Interpretations Committee for further consideration. The Group does not interpret
IFRS or seek consensus on its application in Canada. It meets in public up to four
times per year and has generated several submissions for the Interpretations
Committee’s agenda.
4.3.3 Brazil
Local accounting standards in Brazil (CPCs) have been converged with IFRS since 2010
and public companies regulated by the ‘Comissão de Valores Mobiliários’ (CVM) are
also required to make a formal statement of compliance with IFRS as issued by the IASB
for their consolidated financial statements. The only exception is for homebuilding
companies, which are temporarily permitted to continue to apply IAS 11 – Construction
Contracts – rather than IAS 18 – Revenue – under IFRIC 15 – Agreements for the
Construction of Real Estate.
Banks are regulated by the Brazilian Central Bank, which continues to require
preparation of financial statements under its pre-existing rules. However, larger
companies, as defined by law, including banks, are also required to prepare annual
financial statements in accordance with IFRS since 2010, which must be made publicly
available. Insurance companies were required to adopt the local CPCs, and hence
IFRS, in 2011.
Non-public companies outside financial services are required to apply the CPCs.
Smaller non-public companies are permitted to apply CPCs for SMEs which is an
equivalent of IFRS for SMEs.
4.4 Asia
4.4.1 China
4.4.1.A Mainland
China
The Ministry of Finance in China (the MOF) – through its Accounting Regulatory
Department – is responsible for the promulgation of accounting standards, which are
applicable to various business enterprises.
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Representatives of the China Accounting Standards Committee (CASC), which falls
under the Accounting Regulatory Department of the MOF, and the IASB met in Beijing
in November 2005 to discuss a range of issues relating to the convergence of Chinese
accounting standards with IFRS. At the conclusion of the meeting, the two delegations
released a joint statement setting out key points of agreement, including the following:
• the CASC stated that convergence is one of the fundamental goals of its standard-
setting programme, with the intention that an enterprise applying Chinese
accounting standards should produce financial statements that are the same as
those of an enterprise that applies IFRS; and
• the delegation acknowledged that convergence with IFRS will take time and how
to converge with IFRS is a matter for China to determine.
Since February 2006, the MOF issued a series of new and revised Accounting
Standards for Business Enterprises (ASBE), which included the Basic Standard and 41
specific accounting standards. In April 2010, the MOF issued the Road Map for
Continual Convergence of the ASBE with IFRS (the MOF Road Map), which requires
the application of ASBE by all listed companies, some non-listed financial enterprises
and central state-owned enterprises, and most large and medium-sized enterprises.
The MOF Road Map also states that ASBE will continue to maintain convergence
with IFRS.
To maintain continuous convergence with IFRS, during the period from August 2017
to July 2018, the MOF released the exposure draft for leases, which is generally
consistent with IFRS 16. The MOF also released application guidance for the
following accounting standards: revenue, non-current assets held for sale, disposal
groups and discontinued operations, government grants, and financial instruments.
ASBE, to a large extent, represents convergence with IFRS, with due consideration
being given to specific situations in China. ASBE covers the recognition,
measurement, presentation and disclosure of most transactions and events, financial
reporting, and nearly all the topics covered by current IFRS. Most of ASBE is
substantially in line with the corresponding IFRS, with a more simplified form of
disclosures. However, there are ASBE that do not have an IFRS equivalent, such as
that on non-monetary transactions, debt restructurings and common control business
combinations, and there are certain standards that restrict or eliminate measurement
alternatives that exist in IFRS. For example, the ASBE on investment property
permits the use of the fair value model only when certain strict criteria are met. While
ASBE and IFRS can be largely harmonised by selecting appropriate accounting
policies with supplemental disclosures which satisfy the requirements of both sets of
accounting standards, the more significant divergence from IFRS is that the ASBE on
impairment of assets prohibits the reversal of an impairment loss for long-lived assets
in all situations.
4.4.1.B Hong
Kong
The Hong Kong Institute of Certified Public Accountants (HKICPA) is the principal source
of accounting principles in Hong Kong. These include a series of Hong Kong Financial
Reporting Standards, accounting standards referred to as Hong Kong Accounting
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Standards (HKAS) and Interpretations issued by the HKICPA. The term ‘Hong Kong
Financial Reporting Standards’ (HKFRS) is deemed to include all of the foregoing.
HKFRS was fully converged with IFRS (subject to the exceptions discussed below) with
effect from 1 January 2005. The HKICPA Council supports the integration of its
standard-setting process with that of the IASB.
