2.b.25) New standards issued
As required by IAS 8“Accounting policies, changes in accounting estimates and errors”, we detail below a brief summary of the standards or interpretations issued by the IASB, whose application is mandatory as of the closing date of these consolidated financial statements, as well as of those whose application has not been mandatory as of the closing date of these consolidated financial statements and have, therefore, not been adopted by the Group.
Those standards or interpretations issued by the IASB, the application of which is mandatory as of the closing date of these consolidated financial statements, have been adopted by the Group, if applicable.
| • | Amendments to IAS 7—Information disclosure initiative |
In January 2016, the IASB amended IAS 7 and such amendments are to be applied to fiscal years beginning on or after January 1, 2017, though they may be implemented in advance.
The Disclosure Initiative was amended for the purpose of disclosing information that allows users of financial statements to evaluate the changes in liabilities (and certain assets) that have occurred during a period, derived from financing activities.
The explanation for the changes must differentiate those “changes from cash flows deriving from financing” from those “changes other than cash”.
Also, when explaining changes other than cash, the following sources of changes should be differentiated, to the extent necessary to meet the purpose: (i) changes resulting from the acquisition or loss of control of subsidiaries and other businesses; (ii) the effect of foreign exchange rate changes; (iii) changes in fair value; and (iv) other changes (by separately identifying any variance deemed relevant).
The IASB defines liabilities arising from financing activities as liabilities “for which cash flows were or will be classified in the statement of cash flows as cash flows deriving from financing activities”. Additionally, it emphasizes that new disclosure requirements also relate to changes in financial assets (for example, assets covering liabilities arising from financing activities) if they meet the same definition.
Finally, the amendments set forth that changes in liabilities arising from financing activities must be disclosed separately from changes in other assets and liabilities.
The adoption of such amendments did not have any effects on the Group’s consolidated financial statements.
| • | Amendments to IAS 12—Recognition of deferred tax assets for unrealized losses |
In January 2016, the IASB amended IAS 12 and such amendments are to be applied to fiscal years beginning on or after January 1, 2017, though they may be implemented in advance.
The amendment to IAS 12 provides that when an entity assesses whether the taxable profit against which a deductible temporary difference may be available, it will consider whether the tax legislation restricts the sources of taxable income against which it may make deductions at the time of the reversal of that temporary deductible difference. If the tax law does not impose those restrictions, an entity will evaluate a deductible temporary difference in combination with all others. However, if the tax law restricts the use of losses to be deducted against income of a specific type, a deductible temporary difference will be evaluated in combination only with the appropriate rate.
The adoption of the foregoing modifications did not have any effects on the consolidated financial statements of the Group.
| • | Amendments to IFRS12 – Disclosure of interests in other entities |
The amendment made in compliance with the annual improvements to IFRS 2014-2016, applicable to those fiscal years beginning on or after January 1, 2017, introduces a change in the scope of this standard, considering that an entity does not need to provide summarized financial information for those equity interests in subsidiaries, associates or joint ventures which are classified (or included in a the held-for-sale group which is classified) as held for disposal. The amendments clarify that this is the only concession of the disclosure requirements of IFRS 12 for such equity interests.
The adoption of the foregoing modifications did not have any effects on the consolidated financial statements of the Group.
Standards or interpretations issued by the IASB, the application of which is not mandatory as of the closing date of these consolidated financial statements and which, therefore, have not been adopted by the Group.
| • | Amendments to IFRS 10 and IAS 28—Sale or contribution of assets between an investor and its associate or joint venture |
In September 2014, the IASB amended IFRS 10 and IAS 28 to clarify that in transactions involving a controlled company, the extent of the gain or loss to be recognized in the financial statements depends on whether the sold or contributed controlled company is considered a business in accordance with IFRS 3.
