Are you ready for 31 December 2018 - assets.kpmg · Foreign Currency Transactions and Advance...
Transcript of Are you ready for 31 December 2018 - assets.kpmg · Foreign Currency Transactions and Advance...
Are you ready for 31 December 2018 reporting7 November 2018
2
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Your facilitators arehellip
Ben Seumahu
Julie Locke Anita Pozo-Jones
Kim Heng
3
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
What is our reporting context
ASIC ASX AASB ATO
Response to commissions and
enquiries and ongoing surveillance
activities
Corporate Governance
Principles 4th Edition consultation
Conceptual Framework
Reporting entity and special purpose
financial statements
Tax transparency widening definition of
Significant Global Entity
Agendabull New standards for 31 December 2018 bull Regulatory updatebull Hot topicsbull Looking aheadbull Wrap up
New standards for 31 December 2018
6
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
New standards 31 December 2018 reporting (year-end and interims)
AASB 9 Financial Instruments
AASB 15 Revenue from Contracts with Customers
Interpretation 22Foreign Currency Transactions and Advance Consideration
7
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
New standards 31 December 2018 reporting (year-end and interims)
AASB 9 Financial Instruments
AASB 15 Revenue from Contracts with Customers
AASB 2016-5 Classification and measurement of Share-Based Payment Transactions [AASB 2]
AASB 2017-1Transfers of Investment property Annual Improvements 2014-2016 Cycle [AASB 1 AASB 128 and AASB 140]
Interpretation 22Foreign Currency Transactions and Advance Consideration
AASB 2016-6 and 2017-3Amendments and clarifications to AASB 4 Insurance Contracts
8
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash annual reporting
Business as usual (ongoing)Comparatives
TransitionBridging the gapTelling your story
9
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash comparatives
ApproachComparative
periodFirst year of
adoption
AASB 111 118
AASB 15
Modified retrospective
Cumulative AASB 111 118
MixedRequirements
For completed contracts
AASB 111 118
AASB 15NEW ongoing disclosure
Comparative not required
AASB 9 AASB 15
10
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition disclosures
AASB 9 Classification and measurement
Required disclosures ndash AASB 7 15 101 amp 108
Practical expedients used and qualitative impact of applying
expedient
AASB 7 amp AASB 15
Qualitative information about key changes
AASB 108
Quantitative reconciliation
of adjustments
AASB 108 AASB 7 amp AASB 15
Adjustment to basic and
diluted earnings per
share
AASB 108
Third balance sheet with
retrospective approach
AASB 101 amp AASB 108
AASB 15 Cumulative approach ndash current period disclose revenue amounts that would have been presented under AASB 118 111
11
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Ongoing disclosures ndash Disclosure objective
Disclose quantitative and qualitative information to enable users to understand
the significance of financial instruments to an entityrsquos position
and performance the risk exposures resulting from such
financial instruments and how the entity manages those risks
FINANCIAL INSTRUMENTS
the nature amount timing and uncertainty of revenue and cash flows arising from contracts with
customers
REVENUE
12
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 7 (AASB 9) Disclosure requirements
Methods assumptions judgements and information used to measure the Expected Credit Loss (ECL)
Hedge instruments and Hedged items
Amount timing and uncertainty of future cash flows and the effects on financial position and performance
Disclose quantitative and qualitative information to enable users to understand the significance of financial
instruments to an entityrsquos position and performance the risk exposures resulting from such financial instruments
and how the entity manages those risks
Disclosure objective
Impairment Hedge accounting
AASB 139 or AASB 9
hedge accounting
13
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 15 Disclosure requirements
Performance obligationsContract balances
Disaggregation of revenue
Significant judgments
Costs to obtain or fulfil a contract
Disclose quantitative and qualitative information to enable users to understand the nature amount
timing and uncertainty of revenue and cash flows arising from contracts with customers
Disclosure objective
14
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash half-year disclosuresHalf-year requirements
Disaggregation of revenue
AASB 13416A(l)
Significant events and transactions ndash
explanation to understand change in financial position and performance
AASB 13415
If accounting policies or methods have
changed a description of
nature and effect of change
AASB 13416A(a)
BAU -disclosure
Transition disclosure
Accounting policies
15
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition approach ndash 30 June 2018 half-year disclosures47 listed entities
Not stated - no material impact to revenue recognition
AASB 15AASB 9
55 - no or no material impact
16
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 15 ndash 30 June 2018 half-year disclosuresDisaggregation of revenue
Disclosed gt 1 category of disaggregation2018 55 2017 40
47 listed entities
Products service
Timing
Geography
Operating Segment
20182017
Disclosed revenue disaggregated on a different basis compared to 2017 27
2018
2018
2018
2018
2017
2017
2017
2017
Regulatory update
18
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
2
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Your facilitators arehellip
Ben Seumahu
Julie Locke Anita Pozo-Jones
Kim Heng
3
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
What is our reporting context
ASIC ASX AASB ATO
Response to commissions and
enquiries and ongoing surveillance
activities
Corporate Governance
Principles 4th Edition consultation
Conceptual Framework
Reporting entity and special purpose
financial statements
Tax transparency widening definition of
Significant Global Entity
Agendabull New standards for 31 December 2018 bull Regulatory updatebull Hot topicsbull Looking aheadbull Wrap up
New standards for 31 December 2018
6
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
New standards 31 December 2018 reporting (year-end and interims)
AASB 9 Financial Instruments
AASB 15 Revenue from Contracts with Customers
Interpretation 22Foreign Currency Transactions and Advance Consideration
7
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
New standards 31 December 2018 reporting (year-end and interims)
AASB 9 Financial Instruments
AASB 15 Revenue from Contracts with Customers
AASB 2016-5 Classification and measurement of Share-Based Payment Transactions [AASB 2]
AASB 2017-1Transfers of Investment property Annual Improvements 2014-2016 Cycle [AASB 1 AASB 128 and AASB 140]
Interpretation 22Foreign Currency Transactions and Advance Consideration
AASB 2016-6 and 2017-3Amendments and clarifications to AASB 4 Insurance Contracts
8
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash annual reporting
Business as usual (ongoing)Comparatives
TransitionBridging the gapTelling your story
9
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash comparatives
ApproachComparative
periodFirst year of
adoption
AASB 111 118
AASB 15
Modified retrospective
Cumulative AASB 111 118
MixedRequirements
For completed contracts
AASB 111 118
AASB 15NEW ongoing disclosure
Comparative not required
AASB 9 AASB 15
10
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition disclosures
AASB 9 Classification and measurement
Required disclosures ndash AASB 7 15 101 amp 108
Practical expedients used and qualitative impact of applying
expedient
AASB 7 amp AASB 15
Qualitative information about key changes
AASB 108
Quantitative reconciliation
of adjustments
AASB 108 AASB 7 amp AASB 15
Adjustment to basic and
diluted earnings per
share
AASB 108
Third balance sheet with
retrospective approach
AASB 101 amp AASB 108
AASB 15 Cumulative approach ndash current period disclose revenue amounts that would have been presented under AASB 118 111
11
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Ongoing disclosures ndash Disclosure objective
Disclose quantitative and qualitative information to enable users to understand
the significance of financial instruments to an entityrsquos position
and performance the risk exposures resulting from such
financial instruments and how the entity manages those risks
FINANCIAL INSTRUMENTS
the nature amount timing and uncertainty of revenue and cash flows arising from contracts with
customers
REVENUE
12
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 7 (AASB 9) Disclosure requirements
Methods assumptions judgements and information used to measure the Expected Credit Loss (ECL)
Hedge instruments and Hedged items
Amount timing and uncertainty of future cash flows and the effects on financial position and performance
Disclose quantitative and qualitative information to enable users to understand the significance of financial
instruments to an entityrsquos position and performance the risk exposures resulting from such financial instruments
and how the entity manages those risks
Disclosure objective
Impairment Hedge accounting
AASB 139 or AASB 9
hedge accounting
13
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 15 Disclosure requirements
Performance obligationsContract balances
Disaggregation of revenue
Significant judgments
Costs to obtain or fulfil a contract
Disclose quantitative and qualitative information to enable users to understand the nature amount
timing and uncertainty of revenue and cash flows arising from contracts with customers
Disclosure objective
14
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash half-year disclosuresHalf-year requirements
Disaggregation of revenue
AASB 13416A(l)
Significant events and transactions ndash
explanation to understand change in financial position and performance
AASB 13415
If accounting policies or methods have
changed a description of
nature and effect of change
AASB 13416A(a)
BAU -disclosure
Transition disclosure
Accounting policies
15
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition approach ndash 30 June 2018 half-year disclosures47 listed entities
Not stated - no material impact to revenue recognition
AASB 15AASB 9
55 - no or no material impact
16
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 15 ndash 30 June 2018 half-year disclosuresDisaggregation of revenue
Disclosed gt 1 category of disaggregation2018 55 2017 40
47 listed entities
Products service
Timing
Geography
Operating Segment
20182017
Disclosed revenue disaggregated on a different basis compared to 2017 27
2018
2018
2018
2018
2017
2017
2017
2017
Regulatory update
18
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
3
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
What is our reporting context
ASIC ASX AASB ATO
Response to commissions and
enquiries and ongoing surveillance
activities
Corporate Governance
Principles 4th Edition consultation
Conceptual Framework
Reporting entity and special purpose
financial statements
Tax transparency widening definition of
Significant Global Entity
Agendabull New standards for 31 December 2018 bull Regulatory updatebull Hot topicsbull Looking aheadbull Wrap up
New standards for 31 December 2018
6
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
New standards 31 December 2018 reporting (year-end and interims)
AASB 9 Financial Instruments
AASB 15 Revenue from Contracts with Customers
Interpretation 22Foreign Currency Transactions and Advance Consideration
7
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
New standards 31 December 2018 reporting (year-end and interims)
AASB 9 Financial Instruments
AASB 15 Revenue from Contracts with Customers
AASB 2016-5 Classification and measurement of Share-Based Payment Transactions [AASB 2]
AASB 2017-1Transfers of Investment property Annual Improvements 2014-2016 Cycle [AASB 1 AASB 128 and AASB 140]
Interpretation 22Foreign Currency Transactions and Advance Consideration
AASB 2016-6 and 2017-3Amendments and clarifications to AASB 4 Insurance Contracts
8
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash annual reporting
Business as usual (ongoing)Comparatives
TransitionBridging the gapTelling your story
9
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash comparatives
ApproachComparative
periodFirst year of
adoption
AASB 111 118
AASB 15
Modified retrospective
Cumulative AASB 111 118
MixedRequirements
For completed contracts
AASB 111 118
AASB 15NEW ongoing disclosure
Comparative not required
AASB 9 AASB 15
10
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition disclosures
AASB 9 Classification and measurement
Required disclosures ndash AASB 7 15 101 amp 108
Practical expedients used and qualitative impact of applying
expedient
AASB 7 amp AASB 15
Qualitative information about key changes
AASB 108
Quantitative reconciliation
of adjustments