Although the HKICPA Council has a policy of maintaining convergence of HKFRS
with IFRS, the HKICPA Council may consider it appropriate to include additional
disclosure requirements in an HKFRS or, in some exceptional cases, to deviate from
an IFRS. Each HKFRS contains information about the extent of compliance with the
equivalent IFRS. When the requirements of an HKFRS and an IFRS differ, the HKFRS
is required to be followed by entities reporting within the area of application of
HKFRS. However in practice, exceptions to IFRS are few and relate to certain
transitional provisions.
Certain smaller companies or groups meeting the necessary requirements and size
criteria are permitted (but not required) to adopt the HKICPA’s locally developed small
and medium-sized financial reporting framework and financial reporting standards.
4.4.2 Japan
Gradual convergence of Japanese GAAP and IFRS has been ongoing for a number of
years; however, full mandatory adoption of IFRS in Japan has been put on hold for the
time being.
In June 2009, the Business Advisory Council (BAC), a key advisory body to the Financial
Services Agency, approved a roadmap for the adoption of IFRS in Japan. This roadmap
gives the option of voluntary adoption to companies that meet certain conditions.
In June 2013, the BAC published an ‘Interim Policy Relating to IFRS’ (the Policy), which
further encourages the voluntary adoption of IFRS. The Policy states that although it is
not yet the right time to determine whether or not to require mandatory implementation
of IFRS in Japan, the BAC recognises that it is important to expand greater voluntary
a
doption of IFRS in Japan. Accordingly, conditions for voluntary adoption of IFRS have
been relaxed, and some other measures have been taken to make the dual reporting of
IFRS in consolidated financial statements and Japanese GAAP in standalone financial
statements less of a burden on preparers.
The ruling Liberal Democratic Party (LDP) issued a ‘Statement on Approach to IFRS’
(the Statement) in June 2013. In contrast to the Policy issued by the BAC, the Statement
puts more emphasis on preparation for the future adoption of IFRS. The Statement
highlights key points to expand greater voluntary adoption of IFRS in Japan.
All IFRSs issued by the IASB are the basis of voluntary adoption of IFRS in Japan, but
a further endorsement mechanism was put in place in 2015. It is contemplated that
under this endorsement mechanism, each IFRS would be reviewed and amended
only after careful consideration of situations specific to Japan. However, the
endorsement mechanism has been used to introduce a ‘carved-out version’ of IFRS
to make transition to IFRS as issued by the IASB easier for Japanese companies. In
June 2015, Japan’s Modified International Standards (JMIS): Accounting Standards
Comprising IFRSs and the ASBJ Modifications was issued by the Accounting
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Standards Board of Japan (ASBJ). JMIS may be adopted in annual periods ending on
or after 31 March 2016. JMIS differs from IFRS in that it requires goodwill to be
amortised and requires all items recorded in other comprehensive income be
recycled to profit or loss eventually. At the time of writing, no Japanese companies
have announced plans to apply JMIS. It should be noted that despite the introduction
of JMIS, there is no change in the option of Japanese companies to use IFRS as issued
by the IASB if they so elect.
As a result, the number of the companies adopting IFRS in Japan voluntarily increased
to approximately 200, mostly larger, companies. Although a small percentage of listed
companies, the companies that have adopted IFRS represent a significant and growing
part of the market capitalisation of the Tokyo Stock Exchange, accounting for more
than 25% of the total market capitalisation at the time of writing.
4.4.3 India
Accounting standards in India are issued by the Institute of Chartered Accountants
of India (ICAI) and are ‘notified’ by the Ministry of Corporate Affairs (MCA) under
the Companies Act. Until the financial year ended 31 March 2016, all companies
registered under the Companies Act were required to follow Indian GAAP
standards, which are based on old versions of IFRS and contain many key
differences from IFRS.
In February 2015, the MCA notified the Companies (Indian Accounting Standards)
Rules, 201570 laying down the roadmap for application of IFRS converged standards,
known as Indian Accounting Standards (Ind AS), to Indian companies other than
banking companies, insurance companies and non-banking finance companies
(NBFCs). The Ind AS standards have also been notified.
In January 2016, the MCA issued the phasing-in dates of Ind AS applicability for NBFCs.
The Reserve Bank of India also issued the Ind AS applicability dates in phases for banks
starting from 1 April 2018. However, pending necessary legislative amendments and
considering the level of preparedness of many banks, implementation of Ind AS to the
banks has been deferred by one year. The Insurance Regulatory and Development
Authority of India initially expected to apply Ind AS to insurers from the same date as
banks. However, due to the issuance of IFRS 17 by the IASB, the applicability of Ind AS
to insurers is deferred by two years.