On August 10, 2015, the IASB issued a proposal to postpone the effective date of these changes indefinitely depending on the outcome of its research project on accounting by the equity method, which was approved on December 17, 2015.
| • | IFRS 9—Financial Instruments |
In July 2014, the IASB completed the amendment to the accounting for financial instruments and issued IFRS 9 “Accounting for financial instruments” (in its revised version of 2014 in effect for annual periods beginning on or after January 1, 2018), which will replace IAS 39 “Financial Instruments: Recognition and Measurement” after the expiration of the effective date thereof.
The following describes the key requirements of IFRS 9:
| • | Classification and measurement of financial assets and liabilities: |
The IFRS 9 requires that all recognized financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement be subsequently measured at amortized cost or at fair value. Specifically, the debt instruments that are maintained within a business model whose objective is to collect the contractual cash flows, and which have contractual cash flows that are only principal and interest payments on the amount of outstanding capital, are generally measured at amortized cost at the end of subsequent accounting periods. All other investments in debt and equity securities are measured at their fair values as of the closing of subsequent accounting periods.
The most significant effect of IFRS 9 with respect to the classification and measurement of financial liabilities is related to the accounting for changes in the fair value of a financial liability (designated at fair value through profit or loss) attributable to the changes in the credit risk of such liability. Specifically, under IFRS 9, for financial liabilities that are designated at fair value through profit or loss, the amount of the change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognized in other comprehensive income, unless the recognition of the effects of the changes in the credit risk of the liability in other comprehensive income creates or increases a measurement inconsistency (accounting asymmetry) in the results. The changes in fair value attributable to the credit risk of the financial liability are not reclassified subsequently to the results of the fiscal year. Previously, under IAS 39, the total amount of the change in the fair value of the financial liability designated at fair value through profit or loss was recognized in the income statement of the fiscal year.
The Group has adopted IFRS 9 as of the transition date in advance in accordance with the regulations in force in 2013, which deal with everything related to the classification and measurement of financial assets and liabilities, so it is not expected that there will be an impact on the described treatments, based on the analysis of the Group’s financial assets and liabilities as of December 31, 2017, and based on the facts and circumstances that exist on that date.
| • | Impairment Methodology |
The impairment model in accordance with IFRS 9 reflects expected credit losses, as opposed to credit losses incurred under IAS 39. In regard to the impairment in IFRS 9, it is no longer necessary for a credit event to occur before it is incurred. In contrast, an entity always accounts for both the expected credit losses and their changes. The amount of expected credit losses must be updated on each reporting date to reflect changes in credit risk from initial recognition.
During fiscal year 2017, the Group has analyzed the calculation model of the impairment of its commercial loans and other receivables, based on the simplified approach indicated by such standard. Moreover, it has evaluated the necessary changes in the systems and processes to record the expected credit losses, since until now the calculation contemplated the impairment due to the incurred loss.
The Group has prepared a matrix, based on certain special characteristics indicating the ability to repay the loan, such as i) payments in arrears, ii) existence of guarantees, iii) existence of a legal proceeding, among others; and it has also assigned an expected uncollectibility rate based on historical default rates adjusted to future economic conditions.
After the analysis, the Group considers that the application of the model will not have a significant effect on the financial statements for the fiscal year beginning on January 1, 2018.
| • | Hedge accounting: |
The general hedge accounting requirements of IFRS 9 maintain the three types of hedge accounting mechanisms included in IAS 39. However, the eligible types of hedge accounting transactions are now much more flexible, especially by expanding the types of instruments that are classified as hedging instruments and the types of risk components of non-financial elements ideal for hedge accounting.
In addition, the effectiveness test has been reviewed and replaced by the principle of “economic relationship”. A retrospective evaluation is no longer required to measure the effectiveness of the coverage. Many more disclosure requirements have been added regarding the entity’s risk management activities.
The Group does not anticipate that the application of this part of the standard will have a significant effect on its financial statements because it has not carry out this type of transactions at the end of the fiscal year ended December 31, 2017.
