C.5. Changes in accounting policies

C.5.1. Standards, interpretations and amendments to existing standards relevant for the Company and applied in the reporting period

The following published amendments and interpretations of existing standards are mandatory and relevant to the Company and have been applied by the Company starting from 1 January 2014:

Offsetting Financial Assets and Financial Liabilities – Amendments to IAS 32
These amendments clarify the meaning of ’currently has a legally enforceable right to set-off’ and the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting and is applied retrospectively.

Amendment to IAS 36, Impairment of Assets, amended by Recoverable Amount Disclosures for Non-Financial Assets
These amendments remove the unintended consequences of IFRS 13 Fair Value measurement on the disclosures required under IAS 36 Impairment of Assets. In addition, these amendments require disclosure of the recoverable amounts for the assets or cash-generating units (CGUs) for which an impairment loss has been recognized or reversed during the period.

These amendments have no impact on the Company.

Amendments to IAS 39, Financial Instruments: Recognition and Measurement, Novation of Derivatives and Continuation of Hedge Accounting
These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. These amendments have no impact on the Company.

The revised standards are not expected to have a significant impact on the Company’s financial statements.

C.5.2. Standards, interpretations and amendments to existing standards that are not relevant for the Company’s financial statements

IFRS 10, Consolidated Financial Statements (firstly published May 2011)
IFRS 10 supersedes the previous version of IAS 27 (2008) Consolidated and Separate Financial Statements including the related interpretation SIC 12 Consolidation – Special Purpose Entities.

New standard IFRS 10 requires a parent entity to present consolidated financial statements, defines the principle of control and establishes control as the basis for consolidation and sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must consolidate the investee. IFRS 10 also sets out the accounting requirements for the preparation of consolidated financial statements.

IFRS 11 Joint Arrangements
IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities — Non monetary Contributions by Venturers. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method.

IFRS 12, Disclosure of Interests in Other Entities (firstly published May 2011)
The objective of IFRS 12 is to require the disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with, its interests in other entities (and risks associated with it) and the effect to those interests on its financial position, financial performance and cash flows. IFRS 12 is required to be applied by an entity that has an interest in any of following: subsidiaries, joint arrangements, associates and unconsolidated structured entities.

Amendments to IFRS 10, IFRS 12 and IAS 27, Investment Entities (effective for annual periods beginning on or after 1 January 2014).
These amendments provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10 Consolidated Financial Statements. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss. These amendments have no impact on the Company.

C.5.3. Standards, interpretations and amendments to published standards that are not yet effective and are relevant for the Company’s financial statements

Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning on or after 1 January 2014 or later, and which the Company has not early adopted.:

Amendments to IFRS 7 and IFRS 9, Mandatory Effective Date and Transition Disclosures (effective for annual periods beginning on or after 1 January 2015 or otherwise when IFRS 9 is first applied)

IFRS 9, Financial Instruments (effective for annual periods beginning on or after 1 January 2015, with earlier application permitted, not yet endorsed by the EU).
IFRS 9 replaces those parts of IAS 39 relating to the classification and measurement of financial assets. Key features are as follows:

financial assets are required to be classified into two measurement categories: those to be measured subsequently at fair value, and those to be measured subsequently at amortised cost. The decision is to be made at initial recognition. The classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument;
an instrument is subsequently measured at amortised cost only if it is a debt instrument and both (i) the objective of the entity’s business model is to hold the asset to collect the contractual cash flows, and (ii) the asset’s contractual cash flows represent only payments of principal and interest (that is, it has only “basic loan features”). All other debt instruments are to be measured at fair value through profit or loss; and
all equity instruments are to be measured subsequently at fair value. Equity instruments that are held-for-trading will be measured at fair value through profit or loss. For all other equity investments, an irrevocable election can be made at initial recognition, to recognise unrealised and realised fair value gains and losses through other comprehensive income rather than profit or loss. There is to be no recycling of fair value gains and losses to profit or loss when the asset is derecognised. This election may be made on an instrument-by-instrument basis. Dividends are to be presented in profit or loss, as long as they represent a return on investment.
financial liabilities are recognized similarly to currently applicable IAS 39

On 24 July 2014, the IASB issued the final version of IFRS 9 incorporating a new expected loss impairment model and introducing limited amendments to the classification and measurement requirements for financial assets. This version supersedes all previous versions and is mandatorily effective for periods beginning on or after 1 January 2018 with early adoption permitted.

