IFRS Buzz 003
P C Finance Research Clarifying Complexities
Registration Number: 1985/000022/23
Members: P E Hattingh and C P Hattingh
Tele: 011 476-3626; Fax: 011 476-3627; Email: ; Web: www.mafiabuzz.co.za; Add: P O Box 731625 Fairland 2030
IFRS Buzz 003
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IFRS Buzz 003
Standards Issued Since the 2005 Workshops
The purpose of this IFRS Buzz is to get you up to date on the new standards that have been issued since our 2005 workshops. If something comes up in practice, you will know that there is a new standard on the issue. To get the knowledge in the standard you can either download the standards from SAICA’s handbook on line (if you can get into the site, which I cannot do and they do not answer my emails when I plead for assistance) or you can subscribe to the IASB service (which I have done at a cost of about R4000 p.a.) or you can attend an update workshop in the latter part of the year – by then there will probably be another 100 or so pages of new publications.
I have located a bookshop that will sell you the IASB standards up to 30 November 2005 for a mere R330. The name of the bookshop is Books Express and the very helpful and enthusiastic owner’s name is Shereen. Her telephone number is 482 8433 and she is located at 70 Loch Avenue, Parktown West. Phone her to check if she has stock as she sells these things like hot cakes.
Please see the appendix for the list of the new standards and interpretations.
IFRIC 1: This standard gives guidance on how to account for changes in the estimated future cash outlay for decommissioning, restoration and similar liabilities, changes in the discount rate and changes because of the passage of time.
IFRIC 2: This is an important standard. It states that if members of a co-operative society have the right to demand repayment of their members’ interests, their interests are not equity but liabilities and the dividends paid are deemed to be interest paid. This has serious repercussions for some share based payment deals.
IFRIC 4: This standard could cause grief to those who tried to take assets off their balance sheets by outsourcing their activities to a third party. This is quite a popular stunt in SA where they are combined with BEE deals.
IFRIC 5: This standard deals with the accounting for funds held to cover the costs of decommissioning, restoration and environmental expenditure and the potential additional contributions that may have to be made to these funds.
IFRIC 6: This standard stunned me. The issue is when to provide for the liability to clean the environment if you sell items such as computers. When you manufacture or sell? Read the standard. You will be amazed at how they are losing the plot.
IFRIC 7: This standard deals with the accounting for non-monetary assets in the period an entity first reports its financial position and financial performance under the hyperinflationary accounting standard.
IFRIC 8: The bottom line of this statement is that IFRS 2 applies to BEE deals. (I will not say I told you so!)
IFRIC 9: This standard confirms that an embedded derivative is assessed for separation only at initial recognition or when the terms are significantly modified.
IFRS 5: This is a simple and well written standard giving guidance on what to do with assets that are no longer used in the operations. It also deals with what is now called “discontinued operations”. This used to be called “discontinuing operations” (and before that discontinued operations). The whole concept has changed for the better and the disclosure requirements are now an absolute pleasure.
IFRS 6: This standard explains how to account for the exploration and evaluation of mineral resources. It is wishy washy in the extreme!
IFRS 7: This is a very important standard. It replaces the standard on banks and the disclosures in IAS32.
IAS 1: This amendment requires new disclosures for how the entity manages its capital. I would have thought that this is more relevant to banks. However, the statement says it applies to all reporting entities.
IAS 19: This amendment gives a third option for how to account for actuarial gains and losses and gives guidance on how to account for group schemes where there is no guidance in the scheme on how to apportion excesses and shortfalls.
IAS 39: There are three amendments to this standard:
• The first gives guidance on the initial recognition of financial instruments on transition to IFRS.
• The second now permits hedge accounting in certain forecast intragroup transactions (previously not permitted).
• The third materially changes the circumstances when you can designate a financial instrument as fair value through profit or loss. It is essential that you come to grips with this one.
IFRS 4: They have changed, yet again, how to account for guarantee contracts – can’t make up their minds.
SIC 12:They deleted the exemption for equity compensation plans, which had major repercussions for listed companies.
AC502: This, to me, is a very strange standard. It gives guidance on how to account for tax rate changes. It is too late for the fall from 30% to 29%. Maybe they were anticipating another fall in the latest budget.
Kind regards,
Charles Hattingh
February 2006
CPD 10 Minutes
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