Additionally, during October 2017, a modification related to the early cancellation with negative compensation was introduced, for which the lender (i.e., the holder) could be forced to accept the payment for the early cancellation, of an amount substantially less than the unpaid amounts of principal and interest. In these cases, the amendment proposes that financial assets with these characteristics be measured at amortized cost or at fair value with changes in other comprehensive income.
The Group estimates that the application of this latest amendment, effective as of January 1, 2019 with the possibility of being applied before such date, will not have a significant effect on its financial statements because it has not carried out transactions with these characteristics.
| • | IFRS 15—Income from ordinary activities arising from contracts entered into with customers |
IFRS 15 is in effect for periods to be reported as from January 1, 2018, or afterwards, and may also be implemented in advance. Entities may decide whether to retrospectively apply the model or to use a modified transitional approach, to which the standard will be retrospectively applied only with regard to those contracts that are not completed by the initial date of application (e.g., January 1, 2018 for an entity with a fiscal year ended December 31).
IFRS 15 establishes an extensive and detailed model to be used by entities at the time of accounting for income from contracts entered into with their customers. It will replace the following Income Standards and Interpretations after the effective date:
| • | IAS 18 Revenue; |
| • | IAS 11 Construction contracts; |
| • | IFRIC 13 Customer loyalty programs; |
| • | 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. |
As stated in the heading of the new income standard, IFRS 15 will only cover income from contracts entered into with clients. Under IFRS 15, a customer of an entity is a party that has executed a contract with such entity for the provision of goods and services that are the product of ordinary business activities in exchange for consideration. Unlike the scope of the IAS 18, the recognition and measurement of income from interest and dividends on the debt and investments in shareholders’ equity are not contemplated under the scope of IFRS 15. Conversely, they are contemplated under the scope of IAS 39 “Financial Instruments: Recognition and Measurement” (or IFRS 9 “Financial Instruments”, if such IFRS is adopted in advance).
As mentioned above, the new income standard relies upon a detailed model to explain income from contracts entered into with customers. Its fundamental principle is that an entity should recognize income to represent the transfer of goods or services promised to customers, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services.
The new income recognition standard adds a five-step approach to income recognition and measurement:
1. Identify the contract entered into with the customer.
2. Identify the separable obligations of the contract.
3. Determine the transaction price.
4. Allocate the transaction price between the obligations of the contract.
5. Recognize the income when the entity meets the obligations.
The new revenue standard has introduced many indications that are more prescriptive:
| • | If the contract (or combination of contracts) contains or does not contain more than one of the promised goods or services and, if so, when and how the goods or services should be delivered or provided. |
| • | If the transaction price distributed to each performance obligation should be recognized as income over time or at a specific time. Under IFRS 15, an entity recognizes income when the obligation is satisfied, that is, when the control of the goods and services underlying a particular obligation is transferred to the customer. Unlike IAS 18, the new model does not include separate guidelines for the “sale of goods” and the “provision of services”; instead, it requires entities to assess whether income should be recognized over time or at a specific time, regardless of whether such income includes “the sale of goods” or “the provision of services”. |
| • | When the transaction price includes an element of estimation of variable payments, the way in which it will affect the amount and the time for the recognition of the income. The concept of variable payment estimation is broad. A transaction price is considered as a variable for discounts, refunds, credits, price concessions, incentives, performance bonds, penalties and contingency agreements. The new model introduces a material condition for variable consideration to be recognized as income: only until it is very unlikely that a significant change in the amount of accumulated income will occur when the uncertainties inherent in the variable payment estimate have been resolved. |
| • | When the execution costs of an agreement and the performance costs thereof may be recognized as an asset. |
During fiscal year 2017, the Group has carried out tasks aimed at a preliminary evaluation of the impact generated by the application of this standard. In this process, the unique model of five-step income recognition, described in previous paragraphs, has been taken as the basis for analysis, and it has been applied to the following main income from contracts with customers:
| • | Contracts for the sale of fuels under the consigned pattern; |
| • | Contracts for the direct sale of fuels; |
| • | Contracts for the sale of natural gas; |
| • | Contracts and sales agreements of other refined products; |
| • | Construction contracts. |
In the first four types of contracts, related to the sale of goods, income is recognized when ownership and risks of the goods are transferred to the customer. Even in the case of contracts under the consigned pattern, income is not recognized until the good is sold to the intermediary’s customer. It is emphasized that in these contracts there are no separate performance obligations nor any obligations other than the delivery of goods.