IFRS 15 Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2017
IFRS 15 replaces all existing revenue requirements in IFRS (IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers and SIC 31 Revenue – Barter Transactions Involving Advertising Services) and applies to all revenue arising from contracts with customers. It also provides a model for the recognition and measurement of disposal of certain non-financial assets including property, equipment and intangible assets. The standard outlines the principles an entity must apply to measure and recognise revenue. The core principle is that an entity will recognise revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to a customer.

IFRIC 21, Levies (published in May 2013, effective for annual periods beginning on or after 1 January 2014)
The Company is considering the implications of the above standards, the impacts on the Company and the timing of their adoption by the Company.

C.5.4. Standards, interpretations and amendments to published standards that are not yet effective and are not relevant for the Company’s financial statements

Amendments to IFRS 10 and IAS 28, Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (effective for annual periods beginning on or after 1 January 2016)

IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception – Amendments to IFRS 10, IFRS 12 and IASv28 (effective for annual periods beginning on or after 1 January 2016)
The amendments address issues that have arisen in applying the investment entities exception under IFRS 10. The amendments to IFRS 10 clarify that the exemption (in IFRS 10.4) from presenting consolidated financial statements applies to a parent entity that is a subsidiary of an investment entity, when the investment entity measures all of its subsidiaries at fair value.

Amendments to IFRS 11, Accounting for Acquisitions of Interests in Joint Operations (effective for annual periods beginning on or after 1 January 2016)

IFRS 14, Regulatory Deferral Accounts (issued in January 2014, applies to an entity’s first annual IFRS financial statements for a period beginning on or after 1 January 2016)
The objective of IFRS 14 is to specify the financial reporting requirements for ‘regulatory deferral account balances’ that arise when an entity provides good or services to customers at a price or rate that is subject to rate regulation.

IAS 1 Disclosure Initiative – Amendments to IAS 1 (effective for annual periods beginning on or after 1 January 2016)
The amendments to IAS 1 Presentation of Financial Statements clarify, rather than significantly change, existing IAS 1 requirements. The amendments clarify i)The materiality requirements in IAS 1; ii) That specific line items in the statement(s) of profit or loss and OCI and the statement of financial position may be disaggregated; iii) That entities have flexibility as to the order in which they present the notes to financial statements; iv)That the share of OCI of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss.

Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of financial position and the statement(s) of profit or loss and other comprehensive income.

IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation – Amendments to IAS 16 and IAS 38 (effective for annual periods beginning on or after 1 January 2016).

The amendments clarify the principle in IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, the ratio of revenue generated to total revenue expected to be generated cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets.

Amendments to IAS 16 and IAS 41, Bearer plants (effective for annual periods beginning on or after 1 January 2016)

Amendments to IAS 19, Defined Benefit Plans: Employee Contributions (effective for annual periods beginning on or after 1 July 2014)

Amendments to IAS 27, Equity Method in Separate Financial Statements (effective for annual periods beginning on or after 1 January 2016, with earlier application permitted)
The IASB issued two cycles of Annual Improvements to IFRSs – 2010–2012 Cycle and 2011-2013 Cycle – on 12 December 2013. The amendments contain 11 changes to nine standards – IFRS 1, IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24, IAS 38 and IAS 40, excluding consequential amendments. Other than the amendments that only affect the standards’ Basis for Conclusions, the changes were effective 1 July 2014. Generally, the amendments are effective prospectively, unless they relate to a disclosure standard or revaluing owned assets.

In the 2012–2014 annual improvements cycle, the IASB issued, in September 2014, five amendments to four standards – IFRS 5, IFRS 7, IAS 19 and IAS 34. The changes are effective 1 January 2016. Earlier application is permitted and must be disclosed.

C.5.5. IFRS 4 – exposure draft on Insurance contracts

The IASB (“the board”) released a revised exposure draft on 20 June 2013 proposing a comprehensive standard to address recognition, measurement and disclosure for insurance contracts.

The proposals retain the IFRS 4 definition of an insurance contract but amend the scope to exclude fixed fee service contracts but some financial guarantee contracts may now be within the scope of the proposed standard.

The proposals would require an insurer to measure its insurance contracts using a current measurement model. The measurement approach is based on the following building blocks: a current, unbiased and probability-weighted average of future cash flows expected to arise as the insurer fulfils the contract; the effect of time value of money; an explicit risk adjustment and a contractual service margin calibrated so that no profit is recognised on inception.