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AfrAsia Bank Limited and its Group Entities
Annual Report 2015
page 197
noteS to the finanCial StatementS
for the year ended 30 June 2015
2. ACCOUNTING POLICIES (CONTINUED)
2.4 Accounting standards and interpretations issued but not yet effective (Continued)
IFRS 9 Financial Instruments – Classification and measurement of financial assets, Accounting for financial liabilities and derecognition
– 1 January 2018 (Continued)
Impairment
The impairment requirements are based on an expected credit loss (ECL) model that replaces the IAS 39 incurred loss model. The ECL model applies to: debt
instruments accounted for at amortised cost or at FVOCI; most loan commitments; financial guarantee contracts; contract assets under IFRS 15; and lease receivables
under IAS 17 Leases. Entities are generally required to recognise either 12-months’ or lifetime ECL, depending on whether there has been a significant increase in credit
risk since initial recognition (or when the commitment or guarantee was entered into). For some trade receivables, the simplified approach may be applied whereby the
lifetime expected credit losses are always recognised.
Hedge accounting
Hedge effectiveness testing is prospective, without the 80% to 125% bright line test in IAS 39, and, depending on the hedge complexity, can be qualitative. A risk
component of a financial or non-financial instrument may be designated as the hedged item if the risk component is separately identifiable and reliably measureable.
The time value of an option, any forward element of a forward contract and any foreign currency basis spread, can be excluded from the designation as the hedging
instrument and accounted for as costs of hedging. More designations of groups of items as the hedged item are possible, including layer designations and some net
positions.
The application of IFRS 9 may change the measurement and presentation of many financial instruments, depending on their contractual cash flows and business model
under which they are held. The impairment requirements will generally result in earlier recognition of credit losses. The new hedging model may lead to more economic
hedging strategies meeting the requirements for hedge accounting.
The directors are still assessing the impact of the amendments when they become effective.
Sale or contribution of assets between an investor and its associate or joint venture (Amendments to IFRS 10 and IAS 28) - effective 1 January 2016
This amendment to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures (2011) was made to clarify the treatment of
the sale or contribution of assets from an investor to its associate or joint venture, as follows:
it requires full recognition in the investor’s financial statements of gains and losses arising on the sale or contribution of assets that constitute a business (as defined
in IFRS 3 Business Combinations); and
i
t requires the partial recognition of gains and losses where the assets do not constitute a business, i.e. a gain or loss is recognised only to the extent of the unrelated
investors’ interests in that associate or joint venture.
These requirements apply regardless of the legal form of the transaction, e.g. whether the sale or contribution of assets occurs by an investor transferring shares in a
subsidiary that holds the assets (resulting in loss of control of the subsidiary), or by the direct sale of the assets themselves.
The Directors will assess the impact of the amendments when they become effective.