The New Reporting Standards Since 2005, listed companies have had to prepare their consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). Companies that prepare their annual accounts based on these IFRS standards have had to take a large number of new changes into account. TEXT BY SUSAN VROLIJK, BRAND & COMMUNICATION MANAGER, PWC
The International Accounting Standards Board (IASB) has issued several new standards that have come into effect as of 2018, or later. IFRS 9 and 15 are effective for annual periods beginning on or after 1 January 2018, and IFRS 16 will be effective on or after 1 January 2019. The impact of these new IFRSs (the ‘Big3’) could be enormous for your company. If you have not yet acted in reference to the Big 3, please start right now. By applying IFRS, your business economic performance is better comparable with other companies that use IFRS, including companies abroad. This can lead to new insights for your organization in the financial performance of your company. On 13
January 2016, the international Accounting Standards Board published IFRS 16, ‘Leases’ which replaced the current guidance in IAS 17. If your company applies hedge accounting, then the documentation should have been amended before the end of 2017 to comply with the conditions of IFRS 9. For this new standard, companies should have spent sufficient attention to the consequences of the new impairment model. Due to changes in the classification model, it is important that the client go through the complete balance sheet, enabling companies to understand how the financial instruments are classified in the new model and what the consequences
are for measurement. Some items need to be recognized on a fair-value basis. IFRS 15 contains principles that an entity needs to apply to determine the measurement of revenue and timing of when it is recognized. The underlying principle is that an entity recognizes revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to, in exchange for those goods or services. The standard has significantly changed how many entities recognize revenue, especially those that previously applied industry-specific guidance. The standard has also resulted in a significant increase in the volume of disclosures related to revenue recognition. Although IFRS 16 takes effect at a later date, namely on January 1, 2019, there are also some actions that your company should take into consideration regarding this standard. If your company has chosen to implement IFRS 16 by applying the simplified approach, then there must be a reconciliation between the ‘off-balance sheet liabilities’ arising from the operational lease contracts at the end of 2018 and the amount the client will bring on balance as of January 1, 2019. But the underlying question remains, have you properly implemented the new reporting standard changes for 2018? It is recommended that you seek qualified professional advice on the introduction of IFRS for your company, and what the impact of the new IFRS standards will have throughout the year.
CURAÇAO BUSINESS
| NUMBER 1 | 2018
21
