Media Industry Accounting Group Annual conference 2017

Transcription

1 Media Industry Accounting Group Annual conference 2017 London 15 June 2017

2 General accounting update Katie Woods UK E: Slide 2

3 What s new in 2017? Not much again! 3

4 Amended Standards Effective for years commencing after 1 January Effective IAS 7 Statement of Cash Flows Requirement to prepare a debt reconciliation date: Jan 2017 EU Endorsed: Not yet Q X1 Cash flows Non-cash changes 20X2 Acquisition Foreign exchange movement Fair value changes Long-term borrowings 22,000 (1,000) 21,000 Short-term borrowings 10,000 (500) 200 9,700 Lease liabilities 4,000 (800) 300 3,500 Assets held to hedge longterm borrowings (25) (550) Total liabilities from financing activities 35,325 (2,150) (25) 33,650 4

5 Amended Standards Effective for years commencing after 1 January Effective 3 Effective IAS 12 Income Taxes Clarification of deferred tax on unrealised losses date: Jan 2017 EU Endorsed: Not yet Q Annual Improvements Minor amendments to IFRS 12 Disclosure of interests in other entities. Clarifies disclosure on interest held for sale date: Jan 2017 EU Endorsed: Not yet Q

6 A useful publication 6

7 IFRS 16 Leases 7

8 Overview Lessee has to recognise a rightof-use asset and a lease liability for almost all lease contracts Exemptions for short-term and small ticket leases Lessor accounting stays the same as under current guidance New lease standards are expected to be published by the end of 2015 Effective date 1 January 2019 Still differences between IFRS and US GAAP Enhanced disclosure requirements 8

9 High level description lessee IASB FASB Balance sheet Right-of-use asset/ Lease liability (same as IASB) Income statement Single Approach Dual Approach Amortization (Right-of-use asset) Interest expense (Lease liability) Type A (financing) Amortization Interest expense Type B (operating) Lease expense 9

10 High level description lessor IASB FASB Classification Distinction based on risk and rewards (same as IASB) Finance lease Lease receiveable (net investment in lease) (same as IASB) Operating lease Underlying asset (same as IASB) No change compared to current guidance 10

11 Example - Capacity sharing arrangements under IFRS 16 Capacity sharing agreements are increasingly common, particularly in relation to digital capacity. The following factors should be considered when determining if such agreements should be accounted for as a lease: Is the asset physically distinct? If the asset is not physically distinct, does it represent substantially all of the capacity of the asset and hence the right to obtain substantially all of the economic benefit? 11

12 Example - Set-top box 12

13 3. Project status where are we now? March 2009: July 1996: Discussion paper G4+1 - Leases: Implementation of a New Approach August 2010: Exposure Draft May 2013: Revised exposure draft January 2016: Final standard Effective date: 1 January 2019 EU-Endorsement (IFRS): [H2 2017] 13

14 IFRS 9 Financial instruments 14

15 IFRS 9 Financial instruments Project objective Effective for annual periods beginning on or after 1 January 2018 One Standard 3 components Classification and measurement Impairment Hedging Responding to need for clearer guidance and earlier impairment - IAS 39 considered too little, too late 15

16 What has changed? An overview IAS 39 Rules based approach to classification Bifurcation of embedded derivatives Liabilities at FVPL gains / losses in own credit in P&L Incurred loss impairment model Uncommercial hedging guidance IFRS 9 Principals based approach to classification No bifurcation for assets one unit of account Liabilities at FVPL gains/losses in own credit in OCI, w/out recycling Expected loss impairment model Risk management aligned hedging guidance 16

17 What has changed? Classification and measurement Debt investments 2 part classification test for all debt investments in entirety (no bifurcation) 1 What is the objective of the business model that the financial assets are held in? Equity investments Simplified equity classification no more AFS All equity assumed for trading measured at FVPL 2 Are the contractual cash flows of the financial asset solely payments of principal and interest? If not trading, designation possible at FVOCI without recycling Designation at FVPL still exists 17

18 IFRS 9 Financial instruments Classification and Measurement Debt or equity? (IAS 32) Are cash flows solely payments of principal and interest? Yes Debt Equity FVOCI option? (irrevocable choice by instrument) Assess the business model N0 Hold to collect Hold to collect and sell Hold to sell N0 Yes Amortised cost (AC) FVOCI (debt) FVPL FVOCI (equity) 18

19 What has changed Impairment IAS 39 incurred loss model vs IFRS 9 expected loss model impact to impairment calculation: IAS 39: Incurred loss inputs What is the probability that a counterparty has defaulted? What is our exposure today? How much of this are we likely to lose? Probability of Default (PD) Exposure at Default (EAD) Loss given default (LGD) What is the probability that a counterparty will default? What will be our exposure at this point in time? How much of this are we likely to lose? IFRS 9: Expected loss inputs Inputs are: forward-looking, considering multiple economic scenarios 19

20 Interplay between IFRS 9, IFRS 15 and IFRS 16 Standards cannot be considered in isolation Sale & leaseback: Sale (15) No sale (9) Leaseback (16) IFRS 16 Equipment & service: Sale vs lease (15) Impairment (9) IFRS 9 IFRS 15 20

21 Interplay between IFRS 9, IFRS 15 and IFRS 16 Examples of issues to consider IFRS 16 versus IFRS 9 Legal form of a lease - financing transaction (scope of IFRS 16) Provisions on finance lease receivables Failed sale and leaseback financing in IFRS 9? 21

22 Interplay between IFRS 9, IFRS 15 and IFRS 16 Examples of issues to consider IFRS 16 versus IFRS 15 Lease or service scope of IFRS 16 Lease versus sale accounting consistency for similar arrangements/products between IFRS 15 and IFRS 16 Part of the lease or separate performance obligation - separating of components: lease versus service is this the same as a separate performance obligation Repurchase agreements: Forward/options repurchase price < original selling price Repurchase agreements: Put options significant economic incentive with repurchase price < original selling price 22

23 Interplay between IFRS 9, IFRS 15 and IFRS 16 Examples of issues to consider IFRS 9 versus IFRS 15 Repurchase agreements: Forward/options repurchase price + or > than original selling price Repurchase agreements: Put options significant economic incentive with repurchase price + or > than original selling price Consideration receivable when is this in IFRS 9? [Contract asset versus receivable] Impairment provisions Timing of impairment provisions for lease receivables only on commencement of the lease 23

24 This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it All rights reserved. refers to the network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details.