AASB 108 AASB 7 amp AASB 15
Adjustment to basic and
diluted earnings per
share
AASB 108
Third balance sheet with
retrospective approach
AASB 101 amp AASB 108
AASB 15 Cumulative approach ndash current period disclose revenue amounts that would have been presented under AASB 118 111
11
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Ongoing disclosures ndash Disclosure objective
Disclose quantitative and qualitative information to enable users to understand
the significance of financial instruments to an entityrsquos position
and performance the risk exposures resulting from such
financial instruments and how the entity manages those risks
FINANCIAL INSTRUMENTS
the nature amount timing and uncertainty of revenue and cash flows arising from contracts with
customers
REVENUE
12
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 7 (AASB 9) Disclosure requirements
Methods assumptions judgements and information used to measure the Expected Credit Loss (ECL)
Hedge instruments and Hedged items
Amount timing and uncertainty of future cash flows and the effects on financial position and performance
Disclose quantitative and qualitative information to enable users to understand the significance of financial
instruments to an entityrsquos position and performance the risk exposures resulting from such financial instruments
and how the entity manages those risks
Disclosure objective
Impairment Hedge accounting
AASB 139 or AASB 9
hedge accounting
13
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 15 Disclosure requirements
Performance obligationsContract balances
Disaggregation of revenue
Significant judgments
Costs to obtain or fulfil a contract
Disclose quantitative and qualitative information to enable users to understand the nature amount
timing and uncertainty of revenue and cash flows arising from contracts with customers
Disclosure objective
14
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash half-year disclosuresHalf-year requirements
Disaggregation of revenue
AASB 13416A(l)
Significant events and transactions ndash
explanation to understand change in financial position and performance
AASB 13415
If accounting policies or methods have
changed a description of
nature and effect of change
AASB 13416A(a)
BAU -disclosure
Transition disclosure
Accounting policies
15
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition approach ndash 30 June 2018 half-year disclosures47 listed entities
Not stated - no material impact to revenue recognition
AASB 15AASB 9
55 - no or no material impact
16
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 15 ndash 30 June 2018 half-year disclosuresDisaggregation of revenue
Disclosed gt 1 category of disaggregation2018 55 2017 40
47 listed entities
Products service
Timing
Geography
Operating Segment
20182017
Disclosed revenue disaggregated on a different basis compared to 2017 27
2018
2018
2018
2018
2017
2017
2017
2017
Regulatory update
18
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
Agendabull New standards for 31 December 2018 bull Regulatory updatebull Hot topicsbull Looking aheadbull Wrap up
New standards for 31 December 2018
6
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
New standards 31 December 2018 reporting (year-end and interims)
AASB 9 Financial Instruments
AASB 15 Revenue from Contracts with Customers
Interpretation 22Foreign Currency Transactions and Advance Consideration
7
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
New standards 31 December 2018 reporting (year-end and interims)
AASB 9 Financial Instruments
AASB 15 Revenue from Contracts with Customers
AASB 2016-5 Classification and measurement of Share-Based Payment Transactions [AASB 2]
AASB 2017-1Transfers of Investment property Annual Improvements 2014-2016 Cycle [AASB 1 AASB 128 and AASB 140]
Interpretation 22Foreign Currency Transactions and Advance Consideration
AASB 2016-6 and 2017-3Amendments and clarifications to AASB 4 Insurance Contracts
8
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash annual reporting
Business as usual (ongoing)Comparatives
TransitionBridging the gapTelling your story
9
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash comparatives
ApproachComparative
periodFirst year of
adoption
AASB 111 118
AASB 15
Modified retrospective
Cumulative AASB 111 118
MixedRequirements
For completed contracts
AASB 111 118
AASB 15NEW ongoing disclosure
Comparative not required
AASB 9 AASB 15
10
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition disclosures
AASB 9 Classification and measurement
Required disclosures ndash AASB 7 15 101 amp 108
Practical expedients used and qualitative impact of applying
expedient
AASB 7 amp AASB 15
Qualitative information about key changes
AASB 108
Quantitative reconciliation
of adjustments
AASB 108 AASB 7 amp AASB 15
Adjustment to basic and
diluted earnings per
share
AASB 108
Third balance sheet with
retrospective approach
AASB 101 amp AASB 108
AASB 15 Cumulative approach ndash current period disclose revenue amounts that would have been presented under AASB 118 111
11
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Ongoing disclosures ndash Disclosure objective
Disclose quantitative and qualitative information to enable users to understand
the significance of financial instruments to an entityrsquos position
and performance the risk exposures resulting from such
financial instruments and how the entity manages those risks
FINANCIAL INSTRUMENTS
the nature amount timing and uncertainty of revenue and cash flows arising from contracts with
customers
REVENUE
12
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 7 (AASB 9) Disclosure requirements
Methods assumptions judgements and information used to measure the Expected Credit Loss (ECL)
Hedge instruments and Hedged items
Amount timing and uncertainty of future cash flows and the effects on financial position and performance
Disclose quantitative and qualitative information to enable users to understand the significance of financial
instruments to an entityrsquos position and performance the risk exposures resulting from such financial instruments
and how the entity manages those risks
Disclosure objective
Impairment Hedge accounting
AASB 139 or AASB 9
hedge accounting
13
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 15 Disclosure requirements
Performance obligationsContract balances
Disaggregation of revenue
Significant judgments
Costs to obtain or fulfil a contract
Disclose quantitative and qualitative information to enable users to understand the nature amount
timing and uncertainty of revenue and cash flows arising from contracts with customers
Disclosure objective
14
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash half-year disclosuresHalf-year requirements
Disaggregation of revenue
AASB 13416A(l)
Significant events and transactions ndash
explanation to understand change in financial position and performance
AASB 13415
If accounting policies or methods have
changed a description of
nature and effect of change
AASB 13416A(a)
BAU -disclosure
Transition disclosure
Accounting policies
15
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition approach ndash 30 June 2018 half-year disclosures47 listed entities
Not stated - no material impact to revenue recognition
AASB 15AASB 9
55 - no or no material impact
16
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 15 ndash 30 June 2018 half-year disclosuresDisaggregation of revenue
Disclosed gt 1 category of disaggregation2018 55 2017 40
47 listed entities
Products service
Timing
Geography
Operating Segment
20182017
Disclosed revenue disaggregated on a different basis compared to 2017 27
2018
2018
2018
2018
2017
2017
2017
2017
Regulatory update
18
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
New standards for 31 December 2018
6
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
New standards 31 December 2018 reporting (year-end and interims)
AASB 9 Financial Instruments
AASB 15 Revenue from Contracts with Customers
Interpretation 22Foreign Currency Transactions and Advance Consideration
7
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
New standards 31 December 2018 reporting (year-end and interims)
AASB 9 Financial Instruments
AASB 15 Revenue from Contracts with Customers
AASB 2016-5 Classification and measurement of Share-Based Payment Transactions [AASB 2]
AASB 2017-1Transfers of Investment property Annual Improvements 2014-2016 Cycle [AASB 1 AASB 128 and AASB 140]
Interpretation 22Foreign Currency Transactions and Advance Consideration
AASB 2016-6 and 2017-3Amendments and clarifications to AASB 4 Insurance Contracts
8
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash annual reporting
Business as usual (ongoing)Comparatives
TransitionBridging the gapTelling your story
9
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash comparatives
ApproachComparative
periodFirst year of
adoption
AASB 111 118
AASB 15
Modified retrospective
Cumulative AASB 111 118
MixedRequirements
For completed contracts
AASB 111 118
AASB 15NEW ongoing disclosure
Comparative not required
AASB 9 AASB 15
10
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition disclosures
AASB 9 Classification and measurement
Required disclosures ndash AASB 7 15 101 amp 108
Practical expedients used and qualitative impact of applying
expedient
AASB 7 amp AASB 15
Qualitative information about key changes
AASB 108
Quantitative reconciliation
of adjustments
AASB 108 AASB 7 amp AASB 15
Adjustment to basic and
diluted earnings per
share
AASB 108
Third balance sheet with
retrospective approach
AASB 101 amp AASB 108
AASB 15 Cumulative approach ndash current period disclose revenue amounts that would have been presented under AASB 118 111
11
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Ongoing disclosures ndash Disclosure objective
Disclose quantitative and qualitative information to enable users to understand
the significance of financial instruments to an entityrsquos position
and performance the risk exposures resulting from such
financial instruments and how the entity manages those risks
FINANCIAL INSTRUMENTS
the nature amount timing and uncertainty of revenue and cash flows arising from contracts with
customers
REVENUE
12
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 7 (AASB 9) Disclosure requirements
Methods assumptions judgements and information used to measure the Expected Credit Loss (ECL)
Hedge instruments and Hedged items
Amount timing and uncertainty of future cash flows and the effects on financial position and performance
Disclose quantitative and qualitative information to enable users to understand the significance of financial
instruments to an entityrsquos position and performance the risk exposures resulting from such financial instruments
and how the entity manages those risks
Disclosure objective
Impairment Hedge accounting
AASB 139 or AASB 9
hedge accounting
13
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 15 Disclosure requirements
Performance obligationsContract balances
Disaggregation of revenue
Significant judgments
Costs to obtain or fulfil a contract
Disclose quantitative and qualitative information to enable users to understand the nature amount
timing and uncertainty of revenue and cash flows arising from contracts with customers
Disclosure objective
14
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash half-year disclosuresHalf-year requirements
Disaggregation of revenue
AASB 13416A(l)
Significant events and transactions ndash
explanation to understand change in financial position and performance
AASB 13415
If accounting policies or methods have
changed a description of
nature and effect of change
AASB 13416A(a)
BAU -disclosure
Transition disclosure
Accounting policies
15
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition approach ndash 30 June 2018 half-year disclosures47 listed entities
Not stated - no material impact to revenue recognition
AASB 15AASB 9
55 - no or no material impact
16
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 15 ndash 30 June 2018 half-year disclosuresDisaggregation of revenue
Disclosed gt 1 category of disaggregation2018 55 2017 40
47 listed entities
Products service
Timing
Geography
Operating Segment
20182017
Disclosed revenue disaggregated on a different basis compared to 2017 27
2018
2018
2018
2018
2017
2017
2017
2017
Regulatory update
18
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
6
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
New standards 31 December 2018 reporting (year-end and interims)
AASB 9 Financial Instruments
AASB 15 Revenue from Contracts with Customers
Interpretation 22Foreign Currency Transactions and Advance Consideration
7
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
New standards 31 December 2018 reporting (year-end and interims)
AASB 9 Financial Instruments
AASB 15 Revenue from Contracts with Customers
AASB 2016-5 Classification and measurement of Share-Based Payment Transactions [AASB 2]
