Need to know - IFRSs and Amendments effective in periods after 31.12.2017 year ends
22 February 2018
2017 was the final year before entities are required to implement two significant new accounting standards – IFRS 9 Financial Instruments (IFRS 9) and IFRS 15 Revenue from Contracts with Customers (IFRS 15) – with IFRS 16 Leases (IFRS 16) being mandatory a year later (although early adoption is permitted).
In May 2017, the International Accounting Standards Board (IASB) issued IFRS 17 Insurance Contracts (IFRS 17) which applies to annual reporting periods beginning on or after 1 January 2021. Two new interpretations were also issued during 2017 – IFRIC 22 – Foreign Currency Transactions and Advance Consideration (IFRIC 22) with an effective date of 1 January 2018 and IFRIC 23 – Uncertainty over Income Tax Treatments (IFRIC 23) with an effective date of 1 January 2019. The IASB also issued several amendments to various standards that are detailed in the pursuant sections.
The new accounting standards for financial instruments, revenue and leases are complex, may require significant judgements and estimates, and are likely to have significant commercial effects. The impact of changes arising from other new requirements should not be underestimated. The two new interpretations may bring significant change for some entities, and, for those in the insurance sector, IFRS 17 introduces fundamental accounting changes from current practice.
Implementation projects should be nearing completion for IFRS 9 and IFRS 15 with implementation of IFRS 16 in process. Securities regulators worldwide have indicated that they expect to see meaningful disclosures about the likely effects of adoption of IFRSs 9 and 15 in 31 December 2017 annual reports, with many calling for quantitative information about the anticipated effects of those standards. Our experience indicates that many companies continue to significantly underestimate the likely effects of these new requirements, in particular those for revenue recognition. As we are now in the effective period, the risk of surprises, both internally and externally in the market place, becomes greater. These include profit
warnings, delays in filing financial statements, qualified audit reports, a loss of investor confidence and associated reductions in share prices.
This publication summarises significant changes to IFRSs that will need to be adopted in future reporting periods, together with a discussion about major projects that are currently in progress at the IASB.
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