In the case of the construction contracts, income is recognized considering the estimated final margin for each project that arises from technical studies on sales and the estimated total costs of each of them, as well as the physical progress thereof. In this type of contract, there are performance obligations that are fulfilled over time.
From such analysis, the Group has not identified a significant impact on its financial statements with respect to: (i) changes in transactions within the scope of the new standard; (ii) the identification of performance obligations; (iii) the determination and distribution of the price; (iv) the accrual of income accounts; with respect to the income recognition criteria that are being applied and which are described in the foregoing paragraphs.
On the contrary, in accordance with the introduced requirements the need has been identified to make new dissagregations of the information to be disclosed. To such effect, the Group has evaluated to make such dissagregations based on the analysis carried out by the Board of Directors on this item; consequently, it is expected that a breakdown of the income reported in note 19 will be incorporated by (i) type of good or service and target market, and (ii) sales channels. In addition, the Group has reviewed and adapted its information, management and reporting systems.
| • | IFRS 16—Leases |
IFRS 16 is in effect for reporting periods beginning on January 1, 2019 and its implementation in advance is permitted for entities that use IFRS 15 “Revenue from ordinary activities from contracts entered into with customers” prior to the date of initial application of IFRS 16.
IFRS 16 sets out the principles required for the recognition, measurement, presentation and disclosure of leases. The purpose thereof is to ensure that lessees and lessors provide relevant information in a way that faithfully represents those transactions. The changes incorporated by such standard mainly impact the accounting of tenants. It will replace the following Standards and Interpretations after the effective date thereof:
| • | IAS 17 “Leases”; |
| • | IFRIC 4 “Determination whether an agreement contains a lease”; |
| • | SIC 15 “Operating leases-incentives”; and |
| • | SIC 27 “Evaluating the substance of transactions involving the legal form of a lease”. |
This standard applies to all leases, including leases of rights-of-use assets in a sublease, with the exception of specific leases covered by other standards:
| • | Leases to explore or use minerals, oil, natural gas and similar non-renewable resources; |
| • | Leases of biological assets within the scope of IAS 41 “Agriculture” kept by a lessee; |
| • | Contracts included in the scope of application of IFRIC 12 “Service Concession Agreements”; |
| • | Intellectual property licenses granted by a lessor within the scope of IFRS 15 “Revenue from contracts with customers”; and |
| • | Rights enjoyed by a lessee under license agreements that are within the scope of IAS 38 “Intangible assets” for items such as movies, videos, games, manuscripts, patents and copyrights. |
The new leasing rule has introduced many other prescriptive indications:
| • | Measurement of the asset by right of use |
The cost of the right to use the assets includes the following items:
| (a) | the amount of the initial measurement of the lease liability (as described below); |
| (b) | any rent paid to the lessor prior to the commencement date or on the same date, after discounting any incentive received for the lease; |
| (c) | the initial direct costs incurred by the lessee; and |
| (d) | an estimate of the costs to be incurred by the lessee in dismantling and eliminating the underlying asset, restoring the place where the underlying asset is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless such costs are incurred at the time of making of the inventories. The lessee could incur certain obligations because of such costs either on the date of commencement of the term of the lease, or because of having used the underlying asset during a specified period. |
Subsequently, the valuation of the right to use the assets will be based on the cost model or the revaluation model under IAS 16 “Property, Plant and Equipment” (recognizing therefore the amortization and impairment in the profit and loss account and, if applicable the revaluation model, revaluations in equity). However, the IFRS 16 requires that the right to use a leased property investment be valued at its fair value under the provisions set forth in IAS 40 “Investment properties” for the investment property it holds.
| • | Lease liability |
A lessee will measure the lease liability at the present value of the lease payments that have not been paid on that date. Lease payments will be discounted using the interest rate implied in the lease, if that rate could be easily determined. If that rate cannot be easily determined, the lessee will use the incremental rate for the lessee’s loans.