AASB 2017-1Transfers of Investment property Annual Improvements 2014-2016 Cycle [AASB 1 AASB 128 and AASB 140]
Interpretation 22Foreign Currency Transactions and Advance Consideration
AASB 2016-6 and 2017-3Amendments and clarifications to AASB 4 Insurance Contracts
8
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash annual reporting
Business as usual (ongoing)Comparatives
TransitionBridging the gapTelling your story
9
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash comparatives
ApproachComparative
periodFirst year of
adoption
AASB 111 118
AASB 15
Modified retrospective
Cumulative AASB 111 118
MixedRequirements
For completed contracts
AASB 111 118
AASB 15NEW ongoing disclosure
Comparative not required
AASB 9 AASB 15
10
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition disclosures
AASB 9 Classification and measurement
Required disclosures ndash AASB 7 15 101 amp 108
Practical expedients used and qualitative impact of applying
expedient
AASB 7 amp AASB 15
Qualitative information about key changes
AASB 108
Quantitative reconciliation
of adjustments
AASB 108 AASB 7 amp AASB 15
Adjustment to basic and
diluted earnings per
share
AASB 108
Third balance sheet with
retrospective approach
AASB 101 amp AASB 108
AASB 15 Cumulative approach ndash current period disclose revenue amounts that would have been presented under AASB 118 111
11
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Ongoing disclosures ndash Disclosure objective
Disclose quantitative and qualitative information to enable users to understand
the significance of financial instruments to an entityrsquos position
and performance the risk exposures resulting from such
financial instruments and how the entity manages those risks
FINANCIAL INSTRUMENTS
the nature amount timing and uncertainty of revenue and cash flows arising from contracts with
customers
REVENUE
12
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 7 (AASB 9) Disclosure requirements
Methods assumptions judgements and information used to measure the Expected Credit Loss (ECL)
Hedge instruments and Hedged items
Amount timing and uncertainty of future cash flows and the effects on financial position and performance
Disclose quantitative and qualitative information to enable users to understand the significance of financial
instruments to an entityrsquos position and performance the risk exposures resulting from such financial instruments
and how the entity manages those risks
Disclosure objective
Impairment Hedge accounting
AASB 139 or AASB 9
hedge accounting
13
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 15 Disclosure requirements
Performance obligationsContract balances
Disaggregation of revenue
Significant judgments
Costs to obtain or fulfil a contract
Disclose quantitative and qualitative information to enable users to understand the nature amount
timing and uncertainty of revenue and cash flows arising from contracts with customers
Disclosure objective
14
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash half-year disclosuresHalf-year requirements
Disaggregation of revenue
AASB 13416A(l)
Significant events and transactions ndash
explanation to understand change in financial position and performance
AASB 13415
If accounting policies or methods have
changed a description of
nature and effect of change
AASB 13416A(a)
BAU -disclosure
Transition disclosure
Accounting policies
15
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition approach ndash 30 June 2018 half-year disclosures47 listed entities
Not stated - no material impact to revenue recognition
AASB 15AASB 9
55 - no or no material impact
16
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 15 ndash 30 June 2018 half-year disclosuresDisaggregation of revenue
Disclosed gt 1 category of disaggregation2018 55 2017 40
47 listed entities
Products service
Timing
Geography
Operating Segment
20182017
Disclosed revenue disaggregated on a different basis compared to 2017 27
2018
2018
2018
2018
2017
2017
2017
2017
Regulatory update
18
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
7
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
New standards 31 December 2018 reporting (year-end and interims)
AASB 9 Financial Instruments
AASB 15 Revenue from Contracts with Customers
AASB 2016-5 Classification and measurement of Share-Based Payment Transactions [AASB 2]
AASB 2017-1Transfers of Investment property Annual Improvements 2014-2016 Cycle [AASB 1 AASB 128 and AASB 140]
Interpretation 22Foreign Currency Transactions and Advance Consideration
AASB 2016-6 and 2017-3Amendments and clarifications to AASB 4 Insurance Contracts
8
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash annual reporting
Business as usual (ongoing)Comparatives
TransitionBridging the gapTelling your story
9
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash comparatives
ApproachComparative
periodFirst year of
adoption
AASB 111 118
AASB 15
Modified retrospective
Cumulative AASB 111 118
MixedRequirements
For completed contracts
AASB 111 118
AASB 15NEW ongoing disclosure
Comparative not required
AASB 9 AASB 15
10
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition disclosures
AASB 9 Classification and measurement
Required disclosures ndash AASB 7 15 101 amp 108
Practical expedients used and qualitative impact of applying
expedient
AASB 7 amp AASB 15
Qualitative information about key changes
AASB 108
Quantitative reconciliation
of adjustments
AASB 108 AASB 7 amp AASB 15
Adjustment to basic and
diluted earnings per
share
AASB 108
Third balance sheet with
retrospective approach
AASB 101 amp AASB 108
AASB 15 Cumulative approach ndash current period disclose revenue amounts that would have been presented under AASB 118 111
11
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Ongoing disclosures ndash Disclosure objective
Disclose quantitative and qualitative information to enable users to understand
the significance of financial instruments to an entityrsquos position
and performance the risk exposures resulting from such
financial instruments and how the entity manages those risks
FINANCIAL INSTRUMENTS
the nature amount timing and uncertainty of revenue and cash flows arising from contracts with
customers
REVENUE
12
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 7 (AASB 9) Disclosure requirements
Methods assumptions judgements and information used to measure the Expected Credit Loss (ECL)
Hedge instruments and Hedged items
Amount timing and uncertainty of future cash flows and the effects on financial position and performance
Disclose quantitative and qualitative information to enable users to understand the significance of financial
instruments to an entityrsquos position and performance the risk exposures resulting from such financial instruments
and how the entity manages those risks
Disclosure objective
Impairment Hedge accounting
AASB 139 or AASB 9
hedge accounting
13
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 15 Disclosure requirements
Performance obligationsContract balances
Disaggregation of revenue
Significant judgments
Costs to obtain or fulfil a contract
Disclose quantitative and qualitative information to enable users to understand the nature amount
timing and uncertainty of revenue and cash flows arising from contracts with customers
Disclosure objective
14
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash half-year disclosuresHalf-year requirements
Disaggregation of revenue
AASB 13416A(l)
Significant events and transactions ndash
explanation to understand change in financial position and performance
AASB 13415
If accounting policies or methods have
changed a description of
nature and effect of change
AASB 13416A(a)
BAU -disclosure
Transition disclosure
Accounting policies
15
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition approach ndash 30 June 2018 half-year disclosures47 listed entities
Not stated - no material impact to revenue recognition
AASB 15AASB 9
55 - no or no material impact
16
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 15 ndash 30 June 2018 half-year disclosuresDisaggregation of revenue
Disclosed gt 1 category of disaggregation2018 55 2017 40
47 listed entities
Products service
Timing
Geography
Operating Segment
20182017
Disclosed revenue disaggregated on a different basis compared to 2017 27
2018
2018
2018
2018
2017
2017
2017
2017
Regulatory update
18
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
8
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash annual reporting
Business as usual (ongoing)Comparatives
TransitionBridging the gapTelling your story
9
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash comparatives
ApproachComparative
periodFirst year of
adoption
AASB 111 118
AASB 15
Modified retrospective
Cumulative AASB 111 118
MixedRequirements
For completed contracts
AASB 111 118
AASB 15NEW ongoing disclosure
Comparative not required
AASB 9 AASB 15
10
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition disclosures
AASB 9 Classification and measurement
Required disclosures ndash AASB 7 15 101 amp 108
Practical expedients used and qualitative impact of applying
expedient
AASB 7 amp AASB 15
Qualitative information about key changes
AASB 108
Quantitative reconciliation
of adjustments
AASB 108 AASB 7 amp AASB 15
Adjustment to basic and
diluted earnings per
share
AASB 108
Third balance sheet with
retrospective approach
AASB 101 amp AASB 108
AASB 15 Cumulative approach ndash current period disclose revenue amounts that would have been presented under AASB 118 111
11
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Ongoing disclosures ndash Disclosure objective
Disclose quantitative and qualitative information to enable users to understand
the significance of financial instruments to an entityrsquos position
and performance the risk exposures resulting from such
financial instruments and how the entity manages those risks
FINANCIAL INSTRUMENTS
the nature amount timing and uncertainty of revenue and cash flows arising from contracts with
customers
REVENUE
12
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 7 (AASB 9) Disclosure requirements
Methods assumptions judgements and information used to measure the Expected Credit Loss (ECL)
Hedge instruments and Hedged items
Amount timing and uncertainty of future cash flows and the effects on financial position and performance
Disclose quantitative and qualitative information to enable users to understand the significance of financial
instruments to an entityrsquos position and performance the risk exposures resulting from such financial instruments
and how the entity manages those risks
Disclosure objective
Impairment Hedge accounting
AASB 139 or AASB 9
hedge accounting
13
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 15 Disclosure requirements
Performance obligationsContract balances
Disaggregation of revenue
Significant judgments
Costs to obtain or fulfil a contract
Disclose quantitative and qualitative information to enable users to understand the nature amount
timing and uncertainty of revenue and cash flows arising from contracts with customers
Disclosure objective
14
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash half-year disclosuresHalf-year requirements
Disaggregation of revenue
AASB 13416A(l)
Significant events and transactions ndash
explanation to understand change in financial position and performance
AASB 13415
If accounting policies or methods have
changed a description of
nature and effect of change
AASB 13416A(a)
BAU -disclosure
Transition disclosure
Accounting policies
15
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition approach ndash 30 June 2018 half-year disclosures47 listed entities
Not stated - no material impact to revenue recognition
AASB 15AASB 9
55 - no or no material impact
16
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 15 ndash 30 June 2018 half-year disclosuresDisaggregation of revenue
Disclosed gt 1 category of disaggregation2018 55 2017 40
47 listed entities
Products service
Timing
Geography
Operating Segment
20182017
Disclosed revenue disaggregated on a different basis compared to 2017 27
2018
2018
2018
2018
2017
2017
2017
2017
Regulatory update
18
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
9
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash comparatives
ApproachComparative
periodFirst year of
adoption
AASB 111 118
AASB 15
Modified retrospective
Cumulative AASB 111 118
MixedRequirements
For completed contracts
AASB 111 118
AASB 15NEW ongoing disclosure
Comparative not required
AASB 9 AASB 15
10
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition disclosures
AASB 9 Classification and measurement
Required disclosures ndash AASB 7 15 101 amp 108
Practical expedients used and qualitative impact of applying
expedient
AASB 7 amp AASB 15
Qualitative information about key changes
AASB 108
Quantitative reconciliation
of adjustments
AASB 108 AASB 7 amp AASB 15
Adjustment to basic and
diluted earnings per
share
AASB 108
Third balance sheet with
retrospective approach
AASB 101 amp AASB 108