All companies applying Ind AS are required to present comparative information
according to Ind AS for at least one year. Ind AS will apply to both standalone
financial statements and consolidated financial statements of companies covered
under the roadmap.
Companies not covered under the roadmap can either apply Ind AS voluntarily or
continue applying existing standards, i.e. current Indian GAAP. If Ind AS is applied
voluntarily, this option will be irrevocable.
In 2009, the Securities and Exchange Board of India (SEBI), the securities regulator in
India, permitted listed companies with subsidiaries to submit their consolidated
financial statements in accordance with IFRS as issued by the IASB. Few companies in
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India had availed themselves of this option. The option is no longer available for
companies. Ind AS contains certain departures from IFRS, including:
• mandatory deviations from IFRS, such as, accounting for foreign currency
convertible bonds, accounting for a bargain purchase gain (i.e. ‘negative goodwill’)
in a business combination and current/non-current classification of liabilities on
breach of loan covenants;
• optional carve-outs, such as, measurement of property, plant and equipment on
first-time adoption and accounting for foreign exchange differences on long-term
monetary items that exist at the date of transition;
• removal of accounting options under IFRS, such as, removal of the fair value
measurement option for investment properties and the removal of the two-
statement approach for the statement of comprehensive income;
• additional guidance under Ind AS, such as for common control business
combinations, foreign exchange differences regarded as an adjustment of
borrowing costs and treatment of security deposits; and
• companies are required to apply Ind AS 109 Financial Instruments, corresponding to
IFRS 9, from the date of initial application of Ind AS. There is no Ind AS corresponding
to IAS 39. Ind AS 115 – Revenue from Contracts with Customers, corresponding to
IFRS 15 – Revenue from Contracts with Customers, whose application was originally
deferred, is applicable for financial year beginning on or after 1 April 2018.
Consequently, financial statements prepared in accordance with Ind AS may not
comply with IFRS.
4.5 Australia
Australia has a regime in which IFRSs are issued under its legal framework as Australian
Accounting Standards. These are essentially word-for-word copies of IFRSs. Australian
Accounting Standards also include some additional Australian specific standards for entities
such as superannuation entities, general insurance and life insurance entities (the insurance
standards will be replaced by AASB 17 – Insurance Contracts, which is equivalent to IFRS 17,
once effective) and some additional disclosures within certain standards.
Compliance by Australian private sector for-profit entities with Australian Accounting
Standards will result in compliance with IFRS as issued by the IASB. Explicit statements
to this effect are made by the preparers (in the notes to the financial statements and in
the Directors’ Declaration required by the Corporations Act), as well by the auditors in
their reports. Not-for-profit and public sector entities broadly follow for-profit
Australian Accounting Standards and hence IFRS, but there are some differences.
Australia has not adopted IFRS for SMEs, and does not appear likely to in the near future
because of measurement differences and the removal of options as compared to IFRS.
Australia has a Reduced Disclosure Regime (RDR) for entities that are not publicly
accountable (per the IFRS for SMEs definition). This framework requires such entities
to apply all of the recognition and measurement requirements of Australian Accounting
Standards, but have reduced disclosure requirements. The Reduced Disclosure Regime
disclosures are mandated and are based on the principles adopted by the IASB in its
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development of the IFRS for SMEs. Financial statements prepared under the Reduced
Disclosure Regime are general purpose financial statements but will not comply with
IFRS as issued by the IASB.
Australia also permits non-reporting entities (as defined by Australian Accounting
Standards) to prepare special purpose financial statements. Preparers are encouraged to
follow the recognition and measurement requirements of Australian Accounting
Standards and have a great deal of flexibility as to the level of disclosure to provide.
The Consultation Paper Applying the IASB’s Revised Conceptual Framework and
Solving the Reporting Entity and Special Purpose Financial Statement Problems issued
by the Australian Accounting Standards Board in May 2018 proposed to eliminate
special purpose financial statements for entities required by legislation or otherwise to
comply with Australian Accounting Standards. The affected entities may therefore be
required to prepare general purpose financial statements in accordance with Australian
Accounting Standards. Depending on the nature of the entity, these general purposes
financial reports may be fully compliant with IFRS or may be prepared under the RDR.
4.6 South
Africa
For periods beginning on or after 1 January 2005, the South African securities exchange,
JSE Limited (JSE), has required that all listed companies prepare financial statements
under IFRS.
Effective 1 May 2011, the South African Companies Act permits different accounting
frameworks to apply to different categories of companies based on their ‘public interest
score’. Listed companies are required to use IFRS, however other companies
(depending on their public interest score) may apply IFRS, IFRS for SMEs, or in certain
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