President Ramon Magsaysay State University

College of Accountancy and Business Administration

Iba, Zambales, Philippines
Tel/Fax No: 047-811-1683

Name: Rizza Mae C. Abaniel SY: 2020-2021

Course: BSA-3A Subject: Updates in PFRS/IFRS

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Below are the amendments for our discussion on January 23, 2020:

1. Amendments to PAS 19, Plan Amendment, Curtailment or Settlement

a. Why these amendments have been issued?

The International Accounting Standards Board (IASB) has published 'Plan

Amendment, Curtailment or Settlement (Amendments to IAS 19)' thus finalising
one of two issues relating to IAS 19 submitted to the IFRS Interpretations
Committee and exposed together in June 2015.
 
In June 2015, the IASB published ED/2015/5 Remeasurement on a Plan
Amendment, Curtailment or Settlement/Availability of a Refund from a Defined
Benefit Plan (Proposed amendments to IAS 19 and IFRIC 14) combining two
issues submitted separately to the IFRS Interpretations Committee into a single
package of narrow-scope amendments to IAS 19 Employee Benefits and IFRIC
14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction.
However, in April 2017 the IASB decided to pursue the amendments to IAS 19
and in September 2017 confirmed it would do so despite putting off the
amendments to IFRIC 14. Although exposed together, the IAS 19 amendments
are unrelated to the IFRIC 14 amendments.

b. What are the amendments?

The amendments in Plan Amendment, Curtailment or Settlement (Amendments

to IAS 19) are:
If a plan amendment, curtailment or settlement occurs, it is
now mandatory that the current service cost and the net interest for the period
after the remeasurement are determined using the assumptions used for the
remeasurement. In addition, amendments have been included to clarify the effect
of a plan amendment, curtailment or settlement on the requirements regarding
the asset ceiling.

c. Effective Date and Transition Requirements.

 An entity applies the amendments to plan amendments, curtailments or
settlements occurring on or after the beginning of the first annual reporting
period that begins on or after 1 January 2019. Early application is permitted but
must be disclosed.

2. Amendments to PAS 12, Recognition of Deferred Tax Assets for Unrealized Losses

a. Why these amendments have been issued?

The IFRS Interpretation Committee received a request to clarify the application of

IAS 12 for the recognition of a deferred tax in the following circumstances:
 an entity holds a debt instrument classified as available-for-sale and,
therefore, measured at fair value but whose tax base is cost;
 the entity estimates that it is probable that the issuer of the debt instrument
will make all the contractual payments but changes in market interest rates
have caused the fair value of the debt instrument to be below its cost;
 tax law does not allow a loss to be deducted until it is realised for tax
purposes;
 the entity has the ability and intention to hold the debt instrument until the
unrealised losses reverses (which may be at its maturity);
 tax law prescribes that capital losses can only be offset against capital gains,
whilst ordinary losses can be offset against both capital gains and ordinary
income; and
 the entity has insufficient taxable temporary differences and no other probable
taxable profits against which the entity can utilise deductible temporary
differences.
The objective of the amendments is to explain the application of the existing
principles in IAS 12 to the situation presented.

b. What are the amendments?

The amendments clarify that unrealised losses resulting from the circumstances
described above give rise to a deductible tax difference regardless of whether the
holder expects to recover the carrying amount by holding the debt instrument until
maturity or by selling the debt instrument.

In circumstances in which tax law restricts the utilisation of tax losses such that an
entity can only deduct the tax losses against income of a specified type, an entity
would assess a deferred tax asset in combination with other deferred tax assets of the
same type.
 The amendments clarify that when estimating taxable profit of future periods, an
entity can assume that an asset will be recovered for more than its carrying amount if
that recovery is probable and the asset is not impaired. All relevant facts and
circumstances should be assessed when making this assessment.

The amendments include an illustrative example to IAS 12 to illustrate the

utilisation of deductible temporary differences for different sources of taxable profits
(future reversal of existing taxable temporary differences, future taxable profit and
tax planning opportunities) that are available but insufficient to offset existing
deductible temporary differences.

The amendments make clear that, in evaluating whether sufficient future taxable
profits are available, an entity should compare the deductible temporary differences
with the future taxable profits excluding tax deductions resulting from the reversal of
those deductible temporary differences.

c. Effective date and transition requirements

The amendments are effective from 1 January 2017 with earlier application
permitted.
An entity is required to apply the amendments retrospectively in accordance with
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. However,
in applying the amendments in the first opening statement of financial position, an
entity is not required to make transfers between retained earnings and other
components of equity to restate cumulative amounts previously recognised in profit
or loss, other comprehensive income or directly in equity. If an entity does not make
such transfers, it should disclose that fact. The amendments do not include any
specific transition relief for first time adopters.

3. Amendments to PFRS 10, PFRS 12 and PAS 28, Investment Entities: Applying the
Consolidation Exception

a. Why these amendments have been issued?

The amendments result from three issues submitted to the IFRS Interpretations
Committee (the “IFRS IC”). After discussing these issues, the Committee
recommended that the IASB address the issues in narrow-scope amendments to IFRS
10 and IAS 28.

b. What are the amendments?

 Exemption from preparing consolidated financial statements IFRS 10 provides an
exemption from preparing consolidated financial statements for a parent whose
ultimate or intermediate parent prepares consolidated financial statements that are in
accordance with IFRSs and publicly available.

The amendments confirm that the exemption from preparing consolidated

financial statements continues to be available to a parent entity that is a subsidiary of
an investment entity, even if the investment entity measures all its subsidiaries at fair
value in accordance with IFRS 10. This decision was based on cost-benefit
considerations and the fact that the investment entity parent is required to provide
disclosures under IFRS 12 Disclosure of Interests in Other Entities, IFRS 7 Financial
Instruments: Disclosures and IFRS 13 Fair Value Measurement.

Consequential amendments have been made to IAS 28 to confirm that the

exemption from applying the equity method is also applicable to an investor in an
associate or joint venture if that investor is a subsidiary of an investment entity, even
if the investment entity parent measures all its subsidiaries at fair value.

A subsidiary that provides services related to the investment activities of its

investment entity parent IFRS 10 requires an investment entity to measure its
investments in subsidiaries at fair value. However, as an exception to this
requirement, if a subsidiary provides investment-related services or activities, to the
investment entity it should be consolidated.

The amendments clarify that this exception only applies to subsidiaries that are
not themselves investment entities and whose main purpose are to provide services
and activities that are related to the investment activities of the investment entity
parent. All other subsidiaries of an investment entity should be measured at fair
value.

c. Effective Date and Transition Requirements.

The amendments apply retrospectively are effective for annual

periods beginning on or after 1 January 2016. Earlier application is permitted. If an
entity applies the amendments early, it should state that fact. An entity is only
required to present the information required by IAS 8 paragraph 28(f) for the annual
period immediately preceding the date of initial application of the amendments; this
information is permitted but not required for the current or for earlier comparative
periods.