AASB 15 Cumulative approach ndash current period disclose revenue amounts that would have been presented under AASB 118 111
11
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Ongoing disclosures ndash Disclosure objective
Disclose quantitative and qualitative information to enable users to understand
the significance of financial instruments to an entityrsquos position
and performance the risk exposures resulting from such
financial instruments and how the entity manages those risks
FINANCIAL INSTRUMENTS
the nature amount timing and uncertainty of revenue and cash flows arising from contracts with
customers
REVENUE
12
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 7 (AASB 9) Disclosure requirements
Methods assumptions judgements and information used to measure the Expected Credit Loss (ECL)
Hedge instruments and Hedged items
Amount timing and uncertainty of future cash flows and the effects on financial position and performance
Disclose quantitative and qualitative information to enable users to understand the significance of financial
instruments to an entityrsquos position and performance the risk exposures resulting from such financial instruments
and how the entity manages those risks
Disclosure objective
Impairment Hedge accounting
AASB 139 or AASB 9
hedge accounting
13
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 15 Disclosure requirements
Performance obligationsContract balances
Disaggregation of revenue
Significant judgments
Costs to obtain or fulfil a contract
Disclose quantitative and qualitative information to enable users to understand the nature amount
timing and uncertainty of revenue and cash flows arising from contracts with customers
Disclosure objective
14
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash half-year disclosuresHalf-year requirements
Disaggregation of revenue
AASB 13416A(l)
Significant events and transactions ndash
explanation to understand change in financial position and performance
AASB 13415
If accounting policies or methods have
changed a description of
nature and effect of change
AASB 13416A(a)
BAU -disclosure
Transition disclosure
Accounting policies
15
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition approach ndash 30 June 2018 half-year disclosures47 listed entities
Not stated - no material impact to revenue recognition
AASB 15AASB 9
55 - no or no material impact
16
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 15 ndash 30 June 2018 half-year disclosuresDisaggregation of revenue
Disclosed gt 1 category of disaggregation2018 55 2017 40
47 listed entities
Products service
Timing
Geography
Operating Segment
20182017
Disclosed revenue disaggregated on a different basis compared to 2017 27
2018
2018
2018
2018
2017
2017
2017
2017
Regulatory update
18
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
10
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition disclosures
AASB 9 Classification and measurement
Required disclosures ndash AASB 7 15 101 amp 108
Practical expedients used and qualitative impact of applying
expedient
AASB 7 amp AASB 15
Qualitative information about key changes
AASB 108
Quantitative reconciliation
of adjustments
AASB 108 AASB 7 amp AASB 15
Adjustment to basic and
diluted earnings per
share
AASB 108
Third balance sheet with
retrospective approach
AASB 101 amp AASB 108
AASB 15 Cumulative approach ndash current period disclose revenue amounts that would have been presented under AASB 118 111
11
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Ongoing disclosures ndash Disclosure objective
Disclose quantitative and qualitative information to enable users to understand
the significance of financial instruments to an entityrsquos position
and performance the risk exposures resulting from such
financial instruments and how the entity manages those risks
FINANCIAL INSTRUMENTS
the nature amount timing and uncertainty of revenue and cash flows arising from contracts with
customers
REVENUE
12
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 7 (AASB 9) Disclosure requirements
Methods assumptions judgements and information used to measure the Expected Credit Loss (ECL)
Hedge instruments and Hedged items
Amount timing and uncertainty of future cash flows and the effects on financial position and performance
Disclose quantitative and qualitative information to enable users to understand the significance of financial
instruments to an entityrsquos position and performance the risk exposures resulting from such financial instruments
and how the entity manages those risks
Disclosure objective
Impairment Hedge accounting
AASB 139 or AASB 9
hedge accounting
13
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 15 Disclosure requirements
Performance obligationsContract balances
Disaggregation of revenue
Significant judgments
Costs to obtain or fulfil a contract
Disclose quantitative and qualitative information to enable users to understand the nature amount
timing and uncertainty of revenue and cash flows arising from contracts with customers
Disclosure objective
14
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash half-year disclosuresHalf-year requirements
Disaggregation of revenue
AASB 13416A(l)
Significant events and transactions ndash
explanation to understand change in financial position and performance
AASB 13415
If accounting policies or methods have
changed a description of
nature and effect of change
AASB 13416A(a)
BAU -disclosure
Transition disclosure
Accounting policies
15
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition approach ndash 30 June 2018 half-year disclosures47 listed entities
Not stated - no material impact to revenue recognition
AASB 15AASB 9
55 - no or no material impact
16
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 15 ndash 30 June 2018 half-year disclosuresDisaggregation of revenue
Disclosed gt 1 category of disaggregation2018 55 2017 40
47 listed entities
Products service
Timing
Geography
Operating Segment
20182017
Disclosed revenue disaggregated on a different basis compared to 2017 27
2018
2018
2018
2018
2017
2017
2017
2017
Regulatory update
18
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
11
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Ongoing disclosures ndash Disclosure objective
Disclose quantitative and qualitative information to enable users to understand
the significance of financial instruments to an entityrsquos position
and performance the risk exposures resulting from such
financial instruments and how the entity manages those risks
FINANCIAL INSTRUMENTS
the nature amount timing and uncertainty of revenue and cash flows arising from contracts with
customers
REVENUE
12
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 7 (AASB 9) Disclosure requirements
Methods assumptions judgements and information used to measure the Expected Credit Loss (ECL)
Hedge instruments and Hedged items
Amount timing and uncertainty of future cash flows and the effects on financial position and performance
Disclose quantitative and qualitative information to enable users to understand the significance of financial
instruments to an entityrsquos position and performance the risk exposures resulting from such financial instruments
and how the entity manages those risks
Disclosure objective
Impairment Hedge accounting
AASB 139 or AASB 9
hedge accounting
13
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 15 Disclosure requirements
Performance obligationsContract balances
Disaggregation of revenue
Significant judgments
Costs to obtain or fulfil a contract
Disclose quantitative and qualitative information to enable users to understand the nature amount
timing and uncertainty of revenue and cash flows arising from contracts with customers
Disclosure objective
14
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash half-year disclosuresHalf-year requirements
Disaggregation of revenue
AASB 13416A(l)
Significant events and transactions ndash
explanation to understand change in financial position and performance
AASB 13415
If accounting policies or methods have
changed a description of
nature and effect of change
AASB 13416A(a)
BAU -disclosure
Transition disclosure
Accounting policies
15
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition approach ndash 30 June 2018 half-year disclosures47 listed entities
Not stated - no material impact to revenue recognition
AASB 15AASB 9
55 - no or no material impact
16
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 15 ndash 30 June 2018 half-year disclosuresDisaggregation of revenue
Disclosed gt 1 category of disaggregation2018 55 2017 40
47 listed entities
Products service
Timing
Geography
Operating Segment
20182017
Disclosed revenue disaggregated on a different basis compared to 2017 27
2018
2018
2018
2018
2017
2017
2017
2017
Regulatory update
18
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
12
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 7 (AASB 9) Disclosure requirements
Methods assumptions judgements and information used to measure the Expected Credit Loss (ECL)
Hedge instruments and Hedged items
Amount timing and uncertainty of future cash flows and the effects on financial position and performance
Disclose quantitative and qualitative information to enable users to understand the significance of financial
instruments to an entityrsquos position and performance the risk exposures resulting from such financial instruments
and how the entity manages those risks
Disclosure objective
Impairment Hedge accounting
AASB 139 or AASB 9
hedge accounting
13
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 15 Disclosure requirements
Performance obligationsContract balances
Disaggregation of revenue
Significant judgments
Costs to obtain or fulfil a contract
Disclose quantitative and qualitative information to enable users to understand the nature amount
timing and uncertainty of revenue and cash flows arising from contracts with customers
Disclosure objective
14
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash half-year disclosuresHalf-year requirements
Disaggregation of revenue
AASB 13416A(l)
Significant events and transactions ndash
explanation to understand change in financial position and performance
AASB 13415
If accounting policies or methods have
changed a description of
nature and effect of change
AASB 13416A(a)
BAU -disclosure
Transition disclosure
Accounting policies
15
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition approach ndash 30 June 2018 half-year disclosures47 listed entities
Not stated - no material impact to revenue recognition
AASB 15AASB 9
55 - no or no material impact
16
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 15 ndash 30 June 2018 half-year disclosuresDisaggregation of revenue
Disclosed gt 1 category of disaggregation2018 55 2017 40
47 listed entities
Products service
Timing
Geography
Operating Segment
20182017
Disclosed revenue disaggregated on a different basis compared to 2017 27
2018
2018
2018
2018
2017
2017
2017
2017
Regulatory update
18
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
13
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
AASB 15 Disclosure requirements
Performance obligationsContract balances
Disaggregation of revenue
Significant judgments
Costs to obtain or fulfil a contract
Disclose quantitative and qualitative information to enable users to understand the nature amount
timing and uncertainty of revenue and cash flows arising from contracts with customers
Disclosure objective
14
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash half-year disclosuresHalf-year requirements
Disaggregation of revenue
AASB 13416A(l)
Significant events and transactions ndash
explanation to understand change in financial position and performance
AASB 13415
If accounting policies or methods have
changed a description of
nature and effect of change
AASB 13416A(a)
BAU -disclosure
Transition disclosure
Accounting policies
15
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition approach ndash 30 June 2018 half-year disclosures47 listed entities
Not stated - no material impact to revenue recognition
AASB 15AASB 9
55 - no or no material impact
16
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 15 ndash 30 June 2018 half-year disclosuresDisaggregation of revenue
Disclosed gt 1 category of disaggregation2018 55 2017 40
47 listed entities
Products service
Timing
Geography
Operating Segment
20182017
Disclosed revenue disaggregated on a different basis compared to 2017 27
2018
2018
2018
2018
2017
2017
2017
2017
Regulatory update
18
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
14
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 9 and AASB 15 ndash half-year disclosuresHalf-year requirements
Disaggregation of revenue
AASB 13416A(l)
Significant events and transactions ndash
explanation to understand change in financial position and performance
AASB 13415
If accounting policies or methods have
changed a description of
nature and effect of change
AASB 13416A(a)
BAU -disclosure