Lease liabilities must include the following items:
| (a) | fixed payments (including essentially fixed payments), less any lease incentive receivable; |
| (b) | variable payments, which depend on an index or a rate, initially measured by using the index or rate (e.g., payments related to the consumer price index, prices related to a benchmark interest rate such as LIBOR, or payments that vary to reflect changes in market rental prices) on the effective date of the contract; |
| (c) | amounts that the lessee expects to pay as residual value guarantees; |
| (d) | the exercise price of a call option if the lessee is reasonably certain to exercise that option; and |
| (e) | payment of penalties for terminating the lease, if the lease period reflects that the lessee will exercise an option to terminate it (i.e., because there is a reasonable certainty thereon). |
Subsequently, the lessee will be increasing the liability for the lease to reflect the accrued interest (and recognized in the profit and loss account), deduct the installments that are being paid from such liability and recalculate the book value to reflect any review, amendment to the lease or review of the so-called “in-substance” installments.
| • | Revision of the lease liability |
The lessee must review the lease liability in the following cases:
| (a) | when there is a change in the amount expected to be paid under a residual value guarantee; |
| (b) | when there is a change in future rental payments to reflect the variation of an index or an interest rate used to determine such rental payments (including, for example, a market rent review); |
| (c) | when there is a change in the term of duration of the lease as a result of a change in the non-cancellable period of the lease (for example, if the lessee does not exercise an option previously included in the determination of the lease period); or |
| (d) | when there is a change in the evaluation of the call option of the underlying asset. |
| • | Lessor’s accounting |
IFRS 16 requires the lessor to classify the lease as operational or financial. A finance lease is a lease in which substantially all the risks and benefits derived from ownership of the asset are transferred. A lease will be classified as operating if it does not transfer substantially all the risks and benefits derived from the ownership of an underlying asset.
The classification of the lease is made on the effective date of the agreement and is evaluated again only if there is an amendment to the lease. Changes in estimates (e.g., changes in the economic life or in the residual value of the underlying asset) or changes in circumstances (e.g., non-compliance by the lessee) will not result in a new classification of the lease for accounting purposes.
| • | Sale and Leaseback Transactions |
This type of transaction is dealt with from the point of view of the lessee-seller as lessor-buyer. The fundamental aspect of dealing with such transactions depends on whether the transfer of the relevant asset meets the criteria of IFRS 15 “Revenue from contracts with customers”, to be recognized as a sale.
The Group is still in the process of assessing the full impact of the IFRS 16 application on its financial statements and does not intend to apply such standard in advance.
| • | Amendments to IFRS 2—Classification and Measurement of Share-based Payment Transactions |
In June 2016, the IASB amended IFRS 2, and such amendments are to be applied for fiscal years beginning on or after January 1, 2018, though they may be implemented in advance.
IFRS 2 has been amended to reflect the following:
| • | For share-based payment transactions that are settled in cash, the goods or services purchased and the liability, which they incur, will be measured at the fair value of the liability, subject to the requirements of this standard. Until the liability is settled, the fair value of the liability is remeasured at the end of each reporting period, as well as on the settlement date, recognizing any change in fair value in the results for the period. |
| • | The conditions for the irrevocability of concession and conditions other than the irrevocability of the concession, other than market conditions, will not be taken into account when estimating the fair value of the share-based payment that is settled in cash on the date of measurement. Instead, they will be taken into account by adjusting the number of incentives included in the measurement of liabilities arising from the transaction. Accordingly, an amount will be recognized for the goods or services received during the period up to the irrevocability of the concession. This amount will be based on the best available estimate of the number of incentives that are expected to be irrevocable. |
| • | If the terms and conditions of a share-based payment transaction to be settled in cash are modified to become a share-based payment transaction that is settled by equity securities, such transaction will be accounted for as of the date of the modification. Specifically, (a) a share-based payment transaction that is settled by equity securities is measured by reference to the fair value of the equity securities granted on the date of the modification. The share-based payment transaction settled by equity securities is recognized in equity on the date of the change, in proportion to the goods or services that have been received; (b) the liability for the share-based payment transaction settled in cash on the date of the amendment will be written off in the accounts on the same date; and (c) any difference between the carrying amount of the written off liability and the amount of equity recognized on the date of the change will be recognized immediately in the income statement for such period. |
The Group does not anticipate that the application of the amendments to the standard will have a significant effect on its financial statements.
