211
5.2.4.F
Example of recognition and measurement
requirements ..................................................................... 257
5.2.5
Restatement of goodwill .................................................................... 259
5.2.5.A
Prohibition of other adjustments of goodwill ............ 261
5.2.5.B Derecognition
of
negative
goodwill
............................
262
5.2.5.C
Goodwill previously deducted from equity ............... 262
5.2.6
Currency adjustments to goodwill ................................................... 264
5.2.7 Previously
unconsolidated subsidiaries .......................................... 265
5.2.8 Previously
consolidated
entities that are not subsidiaries .......... 266
5.2.9
Measurement of deferred taxes and non-controlling
interests .................................................................................................. 267
5.2.10 Transition accounting for contingent consideration .................... 268
5.3
Share-based payment transactions .................................................................. 268
5.3.1
Use of previously published fair values ........................................... 271
5.3.2
Restatement of costs recognised under previous GAAP .............. 271
5.4
Insurance contracts .............................................................................................. 272
5.5 Deemed
cost
..........................................................................................................
272
5.5.1
Fair value or revaluation as deemed cost ........................................ 273
5.5.1.A
Determining deemed cost .............................................. 276
5.5.1.B
Deemed cost determined before the date of
transition to IFRSs ........................................................... 277
5.5.1.C Summary
............................................................................
277
5.5.2
Event-driven fair value measurement as deemed cost ................. 278
5.5.2.A
‘Push down’ accounting .................................................. 279
5.5.2.B ‘Fresh
start’ accounting ................................................... 279
5.5.2.C
Exemption for event-driven revaluations after
the date of transition ...................................................... 280
5.5.3
Deemed cost for oil and gas assets ................................................... 280
5.5.4
Deemed cost for assets used in operations subject to rate
regulation............................................................................................... 282
5.6
Leases ..................................................................................................................... 284
5.6.1
IFRIC 4 (prior to adoption of IFRS 16) ............................................ 284
5.6.2 Arrangements
assessed
for lease accounting under
previous GAAP (prior to adoption of IFRS 16) .............................. 285
5.6.3 IFRS
16
...................................................................................................
285
5.7
Cumulative translation differences .................................................................. 286
5.7.1
Gains and losses arising on related hedges ..................................... 288
5.8
Investments in subsidiaries, joint ventures and associates .......................... 288
5.8.1
Consolidated financial statements: subsidiaries and
structured entities................................................................................. 288
5.8.2
Separate financial statements: Cost of an investment in a
subsidiary, joint venture or associate .............................................. 289
212 Chapter
5
5.9
Assets and liabilities of subsidiaries, associates and joint ventures .............. 290
5.9.1
Subsidiary becomes a first-time adopter later than its
parent ..................................................................................................... 290
5.9.1.A
Cumulative translation differences ............................. 292
5.9.2
Parent becomes a first-time adopter later than its
subsidiary .............................................................................................. 293
5.9.3 Implementation
guidance
on accounting for assets and
liabilities of subsidiaries, associates and joint ventures ............... 294
5.9.4
Adoption of IFRSs on different dates in separate and
consolidated financial statements .................................................... 295
5.9.5
Application to investment entities under IFRS 10 ........................ 295
5.9.5.A
Subsidiary adopts IFRSs after investment
entity parent ..................................................................... 295
5.9.5.B
Non-investment entity parent adopts IFRSs
after investment entity subsidiary ................................. 296
5.10 Compound financial instruments ..................................................................... 296
5.11 Designation of previously recognised financial instruments ...................... 296
5.11.1
Designation of financial asset as measured at fair value
through profit or loss .......................................................................... 296
5.11.2
Designation of financial liability at fair value through
profit or loss ........................................................................................... 297
5.11.3
Designation of investment in equity instruments .......................... 297
5.11.4
Determination of an accounting mismatch for presenting a
gain or loss on financial liability ........................................................ 297
5.11.5 Designation
of
contracts
to buy or sell a non-financial
item .......................................................................................................... 297
5.12 Fair value measurement of financial assets or financial liabilities at
initial recognition ................................................................................................. 298
5.13 Decommissioning liabilities included in the cost of property, plant
and equipment ...................................................................................................... 298
5.13.1
IFRIC 1 exemption .............................................................................. 298
5.13.2
IFRIC 1 exemption for oil and gas as
sets at deemed cost ............ 301
5.14 Financial assets or intangible assets accounted for in accordance
with IFRIC 12 ......................................................................................................... 301
5.15 Borrowing
costs
...................................................................................................
302
5.15.1
Borrowing cost exemption ................................................................ 302
5.15.2
Interaction with other exemptions .................................................. 302
5.16 Extinguishing financial liabilities with equity instruments .......................... 303
5.17 Severe
hyperinflation
.........................................................................................
303
5.18 Joint
arrangements
............................................................................................... 304
5.19 Stripping costs in the production phase of a surface mine ......................... 304
5.20 Regulatory
deferral accounts ............................................................................ 304
First-time
adoption
213
5.20.1 Defined terms in IFRS 14 ................................................................... 304
5.20.2 Scope
......................................................................................................