Transition disclosure
Accounting policies
15
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition approach ndash 30 June 2018 half-year disclosures47 listed entities
Not stated - no material impact to revenue recognition
AASB 15AASB 9
55 - no or no material impact
16
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 15 ndash 30 June 2018 half-year disclosuresDisaggregation of revenue
Disclosed gt 1 category of disaggregation2018 55 2017 40
47 listed entities
Products service
Timing
Geography
Operating Segment
20182017
Disclosed revenue disaggregated on a different basis compared to 2017 27
2018
2018
2018
2018
2017
2017
2017
2017
Regulatory update
18
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
15
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Transition approach ndash 30 June 2018 half-year disclosures47 listed entities
Not stated - no material impact to revenue recognition
AASB 15AASB 9
55 - no or no material impact
16
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 15 ndash 30 June 2018 half-year disclosuresDisaggregation of revenue
Disclosed gt 1 category of disaggregation2018 55 2017 40
47 listed entities
Products service
Timing
Geography
Operating Segment
20182017
Disclosed revenue disaggregated on a different basis compared to 2017 27
2018
2018
2018
2018
2017
2017
2017
2017
Regulatory update
18
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
16
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Initial application of AASB 15 ndash 30 June 2018 half-year disclosuresDisaggregation of revenue
Disclosed gt 1 category of disaggregation2018 55 2017 40
47 listed entities
Products service
Timing
Geography
Operating Segment
20182017
Disclosed revenue disaggregated on a different basis compared to 2017 27
2018
2018
2018
2018
2017
2017
2017
2017
Regulatory update
18
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
Regulatory update
18
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
18
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
Chart1
Sheet1
19
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
90 listed and public interest entities
reviewed
20 Enquiries made
Sales | |||
Revenue recognition | 7 | ||
Asset values and impairment | 3 | ||
Tax accounting | 2 | ||
Amortisation of intangible asests | 2 | ||
Classification of liabilities as non-current | 2 | ||
Business combinations | 2 | ||
Other matters | 14 |
Revenue recognition | |
Asset values and impairment | |
Tax accounting | |
Amortisation of intangible asests | |
Classification of liabilities as non-current | |
Business combinations | |
Other matters |
Sheet1
19
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
90 listed and public interest entities
reviewed
20 Enquiries made
Sales | |||
Revenue recognition | 7 | ||
Asset values and impairment | 3 | ||
Tax accounting | 2 | ||
Amortisation of intangible asests | 2 | ||
Classification of liabilities as non-current | 2 | ||
Business combinations | 2 | ||
Other matters | 14 |
19
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance 31 December 2017 results Enquiries from ASIC
90 listed and public interest entities
reviewed
20 Enquiries made
Chart1
Sheet1
20
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance
Asset values and impairment testing
Impairment indicators
Carrying value of CGUs
Reasonableness of cash flows and assumptions
Use of Fair Values
Disclosures
21
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance
Asset values and impairment testing
Impairment indicators
Carrying value of CGUs
Reasonableness of cash flows and assumptions
Use of Fair Values
Disclosures
Revenue recognition
Fee income recognition by a fund manager
Recognition before provision of goods and services
22
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance
Asset values and impairment testing
Impairment indicators
Carrying value of CGUs
Reasonableness of cash flows and assumptions
Use of Fair Values
Disclosures
Revenue recognition
Fee income recognition by a fund manager
Recognition before provision of goods and services
Tax accounting
Application of tax legislation
Recovery of deferred tax assets
Disclosure of disputes with the ATO
23
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC focus areas
Inventories
Impairment and other
asset values
Accounting policy choice
selectionConsolidation
accounting
Sources of judgement
and estimation
Expense deferral
Tax accounting
Revenue recognition
GoodwillIntangibles
Financial Instruments
PPampE
New accounting standards
24
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Do the changes impact you
Consolidation integrity
measures
What are the accounting considerations
25
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
What are the accounting considerations
26
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
Reduction in Corporate Tax rates
Small businesses
What are the accounting considerations
27
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
Reduction in Corporate Tax rates
Small businesses
Significant Global Entity
definition broadened
What are the accounting considerations
28
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Australian Tax office Activity
Streamlined Assurance
Review Risk Review of Top
1000 taxpayers
Reportable tax position schedule
Extended to cover companies with
turnovergt$250million
29
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statements
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
30
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip
31
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
32
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
Detection risk cannot be taken into account Assume that the tax authority would examine and have full knowledge of all
relevant information
33
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
34
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
35
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
36
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
37
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
Other issues
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
bull Deductions claimed for RampD tax incentives
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
Sales | |||
Revenue recognition | 7 | ||
Asset values and impairment | 3 | ||
Tax accounting | 2 | ||
Amortisation of intangible asests | 2 | ||
Classification of liabilities as non-current | 2 | ||
Business combinations | 2 | ||
Other matters | 14 |
Revenue recognition | |
Asset values and impairment | |
Tax accounting | |
Amortisation of intangible asests | |
Classification of liabilities as non-current | |
Business combinations | |
Other matters |
Sheet1
20
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance
Asset values and impairment testing
Impairment indicators
Carrying value of CGUs
Reasonableness of cash flows and assumptions
Use of Fair Values
Disclosures
21
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance
Asset values and impairment testing
Impairment indicators
Carrying value of CGUs
Reasonableness of cash flows and assumptions
Use of Fair Values
Disclosures
Revenue recognition
Fee income recognition by a fund manager
Recognition before provision of goods and services
22
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance
Asset values and impairment testing
Impairment indicators
Carrying value of CGUs
Reasonableness of cash flows and assumptions
Use of Fair Values
Disclosures
Revenue recognition
Fee income recognition by a fund manager
Recognition before provision of goods and services
Tax accounting
Application of tax legislation
Recovery of deferred tax assets
Disclosure of disputes with the ATO
23
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC focus areas
Inventories
Impairment and other
asset values
Accounting policy choice
selectionConsolidation
accounting
Sources of judgement
and estimation
Expense deferral
Tax accounting
Revenue recognition
GoodwillIntangibles
Financial Instruments
PPampE
New accounting standards
24
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Do the changes impact you
Consolidation integrity
measures
What are the accounting considerations
25
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
What are the accounting considerations
26
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
Reduction in Corporate Tax rates
Small businesses
What are the accounting considerations
27
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
Reduction in Corporate Tax rates
Small businesses
Significant Global Entity
definition broadened
What are the accounting considerations
28
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Australian Tax office Activity
Streamlined Assurance
Review Risk Review of Top
1000 taxpayers
Reportable tax position schedule
Extended to cover companies with
turnovergt$250million
29
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statements
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
30
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip
31
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
32
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
Detection risk cannot be taken into account Assume that the tax authority would examine and have full knowledge of all
relevant information
33
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
34
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
35
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
36
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
37
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
Other issues
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
bull Deductions claimed for RampD tax incentives
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
Sales | |||
Revenue recognition | 7 | ||
Asset values and impairment | 3 | ||
Tax accounting | 2 | ||
Amortisation of intangible asests | 2 | ||
Classification of liabilities as non-current | 2 | ||
Business combinations | 2 | ||
Other matters | 14 |
20
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance
Asset values and impairment testing
Impairment indicators
Carrying value of CGUs
Reasonableness of cash flows and assumptions
Use of Fair Values
Disclosures
21
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance
Asset values and impairment testing
Impairment indicators
Carrying value of CGUs
Reasonableness of cash flows and assumptions
Use of Fair Values
Disclosures
Revenue recognition
Fee income recognition by a fund manager
Recognition before provision of goods and services
22
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance
Asset values and impairment testing
Impairment indicators
Carrying value of CGUs
Reasonableness of cash flows and assumptions
Use of Fair Values
Disclosures
Revenue recognition
Fee income recognition by a fund manager
Recognition before provision of goods and services
Tax accounting
Application of tax legislation
Recovery of deferred tax assets
Disclosure of disputes with the ATO
23
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC focus areas
Inventories
Impairment and other
asset values
Accounting policy choice
selectionConsolidation
accounting
Sources of judgement
and estimation
Expense deferral
Tax accounting
Revenue recognition
GoodwillIntangibles
Financial Instruments
PPampE
New accounting standards
24
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Do the changes impact you
Consolidation integrity
measures
What are the accounting considerations
25
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
What are the accounting considerations
26
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
Reduction in Corporate Tax rates
Small businesses
What are the accounting considerations
27
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
Reduction in Corporate Tax rates
Small businesses
Significant Global Entity
definition broadened
What are the accounting considerations
28
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Australian Tax office Activity
Streamlined Assurance
Review Risk Review of Top
1000 taxpayers
Reportable tax position schedule
Extended to cover companies with
turnovergt$250million
29
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statements
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
30
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip
31
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
32
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
Detection risk cannot be taken into account Assume that the tax authority would examine and have full knowledge of all
relevant information
33
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
34
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
35
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
36
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
37
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
Other issues
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
bull Deductions claimed for RampD tax incentives
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
21
