IFRS 9 Financial Instruments
In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early application permitted. Except for hedge accounting, retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions.
The Group plans to adopt the new standard on the required effective date and will not restate comparative information. During 2017, the Group has performed a detailed impact assessment of all three aspects of IFRS 9. This assessment is based on currently available information and may be subject to changes arising from further reasonable and supportable information being made available to the Group in 2018 when the Group will adopt IFRS 9. Overall, the Group expects no significant impact on its statement of financial position and equity except for the effect of applying the impairment requirements of IFRS 9. The Group expects an increase in the loss allowance resulting in a negative impact on equity as discussed below.
(a) Classification and measurement
The Group does not expect any impact on its balance sheet or equity on applying the classification and measurement requirements of IFRS 9. It expects to continue measuring at fair value all financial assets currently held at fair value. Debt securities, loans and trade receivables are held to collect contractual cash flows and are expected to give rise to cash flows representing solely payments of principal and interest. The Group analysed the contractual cash flow characteristics of those instruments and concluded that they meet the criteria for amortised cost measurement under IFRS 9. Therefore, reclassification for these instruments is not required.
(b) Impairment
IFRS 9 requires the Group to record expected credit losses on all of its debt securities, loans and trade receivables, either on a 12-month or lifetime basis. The Group will apply the simplified approach and record lifetime expected losses on all trade receivables and common approach for the rest of financial asssets. The impact on corresponding asset allowances is presented in table below.
(c) Hedge accounting
The Group does not applied hedge accounting in its financial statements.
(d) Other adjustments
In addition to the adjustments described above, on adoption of IFRS 9, other items of the primary financial statements such as deferred taxes, assets held for sale and liabilities associated with them, investments in the associate and joint venture if material, will be adjusted as necessary. The non-controlling interest and exchange differences on translation of foreign operations will also be adjusted.
In summary, the provisional impact of IFRS 9 adoption as of December 31, 2017 is expected to be, as follows:
| Ajustments | Amount | |||||||
|
Assets |
||||||||
|
Cash and cash equivalents |
b | (130 | ) | |||||
|
Trade and other receivables |
b | (38 | ) | |||||
|
Loans issued |
b | (93 | ) | |||||
|
Debt instruments |
b | (5 | ) | |||||
|
Deferred tax assets |
d | 75 | ||||||
|
Total assets |
(191 | ) | ||||||
|
Liabililies |
||||||||
|
Other current liabilities |
b | (111 | ) | |||||
|
Total Liabililies |
(111 | ) | ||||||
|
|
|
|||||||
|
Net impact on equity, Including |
(302 | ) | ||||||
|
|
|
|||||||
|
Retained earnings |
b | (302 | ) | |||||