| • | IFRIC 22—Transactions in Foreign Currency and Advance Payments |
In December 2016, the IASB approved the interpretation of IFRIC 22 “Transactions in foreign currency and advance payments”, which is applicable for the fiscal years beginning on or after January 1, 2018, though they may be implemented in advance. The scope of this interpretation applies to a foreign currency transaction (or any part thereof) where an entity recognizes a non-financial asset or non-financial liability arising from the payment or collection of an early consideration before the entity recognizes the asset, expense or related income (or any part thereof that may be appropriate). This interpretation does not apply when an entity measures the related asset, expense or income at the time of the initial recognition: (a) at fair value; or (b) the fair value of the consideration paid or received as of a date other than that of the initial recognition of the non-monetary asset, or non-monetary liability, arising from the anticipated consideration (e.g., measurement of the goodwill by applying the IFRS 3 “Business Combinations”).
The Group does not anticipate that the application of the interpretation of the standard will have a significant effect on its financial statements.
| • | Annual improvements to IFRS –2014 – 2016 Cycle |
In December 2016, the IASB issued the annual improvements 2014 – 2016, which are applicable to fiscal years beginning on or after January 1, 2018, though they may be implemented in advance.
|
Standard |
Amended Subject |
Detail |
||
| IFRS 1 “First-time Adoption of International Financial Reporting Standards” | Elimination of short-term exemptions for first-time adopters of IFRS. | The amendment introduces the deletion of paragraphs that consider the limited exemption of comparative disclosure from IFRS 7 for first-time adopters of IFRS, disclosures of transfers of financial assets and paragraph 39AA considered the annual best improvements to IFRS 2014-2016 Cycle. | ||
| IAS 28 “Investments in associates and joint ventures” | Measurement at fair value of an associate or joint venture. | The amendment introduces changes in relation to the exemption and the procedures to be applied to the equity method, clarifies that an entity will apply this exemption or the method separately to each associate or joint venture, in the case of exemption in the initial recognition of the associate or joint venture, and with respect to the method on a date that is the later of: a) when the associate or joint venture that is an investment entity is initially recognized; b) when the associate or joint venture becomes an investment entity; or c) when the associate or joint venture that is an investment entity becomes a parent company. | ||
The Group does not anticipate that the application of the amendments to the standard will have a significant effect on its financial statements.
| • | Amendments to IAS 40—Investment Properties |
In December 2016, the IASB made amendments to IAS 40 applicable to fiscal years beginning on or after January 1, 2018.
IAS 40 has been modified to reflect that in relation to transfers, an entity will transfer an investment property to, or from investment properties when, and only when, there is a change in use. This change in use occurs when a property meets or fails to meet the definition of investment property and there is evidence of a change in use. It also clarifies that the change in the management’s intentions regarding the use of a property does not provide evidence of a change of use.
The Group does not anticipate that the application of the amendments to the abovementioned standards will have a significant effect on its financial statements.
| • | IFRIC 23—Uncertainty about income tax treatment |
The Interpretation issued in June 2017 clarifies how to apply the recognition and measurement requirements of IAS 12 when there is uncertainty regarding income tax treatment.
