Download - Hong Kong Institute of Certified Public Accountants

Tech Q&A
The Institute has issued amendments to HKFRS 10 Consolidated Financial
Statements, HKFRS 11 Joint Arrangements and HKFRS 12 Disclosure of
Interests in Other Entities. Could you provide details of the amendments?
In July, the Institute issued amendments
to HKFRS 10 Consolidated Financial
Statements, HKFRS 11 Joint Arrangements
and HKFRS 12 Disclosure of Interests in Other
Entities: Transition Guidance. These clarify the
transition guidance contained in HKFRS10,
provide additional transition relief in the
three standards and limit the requirement to
provide adjusted comparative information to
the preceding comparative period only.
Furthermore, for disclosures related
to unconsolidated structured entities, the
amendments will remove the requirement to
present comparative information for periods
before HKFRS 12 is first applied.
The amendments clarify the meaning
of the “date of initial application” as the
beginning of the annual reporting period for
which HKFRS 10 is applied for the first time
(i.e. 1 January 2013 for a calendar year entity,
assuming no early application).
The transition guidance is amended to
confirm that an entity is not required to make
adjustments to the previous accounting for its
involvement with entities if the consolidation
conclusion reached at the date of initial application
is the same whether applying HKAS 27
Consolidated and Separate Financial Statements/HK(SIC)
– Interpretation 12 Consolidation-Special
Purpose Entities or HKFRS 10.
As a result, the amendments confirm
that relief from retrospective application of
HKFRS 10 would also apply to an investor’s
interests in investees that were disposed of
during a comparative period in such a way
that consolidation would not occur in accordance
with either HKAS 27/HK(SIC) – Int 12 or
HKFRS 10 at the date of initial application.
In clarifying how an entity should retrospectively
adjust its comparative information
on initial application of the amendments, the
50 December 2012
basis for conclusions in HKFRS 10 acknowledges
that presenting all adjusted comparatives
would be burdensome for preparers in
jurisdictions where several years of comparatives
are required.
Without changing the requirement to
apply the recognition and measurement
requirements of HKFRS 10 retrospectively,
the amendments limit the requirement to
present adjusted comparatives to the annual
period immediately preceding the date of
initial application.
The amendments confirm that an entity
is not prohibited from presenting adjusted
comparative information for earlier periods.
If all comparative periods are not adjusted,
entities are required to state that fact, clearly
identify the information that has not been
adjusted and explain the basis on which it
has been prepared.
The amendments also consider the disclosure
requirements of HKAS 8 Accounting
Policies, Changes in Accounting Estimates
and Errors. On initial application of an
HKFRS, paragraph 28(f) of HKAS 8 requires
an entity to disclose, for the current period
and for each prior period presented, the
amount of any adjustment for each financial
statement line item affected. Changes in the
consolidation conclusion on transition to
HKFRS 10 are likely to affect many line items
throughout the financial statements.
This requirement could also mean more
work for preparers and so the amendments
agreed to limit the disclosure of the quantitative
impact of any changes in the consolidation
conclusion to only the annual period immediately
preceding the date of initial application.
The amendments clarify that when an
investor concludes it should consolidate an
investee that was not previously consolidated,
and control was obtained before the effective
date of the 2008 revisions to HKFRS 3 Business
Combinations and HKAS 27, an entity
is allowed to use either the 2008 or 2004
versions of those standards in applying the
transition requirements.
HKFRS 11 and HKFRS 12 have also been
amended to provide similar relief from the
presentation or adjustment of comparative information
for the annual periods immediately
preceding the date of initial application of those
standards. HKFRS 12 is further amended to
provide additional transition relief by eliminating
the requirement to present comparatives
for the disclosures relating to unconsolidated
structured entities for any period before HKFRS
12 is initially applied.
The amendments are effective for annual
periods beginning on or after 1 January 2013,
the same effective date of HKFRS 10, 11 and 12.
Send your questions and comments to
commentletters@hkicpa.org.hk. The standard setting
team will answer these questions in accordance
with its policy, posted on the Institute’s website.