before property, plant and equipment (PPE) are used as intended by management. Before, proceeds from sales while bringing an item of PPE to the location and condition necessary to operate in the manner intended by management were deductible from the cost of that item. The amendment now prohibits any deduction; instead, those sales proceeds would be recognized in profit or loss.

The Amendments to IAS 37 clarify which costs are included in the assessment of whether a contract is onerous. When determining the “cost of fulfilling a contract”, all costs that relate directly to the contract should be considered.

The Amendments to IFRS 3

  • update IFRS 3 so it refers to the 2018 Conceptual Framework instead of the 1989 Framework.
  • add to IFRS 3 an exception to its recognition principle for liabilities and contingent liabilities that would be within the scope of IAS 37 or IFRIC 21 if incurred separately.
  • add to IFRS 3 an explicit statement that an acquirer should not recognise contingent assets acquired in a business combination.

All amendments shall be applied in annual periods beginning on or after 1 January 2022.

The amendments are, as usual, available from the IASB only, and subject to a charge.