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IASB issues Annual Improvements to IFRS Standards 2015-2017 Cycle

IASB issues Annual Improvements

The International Accounting Standards Board (IASB) issues amendments to International Financial Reporting Standard (IFRS) as part of its annual improvements process.


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The International Accounting Standards Board (IASB) issues amendments to International Financial Reporting Standard (IFRS) as part of its annual improvements process. Annual improvements are part of the IASB’s process for maintaining IFRS and contain interpretations that are minor or narrow in scope. Amendments made as part of annual improvement process either clarify the wording in an IFRS or correct relatively minor oversights or conflicts between existing requirements of IFRS.

Recently, IASB published exposure drafts to propose narrow scope amendments to following standards:

  • IFRS 3, Business Combinations and IFRS 11, Joint Arrangements (issued on 28 June 2016)
  • IAS 12, Income Taxes and IAS 23, Borrowing Costs (issued on 19 January 2017 as part of annual improvements process).

New development

The IASB on 12 December 2017 as part of its annual improvements process 2015-2017 cycle issued amendments to following standards:

Standard Amendment






IFRS 3, Business Combinations and IFRS 11, Joint Arrangements

Additional guidance for acquisition accounting

The IASB added paragraph 42A to IFRS 3 to clarify that when an entity obtains control of a business that is a joint operation, then the acquirer would remeasure its previously held interest in that business. Such a transaction would be considered as a business combination achieved in stages and accounted for on that basis.

Further, paragraph B33CA was added to IFRS 11 to clarify that if a party that participates in a joint operation, but does not have joint control, obtains joint control over the joint operation (which constitutes a business as defined in IFRS 3), it would not be required to remeasure its previously held interests in the joint operation. The IASB observed that although such a transaction changed the nature of the entity’s interest in the joint operation, it did not result in a change in the group boundaries. Consequently, no remeasurement of previously held interests would be required







IAS 12, Income Taxes

Recognition of income tax consequences of dividends

This amendment clarifies that the income tax consequences of distribution of profits (i.e. dividends), including payments on financial instruments classified as equity, should be recognised when a liability to pay dividend is recognised. The income tax consequences should be recognised in profit or loss, other comprehensive income or equity according to where the past transactions or events that generated distributable profits were originally recognised.

Also the amendment, by moving the requirement of recognition from paragraph 52B to 57A, aims to clarify that the requirement for recognition applies to all income tax consequences and not only to the situation where there are different tax rates for distributed and undistributed profits as described in paragraph 52A of IAS 12.







IAS 23, Borrowing Costs

Borrowing cost eligible for capitalisation

The amendment clarifies that in computing the capitalisation rate for funds borrowed generally, an entity should exclude borrowing costs applicable to borrowings made specifically for obtaining a qualifying asset, only until the asset is ready for its intended use or sale. Borrowing costs related to specific borrowings that remain outstanding after the related qualifying asset is ready for intended use or for sale would subsequently be considered as part of the general borrowing costs of the entity.

Transitional provisions: The IASB clarified that an entity applying IAS 23 should apply the amendments to the borrowing costs incurred on or after the date the entity first applies the amendments.

(Source: KPMG in India’s analysis, 2017)

Effective date

The amendments made in the annual improvements to IFRS standards would be applicable for annual periods beginning on or after 1 January 2019, with early adoption permitted.

Our comments

With the issue of these annual improvements, IASB closes the process for annual improvements to 2015-2017 cycle. Companies that prepare their financial statements as per IFRS should assess the impact of the amendments as this would form part of notes to financial statements as part of disclosure of standards issued but not effective.
Further the transitional relief provided in IAS 23 is welcome step as it is expected to provide respite to companies which are not required to apply the amendments to existing borrowings and change their capitalisation rates and amounts.

To access the text of the IASB notification, please click here.


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