For such purpose, the entity must evaluate whether the tax authority will accept an uncertain tax treatment used, or proposed to be used, or which is intended to be used in its income tax return.
If an entity concludes that the tax authority is likely to accept an uncertain tax treatment, the entity will determine the tax position consistent with the tax treatment used or intended to be used on its income tax return. If an entity concludes that such acceptance is improbable, the entity will reflect the effect of the uncertainty in determining the fiscal result, the tax bases, unused tax losses, unused tax credits and tax rates. An entity will reflect the effect of the uncertainty for each uncertain tax treatment by using one of the following methods, depending on which method the entity expects to better predict the resolution of the uncertainty:
| • | The most probable amount—the only most probable amount in a range of possible outcomes. The most probable amount may better predict the resolution of the uncertainty if the possible outcomes are dual or are concentrated in a value. |
| • | The expected value—the addition of the amounts weighted by their probability in a range of possible outcomes. The expected value may better predict the resolution of the uncertainty if there is a range of possible outcomes that are not dual or are concentrated in a value. |
This amendment will be effective for the fiscal years beginning on or after January 1, 2019 and may be early applied.
The Group is in the process of evaluating the impact of this modification on its financial statements.
| • | Amendments to IAS 28 – Long-term Investments in associates and joint ventures |
In October 2017, the IASB issued amendments to IAS 28, which are applicable to the fiscal years beginning on or after January 1, 2019, allowing early application. It is recommended to apply this modification simultaneously with the application of IFRS 9 for the first time.
The amendment defines that the long-term investments in associates and joint ventures, which are not accounted for using the equity method, will be accounted for in accordance with IFRS 9.
The Group estimates that the application of the aforementioned interpretation will not have a significant effect on the financial statements of the Company.
| • | Annual improvements to IFRS—2015-2017 cycle |
In December 2017, the IASB issued the 2015-2017 cycle of annual improvements that are applicable for the years beginning on or after January 1, 2019, allowing early application.
A summary of the main modified standards and their purpose follows:
|
Standard |
Amended Subject |
Detail |
||
| IFRS 3 “Business Combinations” and IFRS 11 “Joint arrangements” | Holdings previously held in a joint operation | The amendment to IFRS 3 establishes that when obtaining control of a business that was a joint operation, the acquirer will apply the requirements for a business combination carried out in stages, including the re-measurement of its previously held share in the joint operation at the reasonable value on the acquisition date. On the other hand, the amendment to IFRS 11 establishes that when obtaining joint control of a business that was a joint operation, it does not measure again its previously held shares. | ||
| IAS 12 “Income Tax” | Exposure of the effect of dividends on Income Tax | The amendment clarifies that the entity will recognize the consequences of the dividends on the income tax where it has recognized the transactions or events that gave rise to those distributable profits. | ||
| IAS 23 “Loan Costs” | Capitalization of generic loans | The amendment to this standard clarifies that, for the capitalization of costs from generic loans, it must necessarily consider all outstanding loans when determining the capitalization rate, except those taken specifically to finance an eligible asset that is not yet ready for its intended use or sale; i.e., if any specific loan remains unpaid after the related eligible asset is ready for its intended use or for sale, that loan becomes part of the funds that the entity took as generic loans. | ||
The Group does not anticipate that the application of the amendments to the mentioned standards will have a significant effect on its financial statements.
| • | Amendments to IFRS 4—Application of IFRS 9 “Financial Instruments” with IFRS 4 “Insurance Contracts” |
In September 2016, the IASB issued amendments to IFRS 4 that are applicable to those fiscal years beginning on or after January 1, 2018.
The Group does not anticipate that this standard will have effects on its financial statements, because of not providing this type of services.
| • | IFRS 17—Insurance contracts |
The IFRS 17 issued in May 2017 is applicable to those fiscal years beginning on or after January 1, 2021, allowing its early application and replacing IFRS 4.
The Group does not anticipate that this standard will have effects on its financial statements because it does not provide this type of services