305
5.20.3 Continuation of previous GAAP accounting policies
(Temporary exemption from paragraph 11 of IAS 8) .................... 305
5.20.4 Recognition as regulatory deferral account balances .................. 306
5.20.5 Changes in accounting policies ......................................................... 306
5.20.6 Presentation and disclosures .............................................................. 307
5.20.6.A Presentation ...................................................................... 307
I Presentation of deferred tax balances ........................... 307
II Presentation of earnings per share amounts ............... 308
III Presentation of discontinued operations and
disposal groups .................................................................. 308
5.20.6.B
Disclosures ....................................................................... 309
I Explanation of activities subject to rate
regulation ............................................................................ 309
II Explanation of recognised amounts ............................... 310
5.20.7 Interaction with other standards ....................................................... 310
5.20.7.A
Application of IAS 10 – Events after the
Reporting Period ............................................................... 311
5.20.7.B
Application of IAS 12 – Income Taxes ......................... 311
5.20.7.C
Application of IAS 36 – Impairment of Assets ........... 311
5.20.7.D
Application of IFRS 3 – Business
Combinations ..................................................................... 311
5.20.7.E
Application of IFRS 10 – Consolidated
Financial Statements – and IAS 28 –
Investments in Associates and Joint Ventures ........... 312
5.21 IFRS 15 – Revenue from Contracts with Customers .................................... 312
5.22 Foreign currency transactions and advance consideration ......................... 313
5.23 Short-term exemptions from restatement of comparative
information for IFRS 9 ......................................................................................... 313
5.24 Short-term exemptions from IFRIC 23 ............................................................ 314
6 PRESENTATION AND DISCLOSURE ............................................................... 314
6.1
Comparative information .................................................................................... 315
6.2 Non-IFRS
comparative
information and historical summaries .................. 315
6.3
Explanation of transition to IFRSs .................................................................... 315
6.3.1
Disclosure of reconciliations .............................................................. 317
6.3.1.A
Reconciliation by a first-time adopter that
continues to publish previous GAAP financial
statements .......................................................................... 318
6.3.2
Line-by-line reconciliations and detailed explanations ............... 319
6.3.3 Recognition
and
reversal of impairments ........................................ 327
214 Chapter
5
6.3.4
Inclusion of IFRS 1 reconciliations by cross reference ................. 327
6.4
Designation of financial instruments ................................................................ 327
6.5 Disclosures
regarding deemed cost .................................................................. 328
6.5.1
Use of fair value as deemed cost ...................................................... 328
6.5.2
Use of deemed cost for investments in subsidiaries, joint
ventures and associates ...................................................................... 328
6.5.3
Use of deemed cost for oil and gas assets ....................................... 328
6.5.4
Use of deemed cost for assets used in operations subject
to rate regulation .................................................................................. 329
6.5.5
Use of deemed cost after severe hyperinflation ........................... 329
6.6
Interim financial reports ..................................................................................... 329
6.6.1
Reconciliations in the interim financial reports ............................ 329
6.6.2
Disclosures in the interim financial report ...................................... 331
6.7
Disclosure of IFRS information before adoption of IFRSs .......................... 332
7 ACCOUNTING POLICIES AND PRACTICAL APPLICATION ISSUES .............. 334
7.1
IAS 7 – Statement of Cash Flows ...................................................................... 334
7.2 IAS
8 – Accounting Policies, Changes in Accounting Estimates and
Errors ....................................................................................................................... 335
7.2.1
Changes in IFRS accounting policies during the first IFRS
reporting period ..................................................................................... 335
7.2.2
Changes in estimates and correction of errors ...............................336
7.3
IAS 12 – Income Taxes ........................................................................................336
7.3.1
Previous revaluation of plant, property and equipment
treated as
deemed cost on transition ................................................ 337
7.3.2 Share-based
payment
transactions subject to transitional
provisions of IFRS 1 ............................................................................ 338
7.3.3
Retrospective restatements or applications ................................... 338
7.3.4
Defined benefit pension plans ...........................................................339
7.4
IAS 16 – Property, Plant and Equipment – and IAS 40 –
Investment Property (cost model) .................................................................... 340
7.4.1
Depreciation method and rate .......................................................... 340
7.4.2
Estimates of useful life and residual value ...................................... 340
7.4.3 Revaluation
model
..............................................................................
340
7.4.4 Parts
approach ...................................................................................... 341
7.5
IAS 17 – Leases ..................................................................................................... 342
7.5.1
Assets held under finance leases ...................................................... 342
7.6
IFRS 15 – Revenue from Contracts with Customers ................................... 342
7.7 IAS
19 – Employee Benefits ............................................................................... 343
7.7.1
Sensitivity analysis for each significant actuarial
assumption ............................................................................................. 343
7.7.2
Full actuarial valuations ....................................................................... 343
First-time
adoption
215
7.7.3 Actuarial
assumptions .......................................................................... 343
7.7.4 Unrecognised
past service costs ....................................................... 344
7.8
IAS 21 – The Effects of Changes in Foreign Exchange Rates .................... 344
7.8.1
Functional currency ............................................................................ 344
7.9
IAS 28 – Investments in Associates and Joint Ventures ............................... 345
7.9.1
Transition impairment review ........................................................... 345
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 43
