Common Application Issues of HKFRSs

Transcription

1 Common Application Issues of HKFRSs Date 23 January 2018 Time 19:00 21:00 Venue Duke of Windsor Social Service Building Disclaimer The materials of this seminar are intended only to provide general information on the subject concerned and shall not be relied upon for technical advice. ZHONGHUI ANDA and the speakers take no responsibility for any errors or omissions in, or for the loss incurred by individuals or companies due to the use of, the materials of this seminar. No claims, actions or legal proceedings in connection with this seminar brought by any individuals or companies having reference to the materials of this seminar will be entertained by ZHONGHUI ANDA and the speakers. Any unauthorized audio and video recordings of this seminar without the consent of the speakers are strictly prohibited, and represent a copyright violation.

2 HKFRS 2 3A SBP may be settled by another group entity (or shareholder of any group entity) i.e. exclude associates and joint ventures SBP applies to entity that receives goods/service when another group entity (or shareholder of any group entity) has obligation to settle, or has obligation to settle when another group entity receives goods/service No guidance on intra-group settlement 3 HKFRS 2 A C B E G D F 4

3 HKFRS 2 4 Exclude transaction with party as holder of equity instruments e.g. rights issues 13A Identifiable consideration received < FV of equity instruments granted other consideration received 5 HKFRS 2 Employees and others providing similar service - individuals render personal service either individuals regarded as employees, individuals work for entity under its direction in same way as employees, or service rendered similar to those rendered by employees Grant date Both parties have shared understanding of terms and conditions If agreement subject to approval, grant date is date when approval obtained 6

4 HKFRS 2 IG2 Offer and acceptance can be explicit (sign contract) or implicit (employee commences to render service) IG3 If some terms agreed on a later date, grant date is that later date (e.g. exercise price of options to be set by compensation committee) 7 HKFRS 2 IG4 Grant date might occur after employees render services (e.g. grant subject to shareholder approval) HKFRS 2 requires entity to recognise service when received estimate grant date FV and adjust when grant date is fixed 8

5 HKFRS 2 11 For transactions with employees, measure FV of equity instruments at grant date 13 For transactions with other parties, rebuttable presumption that FV of goods/services estimated reliably. FV measured at date of receiving goods/service If presumption rebutted, measure by reference to FV of equity instruments at date of receiving goods/service 9 HKFRS 2 IG6 If goods/service received on more than one date, measure FV of equity instruments granted on each date IG7 Approximation could be used (e.g. share price not change significantly) 10

6 HKFRS 2 23 No subsequent adjustment to total equity after vesting date Can transfer within equity 11 HKFRS 2 27 Recognise, as a minimum, grant date FV unless not vest Recognise effects of modifications that increase total FV beneficial to employee 28 If cancelled/settled during vesting period (other than vesting conditions not satisfied), account for cancellation/settlement as acceleration of vesting 12

7 HKAS 1 Clarification of Requirements for Comparative Information (Included in Annual Improvements Cycle and effective from 1 Jan 13) Minimum comparative information required is comparative in respect of previous preceding period for all amounts reported in current period. For example, 7 months ended 31 Jul 2013 full set accounts: statement of financial position 31 Jul 13 and 31 Dec 12 other statements 7 months ended 31 Jul 13 and year ended 31 Dec HKAS 1 Present additional comparative information: prepared under HKFRS may include one or more primary statements i.e. no need all 4 statements together with notes Need third statement of financial position if: apply accounting policy retrospectively, retrospective restatement or reclassification; and material effect on third statement of financial position 14

8 HKAS 1 Date of third statement of financial position is beginning of preceding period (i.e. 1 Jan 12 for Y.E. 31 Dec 13 accounts) whether or not present additional comparative information Third statement of financial position not requires notes except for information required by HKAS 8 (e.g. amount of adjustment for each financial statement line item affected) Need notes for third statement of financial position of first HKFRS financial statements under HKFRS 1 15 HKAS 1 66 Classify asset as current if: expect to realise asset, or intends to sell or consume it, in normal operating cycle hold asset primarily for trading expect to realise asset within 12 months after reporting period or cash or cash equivalent unless restricted for use for at least 12 months after reporting period Classify all other assets as non-current 16

9 HKAS 1 69 Classify liability as current if: expect to settle liability in normal operating cycle hold liability primarily for trading liability due within 12 months after reporting period or no unconditional right to defer settlement for at least 12 months after reporting period. Conversion terms of liability not affect classification Classify all other liabilities as non-current 17 HKAS 1 Example Loan due from subsidiary to parent Repayble on demand Subsidiary has no cash and therefore parent not expects subsidiary can repay within 1 year 18

10 HKAS 1 Answer Non-current asset in parent s statement of financial position Current liability in subsidiary s statement of financial position 19 HKAS 24 Approaches of definition of related party: Related by symmetry Significant influence equivalent to Key Management Personnel but not as close as control or joint control If one to one, related if control, joint control or significant influence 20

11 HKAS 24 3 party situation: H A Related if common control or common joint control Related if one control (or jointly control) and other significant influence Not related if common significant influence B 21 HKAS 27 Separate financial statements issued before consolidated financial statements IFRIC Update in March 2006 Argument to interpret IAS 27 as permitting separate accounts to be published when reasonable expectation that consolidated accounts will be published shortly IFRIC members rejected this approach IAS 27 requires that separate financial statements should identify the consolidated financial statements 22

12 HKAS Balance with foreign operation with settlement neither planned nor likely to occur in foreseeable future is, in substance, net investment in foreign operation Include long-term receivables or loans Not include trade receivables or payables 15A May be any subsidiary of group 23 HKAS Exchange differences recognised in profit or loss in separate company accounts In consolidated accounts, such exchange differences recognised initially in other comprehensive income and reclassified to profit or loss on disposal of net investment 33 Can be any currency 24

13 HKAS 21 H S1 S3 S2 S4 25 HKAS Options and warrants dilutive when exercise price < average market price during period 50 Convertible instruments antidilutive when dividend/interest (net of tax) per ordinary share saved > basic EPS 26

14 HKAS 33 Example Profit # of shares EPS HK$ cents Basic EPS 4,000, ,000, CB 1 200,000 20,000, CB 2 500,000 20,000, CB 3 700,000 20,000, Diluted EPS 5,400, ,000, HKAS 33 Example Profit # of shares EPS HK$ cents Basic EPS 4,000, ,000, CB 1 200,000 20,000, ,200, ,000, CB 2 500,000 20,000, Diluted EPS 4,700, ,000, CB 3 700,000 20,000, Anti-diluted 5,400, ,000,

15 HKAS 38 HKAS For revaluations under HKAS 38, FV measured by reference to active market HKFRS 13.A Actice market is market in which transactions for asset or liability take place with sufficient frequency and volume to provide pricing information on ongoing basis 29 30