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance
Asset values and impairment testing
Impairment indicators
Carrying value of CGUs
Reasonableness of cash flows and assumptions
Use of Fair Values
Disclosures
Revenue recognition
Fee income recognition by a fund manager
Recognition before provision of goods and services
22
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance
Asset values and impairment testing
Impairment indicators
Carrying value of CGUs
Reasonableness of cash flows and assumptions
Use of Fair Values
Disclosures
Revenue recognition
Fee income recognition by a fund manager
Recognition before provision of goods and services
Tax accounting
Application of tax legislation
Recovery of deferred tax assets
Disclosure of disputes with the ATO
23
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC focus areas
Inventories
Impairment and other
asset values
Accounting policy choice
selectionConsolidation
accounting
Sources of judgement
and estimation
Expense deferral
Tax accounting
Revenue recognition
GoodwillIntangibles
Financial Instruments
PPampE
New accounting standards
24
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Do the changes impact you
Consolidation integrity
measures
What are the accounting considerations
25
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
What are the accounting considerations
26
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
Reduction in Corporate Tax rates
Small businesses
What are the accounting considerations
27
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
Reduction in Corporate Tax rates
Small businesses
Significant Global Entity
definition broadened
What are the accounting considerations
28
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Australian Tax office Activity
Streamlined Assurance
Review Risk Review of Top
1000 taxpayers
Reportable tax position schedule
Extended to cover companies with
turnovergt$250million
29
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statements
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
30
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip
31
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
32
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
Detection risk cannot be taken into account Assume that the tax authority would examine and have full knowledge of all
relevant information
33
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
34
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
35
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
36
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
37
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
Other issues
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
bull Deductions claimed for RampD tax incentives
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
22
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC financial statement surveillance
Asset values and impairment testing
Impairment indicators
Carrying value of CGUs
Reasonableness of cash flows and assumptions
Use of Fair Values
Disclosures
Revenue recognition
Fee income recognition by a fund manager
Recognition before provision of goods and services
Tax accounting
Application of tax legislation
Recovery of deferred tax assets
Disclosure of disputes with the ATO
23
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC focus areas
Inventories
Impairment and other
asset values
Accounting policy choice
selectionConsolidation
accounting
Sources of judgement
and estimation
Expense deferral
Tax accounting
Revenue recognition
GoodwillIntangibles
Financial Instruments
PPampE
New accounting standards
24
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Do the changes impact you
Consolidation integrity
measures
What are the accounting considerations
25
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
What are the accounting considerations
26
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
Reduction in Corporate Tax rates
Small businesses
What are the accounting considerations
27
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
Reduction in Corporate Tax rates
Small businesses
Significant Global Entity
definition broadened
What are the accounting considerations
28
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Australian Tax office Activity
Streamlined Assurance
Review Risk Review of Top
1000 taxpayers
Reportable tax position schedule
Extended to cover companies with
turnovergt$250million
29
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statements
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
30
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip
31
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
32
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
Detection risk cannot be taken into account Assume that the tax authority would examine and have full knowledge of all
relevant information
33
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
34
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
35
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
36
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
37
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
Other issues
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
bull Deductions claimed for RampD tax incentives
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
23
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
ASIC focus areas
Inventories
Impairment and other
asset values
Accounting policy choice
selectionConsolidation
accounting
Sources of judgement
and estimation
Expense deferral
Tax accounting
Revenue recognition
GoodwillIntangibles
Financial Instruments
PPampE
New accounting standards
24
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Do the changes impact you
Consolidation integrity
measures
What are the accounting considerations
25
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
What are the accounting considerations
26
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
Reduction in Corporate Tax rates
Small businesses
What are the accounting considerations
27
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
Reduction in Corporate Tax rates
Small businesses
Significant Global Entity
definition broadened
What are the accounting considerations
28
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Australian Tax office Activity
Streamlined Assurance
Review Risk Review of Top
1000 taxpayers
Reportable tax position schedule
Extended to cover companies with
turnovergt$250million
29
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statements
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
30
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip
31
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
32
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
Detection risk cannot be taken into account Assume that the tax authority would examine and have full knowledge of all
relevant information
33
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
34
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
35
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
36
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
37
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
Other issues
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
bull Deductions claimed for RampD tax incentives
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
24
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Do the changes impact you
Consolidation integrity
measures
What are the accounting considerations
25
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
What are the accounting considerations
26
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
Reduction in Corporate Tax rates
Small businesses
What are the accounting considerations
27
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
Reduction in Corporate Tax rates
Small businesses
Significant Global Entity
definition broadened
What are the accounting considerations
28
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Australian Tax office Activity
Streamlined Assurance
Review Risk Review of Top
1000 taxpayers
Reportable tax position schedule
Extended to cover companies with
turnovergt$250million
29
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statements
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
30
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip
31
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
32
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
Detection risk cannot be taken into account Assume that the tax authority would examine and have full knowledge of all
relevant information
33
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
34
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
35
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
36
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
37
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
Other issues
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
bull Deductions claimed for RampD tax incentives
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
25
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
What are the accounting considerations
26
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
Reduction in Corporate Tax rates
Small businesses
What are the accounting considerations
27
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
Reduction in Corporate Tax rates
Small businesses
Significant Global Entity
definition broadened
What are the accounting considerations
28
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Australian Tax office Activity
Streamlined Assurance
Review Risk Review of Top
1000 taxpayers
Reportable tax position schedule
Extended to cover companies with
turnovergt$250million
29
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statements
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
30
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip
31
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
32
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
Detection risk cannot be taken into account Assume that the tax authority would examine and have full knowledge of all
relevant information
33
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
34
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
35
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
36
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
37
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
Other issues
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
bull Deductions claimed for RampD tax incentives
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
26
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
Reduction in Corporate Tax rates
Small businesses
What are the accounting considerations
27
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
Reduction in Corporate Tax rates
Small businesses
Significant Global Entity
definition broadened
What are the accounting considerations
28
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Australian Tax office Activity
Streamlined Assurance
Review Risk Review of Top
1000 taxpayers
Reportable tax position schedule
Extended to cover companies with
turnovergt$250million
29
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statements
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
30
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip
31
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
32
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
Detection risk cannot be taken into account Assume that the tax authority would examine and have full knowledge of all
relevant information
33
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
34
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
35
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
36
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
37
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
Other issues
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
bull Deductions claimed for RampD tax incentives
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
27
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Recent changes to tax legislation
Other integrity
measures(egDeductible
liabilities measures)
Do the changes impact you
Consolidation integrity
measures
Reduction in Corporate Tax rates
Small businesses
Significant Global Entity
definition broadened
What are the accounting considerations
28
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Australian Tax office Activity
Streamlined Assurance
Review Risk Review of Top
1000 taxpayers
Reportable tax position schedule
Extended to cover companies with
turnovergt$250million
29
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statements
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
30
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip
31
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
32
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
