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      Tuesday 19 November 2019

      ED/2019/2 “Annual Improvements to IFRS Standards 2018-2020”

       ED/2019/2 “Annual Improvements to IFRS Standards 2018-2020” - May 2019

      On 21 May 2019 the IASB published ED/2019/2 ''Annual Improvements to IFRS Standards 2018-2020''. 

      The Annual Improvement Project is dealing with the following four specific amendments to IFRS:

      IFRS 1 First Time Adoption of International Financial Reporting Standards: For a subsidiary which becomes a first-time adopter later than its parent the exemption to use the carrying amounts that would be included in the parent's consolidated financial statements, based on the parent's date of transition to IFRS will be extended with reference to cumulative foreign exchange translation differences.

      The exemption will also be available for an associate or a joint venture that becomes a first-time adopter later than the entity which has significant influence or joint control.

      This amended exemption will not be available for entities which previously applied IFRS 1.

      IFRS 9 Financial Instruments: The IASB will include in the Application Guidance to IFRS 9 a clarification of the term ''fees'' for purpose, because if the change of the discounted present value of the cash flows under the new terms of the debt instrument compared to the remaining cash flows of the original financial liability has to be recognised. The difference between the carrying amount of the existing financial liability and the fair value of the amended financial liability (including fees paid for the debt restructuring) shall be recoginised in profit and loss.

      In determining the fees paid (or received) for purpose of the 10% test a borrower should include only fees paid (or received) between the borrower and the lender, including fees paid (or received) by either the borrower  or the lender on the other's behalf.

      IFRS 16 Leases: The IASB proposes to amend the illustrative Example 13 accompanying IFRS 16 by deleting the reimbursement by the lessor for leasehold improvements. The background of this amendment is to avoid confusion in applying IFRS 16, because in the status quo it is unclear why the lessee does not consider the reimbursement relating to the leasehold improvement. The IASB argued that these payments might be a reimbursement to the lessee for improvements made to the lessor's asset.

      IAS 41 Agriculture: The prohibition to include tax cash-flows in the determination of fair value less cost to sell should be withdrawn, to be in line with the requirements of IFRS 13.

      The comment period for ED/2019/2 ends on 20 August 2019.

       ED/2019/3 ''Reference to the conceptual framework'' 

      On 30 May 2019, the IASB published ED/2019/3 ''Reference to the conceptual framework''. Beside of the replacing the reference to the 1989 Framework by the reference to the current version (2018 Framework) the IASB incorporates an exception to the recognition principle. For a provision or contingent liability that would be within the scope of IAS 37 and for a levy that would be within the scope of IFRIC 21 instead of the definition of the Conceptual Framework the rules of IAS 37/IFRIC 21 should be applicable. The reason for that change is that using the definition of the Conceptual Framework might result in an earlier recognition of a liability compared to the applying IAS 37 or IFRIC 21 in specific circumstances.

      The IASB invites for comments until 27 September 2019.

      For further information, please contact :

      Mohammed Yaqoob
      Global Office

      Date: August 2019

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      Date: August 2019

      This IASB Update highlights preliminary decisions of the International Accounting Standards Board (Board). The Board's final decisions on IFRS® Standards, Amendments and IFRIC® Interpretations are formally balloted as set forth in the "Due Process Handbook" of the IFRS Foundation and the IFRS Interpretation Committee. 

      Date: August 2019
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