Detection risk cannot be taken into account Assume that the tax authority would examine and have full knowledge of all
relevant information
33
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
34
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
35
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
36
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
37
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
Other issues
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
bull Deductions claimed for RampD tax incentives
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
28
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Australian Tax office Activity
Streamlined Assurance
Review Risk Review of Top
1000 taxpayers
Reportable tax position schedule
Extended to cover companies with
turnovergt$250million
29
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statements
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
30
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip
31
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
32
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
Detection risk cannot be taken into account Assume that the tax authority would examine and have full knowledge of all
relevant information
33
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
34
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
35
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
36
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
37
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
Other issues
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
bull Deductions claimed for RampD tax incentives
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
29
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statements
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
30
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip
31
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
32
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
Detection risk cannot be taken into account Assume that the tax authority would examine and have full knowledge of all
relevant information
33
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
34
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
35
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
36
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
37
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
Other issues
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
bull Deductions claimed for RampD tax incentives
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
30
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip
31
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
32
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
Detection risk cannot be taken into account Assume that the tax authority would examine and have full knowledge of all
relevant information
33
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
34
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
35
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
36
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
37
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
Other issues
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
bull Deductions claimed for RampD tax incentives
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
31
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
32
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
Detection risk cannot be taken into account Assume that the tax authority would examine and have full knowledge of all
relevant information
33
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
34
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
35
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
36
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
37
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
Other issues
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
bull Deductions claimed for RampD tax incentives
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
32
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
When should an uncertain tax treatment be reflected in the financial statementsKey test Is it probable that the tax authority will accept the treatment
Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
Financial statements
Tax return
=
If yes thenhellip If no thenhellip
Financial statements
Tax return
ne
Detection risk cannot be taken into account Assume that the tax authority would examine and have full knowledge of all
relevant information
33
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
34
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
35
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
36
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
37
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
Other issues
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
bull Deductions claimed for RampD tax incentives
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
33
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
34
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
35
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
36
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
37
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
Other issues
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
bull Deductions claimed for RampD tax incentives
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
34
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
35
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
36
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
37
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
Other issues
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
bull Deductions claimed for RampD tax incentives
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
35
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
36
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
37
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
Other issues
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
bull Deductions claimed for RampD tax incentives
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
36
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
37
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
Other issues
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
bull Deductions claimed for RampD tax incentives
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
37
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Common examples of uncertain tax treatments in Australia
Tax consolidation
Thin capitalisation
Transfer pricing
Revenue vs capital
account
Other issues
bull Intra-group financing arrangements
bull Tax residence of foreign subsidiaries
Valuation of PPE amp intangible assets in thin cap calculations
bull Deductions claimed under tax cost setting rules
Gain or loss on sale of assets or
business
bull Deductions claimed for RampD tax incentives
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
Hot Topics
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
39
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Contract ndash AASB 15 vs AASB 137
A contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it
An agreement between two or more parties that creates enforceable rights and obligations
Contract AASB 15
Onerous contract AASB 137
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
40
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
Coffee Maker enters into a
MSA for customised
coffee machine
Q Can the expected purchase orders for the pods be included in the expected economic benefits
No minimum quantity for
number of pods in MSA
Revenue recognised as
coffee machine manufactured
Coffee machine
Sale price $300Cost $400
Anticipates coffee pod
sales to recoup loss
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
41
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
SeparateAASB 15 contract
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
42
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Onerous contract ndash expected economic benefits
AASB 15 contract
AASB 137 contractExpected economic
benefits
SeparateAASB 15 contract
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
43
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of debt instruments
AASB 139Financial Instruments
Recognition and Measurement
AASB 9Financial Instruments
Mixed practice for Non-Substantial Modifications
Gain loss recognised immediately on
modification in PampL for Non-Substantial Modifications
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
44
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Example 1 Non-substantial modification on transition to AASB 9
10 year $50m loan
4 pa
Loan renegotiated to 35 pa
(6 years remaining)Non-substantial
modification
Q What is impact of modification on transition to AASB 9
Loan outstanding on transition to
AASB 9(5 years remaining)
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
45
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Example 1 solution Non-substantial modification on transition to AASB 9
4 35
Date of modification
Applicable interest rate
First year of AASB 9
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m3 difference
Non-substantial modificationProspective recognition of gain
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
46
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Prior periods (AASB 139)
Original loan Transition date to AASB 9
Gain loss in opening retained
earnings
Example 1 solution Non-substantial modification on transition to AASB 9
Continue using original effective interest rate (4)
4 35
Date of modification
$11m gain to open retained
earnings3 difference
AASB 139 AASB 9
50m 50m
50m 489m
First year of AASB 9
Applicable interest rate
AASB 139
Original loan carry amt 50m
Modified loan carry amt 50m
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
47
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Modification of terms
Substantial modification
bull De-recognise existing asset or liabilitybull Recognise new asset or liability at FV and
calculate a new effective interest rate (EIR)
bull Recognise any gain or loss in PampLbull Original and new transaction costs
recognised immediately in PampL (unless relates solely to new liability)
Non-substantial modification
bull Re-calculate the carrying amount by discounting the modified cash flows using the original effective interest rate (EIR)
bull Recognise change in PampLbull New and original transactions costs
capitalised and amortised over the remaining life using EIR method
ConsiderBoth quantitative and
qualitative considerations
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
48
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m ---
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
5 financiers
Modification to interest rate maturity date
and facility limit
Drawn
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
49
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$50m - -$40m
Example 2a Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q What is the unit of account for the modification - 1 master financing agreement or 5 loan facilities
Depends - facts and circumstance specific
Modification to interest rate maturity date
and facility limit
Drawn
5 financiers
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
50
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Unit of accountEach Facility
5 financiers
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
51
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
-$40m $50m - -
Example 2b Master financing agreement
Facility 5Facility 4Facility 3Facility 2Facility 1
Q Is quantitative modification assessment performed on all loans or only those drawn down
Modification to interest rate maturity date
and facility limit
Drawn
Only on facilities loans drawn down
Unit of accountEach Facility
5 financiers
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
52
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
53
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
$40m $50m
Example 2c Master financing agreement
Facility 2Facility 1Drawn
Future expected draw downs not included
Unit of accountEach Facility
5 financiers
Q Are expected future draw downs included in the quantitative assessment of whether a debt modification is substantial or not
Expect to draw down
an additional $50m
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
Looking ahead
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
55
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
56
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
57
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash Amendments to Standards
‒ Business and Asset acquisition accounting can be very different‒ Changes how you determine whether a business is acquired‒ Issued in October 2018
Definition of a business
‒ Refines definition of materiality and clarify its characteristics‒ Standard expected to be issued early November 2018
Definition of material
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
58
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
59
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Looking ahead ndash AASB projects
ndash Across all sectors for-profit not-for-profit and public sector
ndash Seeks to develop criteria for application of reporting requirements
ndash Consultation on removing special purpose financials
Australian Financial Reporting
Framework
Change to focus solely on For-profit
‒ Public Sector Licensor guidance issued‒ AASB 1059 deferred ‒ Fair value measurement‒ Insurance contracts amendments‒ Roundtables on extractive industry and goodwill
Public sector projects
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
60
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Take-aways
Prepare for changes that impact you at 31 December 20181
Consider how you disclose impact of adoption to new financial instruments revenue standards and for standards not yet effective leases standards Be aware of ASIC and ATO focus areas and consider tax changes and uncertainties and their impact on your financial statements
Consider whether any of the Hot topics relating to onerous contracts and debt modifications impact on your current practices
2
3
4
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
Appendix
Standards effective for 31 December 2018Standards available for early adoption
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
62
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Financial Instruments AASB 9
This standard includes revised guidance on the classification and measurement of financial assets including a new expected credit loss model for calculating impairment and new general hedge accounting requirements The 2014 version supersedes all prior versions of AASB 9 (issued in 2009 2010 and 2013)
Revenue from Contracts with Customer AASB 15
This standard contains a single model that applies to contracts with customers and two approaches to recognising revenue at a point in time or over time The model features a contract-based five-step analysis of transactions to determine whether how much and when revenue is recognisedFor not-for-profit entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
Transfers of Investment Property
Amendments to AASB 140
Provides guidance on transfers to or from investment properties
Classification and Measurement of Share-based
Payment Transactions Amendments to AASB 2
Introduces new requirements for accounting for the effects of vesting and non-vesting conditions on cash-settled share-based payments share-based payment transactions with a net settlement feature for withholding tax obligations and modifications that change classification of share-based payment transactions from cash-settled to equity-settled
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
63
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards first effective ndash 31 December 2018 annual and half-years
Annual reporting periods beginning on or after 1 January 2018
Foreign Currency Transactions and Advance
Consideration Interpretation 22
Provides guidance about the exchange rate to be used in reporting foreign currency transactions when advances are received
Annual Improvements 2014-2016 Cycle
Amendments to AASB 1 amp AASB 128
Amends the Investments in associates and joint ventures standard to allow a venture capital organisation or other qualifying entity to elect to measure its investments in an associate or joint venture at fair value through profit or loss rather than apply the equity method This election can be made on an investment-by-investment basis In addition a non-investment entity investor is able to elect to retain the fair value accounting in certain circumstances Amends AASB 1 to remove outdated exemptions for first time adopters of IFRS
Amendments and clarifications to AASB 4
Insurance ContractsProvides relief to insurers when adopting AASB 9 and clarification on the scoping of additional Australian specific standards for insurers
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
64
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Prepayment features with negative compensationAmendments to AASB 9
Instruments with prepayment features that result in negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of AASB 9 The second amendment is more of an official clarification and will mean that companies that have modified or exchanged fixed rate financial liabilities face a significant change in the accounting for non-substantial modifications that do not result in de-recognition
Income of Not-for-profit entities
(AASB 1058 amp AASB 15 NFP Implementation guidance)
Changes the income recognition requirements that apply to not-for-profit (NFP) entities and requires an arrangement entered into by a NFP to be enforceable and sufficiently specific to be considered within the scope of AASB 15 The Standard replaces the income recognition requirements relating to private sector NFP entities previously in AASB 1004 Contributions and the majority of existing requirements for income recognition relating to public sector NFP entities For NFP entities AASB 15 applies for annual reporting periods beginning on or after 1 January 2019
NFP Public Sector Licensors (AASB 15 NFP Implementation
guidance)
Add requirements and implementation guidance for application by NFP public sector licensors to transactions involving the issue of licences Specifically the amendments expand the scope of AASB 15 to include non-contractual licences provide guidance distinguishing a licence from a tax and to clarify the types of licences issued by not-for-profit public sector licensors Recognition exemptions are provided for short-term licences and licences issued for a low transaction price
Long-term interests in associates and joint ventures
Amendments to AASB 128
Address equity-accounted loss absorption by long-term interests involving the dual application of AASB 128 Investments in Associates and Joint Ventures and AASB 9 Financial Instruments An explanation o the annual sequence in which both standards are applied is provided
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
65
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Plan amendment curtailment and settlement
Amendments to AASB 2
Curtailment or settlement of a defined benefit plan updated actuarial assumptions are used to determine the current service cost and net interest for the periodThe effect of the asset ceiling is disregarded when calculating the gain or loss on any settlement of the plan and is dealt with separately in other comprehensive income
Annual Improvements 2015-2017 Cycle
Amendments to AASB 3 AASB 11 AASB 112 and AASB 123
How a company accounts for increasing its interest in a joint operation that meets the definition of a businessAll income tax consequences of dividends are recognised consistently with the transactions that generated the distributable profits ndash ie in profit or loss OCI or equityWhich borrowing costs are included in the general pool of borrowing costs to calculate eligible borrowing costs which are able to be capitalised
LeasesAASB 16
Removes the classification of leases as either operating leases or finance leases ndash for the lessee ndash effectively treating all leases as finance leasesShort-term leases (less than 12 months) and leases of low-value are exempt from the lease accounting requirementsChanges in accounting over the life of the lease In particular companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentalsLessor accounting remains similar to current practice ndash ie lessors continue to classify leases as finance and operating leases
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
66
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
Annual reporting periods beginning on or after 1 January 2019
Uncertain tax positionsInterpretation 23
Clarifies the impact of uncertain tax positions and the accounting for income tax treatments that have yet to be accepted by tax authorities whilst also aiming to enhance transparency
Service Concessions Grantors
AASB 1059
Guidance for public sector entities (grantors) who have entered into service concession arrangements with private sector operators Issued to address the divergence in practice and requires grantors to recognise a service concession asset and a corresponding liability on the balance sheet The initial balance sheet accounting as well as the ongoing profit or loss impacts could have implications for grantors
Annual reporting periods beginning on or after 1 January 2020
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
67
Document Classification KPMG Public
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved The KPMG name and logo are registered trademarks or trademarks of KPMG International Liability limited by a scheme approved under Professional Standards Legislation
Standards available for early adoption
AASB 17Insurance contracts
Expected to result in lower deferral of acquisition expenses the introduction of risk adjustments for reporting purposes and a likely change in lsquoboundaryrsquo for certain contracts such as yearly renewable term insurance policies
Annual reporting periods beginning on or after 1 January 2021
Sale or Contribution of Assets between an Investor and its Associate or Joint VentureAmendments to AAB 3 and
AASB 128
Requires the full gain or loss to be recognised when the assets transferred meet the definition of a lsquobusinessrsquo under AASB 3 Business Combinations (whether housed in a subsidiary or not)
Annual reporting periods beginning on or after 1 January 2022
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-
Document Classification KPMG Public
kpmgcomau
copy 2018 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
Liability limited by a scheme approved under Professional Standards Legislation
The information contained in this document is of a general nature and is not intended to address the objectives financial situation or needs of any particular individual or entity It is provided for information purposes only and does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to influence a person in making a decision including if applicable in relation to any financial product or an interest in a financial product Although we endeavour to provide accurate and timelyinformation there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
To the extent permissible by law KPMG and its associated entities shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise)
- Are you ready for 31 December 2018 reporting
- Your facilitators arehellip
- What is our reporting context
- Agenda
- New standards for 31 December 2018
- New standards 31 December 2018 reporting (year-end and interims)
- New standards 31 December 2018 reporting (year-end and interims)
- Initial application of AASB 9 and AASB 15 ndash annual reporting
- Initial application of AASB 9 and AASB 15 ndash comparatives
- Transition disclosures
- Ongoing disclosures ndash Disclosure objective
- AASB 7 (AASB 9) Disclosure requirements
- AASB 15 Disclosure requirements
- Initial application of AASB 9 and AASB 15 ndash half-year disclosures
- Transition approach ndash 30 June 2018 half-year disclosures
- Initial application of AASB 15 ndash 30 June 2018 half-year disclosures
- Regulatory update
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC financial statement surveillance
- ASIC focus areas
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Recent changes to tax legislation
- Australian Tax office Activity
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Uncertain tax treatments ndash whatrsquos changing under Interpretation 23
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Common examples of uncertain tax treatments in Australia
- Hot Topics
- Contract ndash AASB 15 vs AASB 137
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Onerous contract ndash expected economic benefits
- Modification of debt instruments
- Example 1 Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Example 1 solution Non-substantial modification on transition to AASB 9
- Modification of terms
- Example 2a Master financing agreement
- Example 2a Master financing agreement
- Example 2b Master financing agreement
- Example 2b Master financing agreement
- Example 2c Master financing agreement
- Example 2c Master financing agreement
- Looking ahead
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash Amendments to Standards
- Looking ahead ndash AASB projects
- Looking ahead ndash AASB projects
- Take-aways
- AppendixStandards effective for 31 December 2018Standards available for early adoption
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards first effective ndash 31 December 2018 annual and half-years
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Standards available for early adoption
- Slide Number 68
-