ating for financial assets in IAS No, 32, “Financial Instruments: Presentation” cating for intangibles in JAS No. 38, “Intangible Assets sing for goodwill in IFRS No. 3,"Business Combinations,” which replaced px. 22 -élosure of information on financillinstruments in JFRS No. 7, “Financial rsments: Disclosures” cating for financial assets in IFRS No. 9, “Financial Instruments” 28 ps “Investments in Associates and Joint Ventures," as amended in 2011, outlines how to ity method to investments in assocjates and joint ventures. The standard also defines ny reference to the concept of “significant influence.” which requires power to par- svncial and operating policy decisions ofan investce (but not joint control or control eicces), I applies to all investments in which an investor has significant influence but *e joint control except for investments held by a venture capital organization, mutual “ese and similar entity that are designated under JFRS No. 9 to be at fair value with ‘nanges recognized in profit of loss: cnnced JAS No. 28, the LASB did not change the fundamental accounting for associates ‘ity method. The board's main objective for the revision was to reduce alternatives. TAS No. 28 addressed accounting for investments where the investor does not own a Mmnerest but has the ability to significantly influence the investee. The reporting require- wed in this statement are quite similar to US GAAP discussed in APB Opinion No. 18. mee changes in the revised IAS No, 28 were as follows: sons additional guidance and disclosures for when it is appropriate to overcome the scion that an investor has significant influence if it holds 20% or more of the voting “Vn example would be when an inyoste i in legal reorganization or bankruptey or «onder severe long-term restrictions on its ability to transfer fonds to the investor snred the investor and equity method associates to use uniform accounting policies ‘ee ‘ransactions and events in similar circumstances. gered additional disclosutes, including the fair values of investments in associates for chere are published price quotations, summarized financial information of associates, ‘or a departure from the 20% presumption of significant influence, differences in dates, esrictions on a associate's ability to transfer funds, unrecognized losses vmaociate, and tbe investor's contingent liabilities with respect tothe associate ceter, 2016, the IASB issued Annual Improvements to TERS Standards 2014-2016 aed that te elton to measure aa investment in an associate of ant venture Saari that isa ventre capital organization, or other qualifying emty a fair Se nor loss, i avalable foreach investment in an associat or joint venture onan investment basis, upon init recognition é = financial Instruments: Presentation,” outlines the accounting requirements for the «of financial instruments and how (o classify these financial instruments into financial teaccial Fiabilities, and equity instrunients, The standard also provides guidance on the| classification of related interest, dividends, and gains/losses and when financial assets 2nd cial liabilities can be offset. “The title of IAS No. 32 was originally “Financigl Instruments Disclosure end Presezm but its disclosure provisions were replaced by IFRSNo. 7 in 2007. IAS No. 32's main are to provide additional guidance on selected mafters such as the measurement of nents of financial statements on initial recognition and the classification of derivative an entity's own shares; italso aimed to put a disclosures relating to financial instrume= standard. The fundamental approach to the presentation and disclosure of financial = ‘was not changed inthe revision. Under ZAS No. 32, financial assets are defined as cash. = receive cash or other financial assets from another enterprise, or a contractual right te < financial assets with another enterprise under pctential Favorable conditions or equity of other enterprises. TONG ASSIETS th INVESTMENTS AND INTANGIBLES TAS No. 38 JAS No 38, “Intangible Assets,” outlines the accounting requirements for intangible asses are defined as nonmotetary assets without physical substance and identifiable. Intancsti ‘meeting the relevant recognition criteria arc intially measured at cost, subsequent}y cost or using the revaluation model, and amortized on a systematic basis over their ose unless the asset has an indefinite useful life, in which case itis not amortized. ‘The standard applies to all intangible assets that are not specifically dealt wits a International Accounting Standards. It specifically applics to expenditures for a2» training, start-up, and research and development activities, Specifically, JAS No. 38 ine fan intangible asset should be recognized initially, at cost, in the financial stetements these three conditions: 1. The asset meets the definition of an intangible asset, Particularly, there should be a tifiable asset that is controlled and clearly distinguishable from an enterprise's eo° 2, Itis probable thatthe furure economic berefits that are attributable to the asset «= the enterprise ‘The cost of the asset can be measured reliably. 3. ‘These requirements apply whether an intangible asset is acquired externally or internally. If an intangible item does not meét both the definition and the criteria for nition of an intangible asset, it is expensed when incurred. All expenditures on reseas be immediately recognized as expenses, and ihternally generated intangibles such 25 cannot be recognized as assets. JAS No. 38 does provide that all development costs ‘once both technical and economic feasibility have been demonstrated are to be capita treatment is inconsistent with US GAAP where these costs would be expensed as inc “After initial recognition in the financial statements, JAS No. 38 indicates that an = asset should be measured under one of the following two treatments: 1. Benchmark treatment, Historical cost less any amortization and impairment loss 2, Allowed alternative trearment, Revalued amount (based on fair value) less any ‘subsequent amortization and impairment josses. The main difference from the for revaluations of property, plant, and equipment under IAS No. 16 is that re for intangible assets are permitted only fair value can be determined by referes active market, Active markets are expecte1l to be rare for intangible assets. ‘The statement requites intangible assets (oe amortized over the best estimate of 2 ful life, and it includes the presumption that the useful life of an intangible asset willIntefnational Aécount sy vears from the date when the asset is available for use. In rare cases, where persuasive evi- ~e suggests that the useful life of an intangible asset will exceed 20 years, ahlenterprise shoutd nortize the intangible asset over the best estimate ofits useful life as well as perform these steps: |. Test the intangible asset for impaizment at least annually in accordance with JAS No. 36, ‘Impairment of Assets.” {> Disclose the reasons why the presiimption that the useful life of an intangible asset will not exceed 20 years is rebutted ang also the factor(s) that played a significant role in deter- ‘mining the useful life of the asset ‘RS No.3 2 85 No, 3, “Business Combinations,” requires the use of the acquisition method in accounting business combinations. The acquisition method requires the assets acquired and liabilities ‘sssumed f0 be measured at their fair Values at the acquisition date and the recognition of the ‘aeference between the acquisition price and the net assets acquired to be recorded as goodwi ERS No. 3 prohibits the amortization gf goodwill. Instead, goodwill must be tested for impait- meat at least annually in accordance with JAS No, 36, “Impairment of Assets.” if the acquirer's interest in the net fair value of the acquired identifiable net assets exceeds ‘he cost of the business combination, that excess (referred to as negative goodwill) must be rec- ‘ognized immediately in the income statement as a gain. Before concluding that negative good- ‘wsll has arisen, however, IFRS No. 3 requires that the acquirer reassess the identification and neasurement of the acquiree’s identifighle assets, liabilities, and contingent fiabilities and the ‘neasurement of the cost of the combination. These requitements bring international accounting seandards in line with US GAAP. IFRS No.7 ne primary objective of IFRS No. 7 is (0 provide risk manayement and financial instrument ssclosures that enable users to evaluate the significance of financial instruments to an entity's nancial position and performance. Spes'ically, JFRS No. 7 requires the following disclosures: 1, The significance of an emtity’s financial instruments entity, 2. The nature and extent of risks arising from financial instruments to which an entity is exposed and how those risks have been managed ‘The following balance sheet and income statement disclosures are required to provide formation about the significance of an entity's assets + Financial assets measured at fair value + Held-to-maturity investments + Loans and receivables + Available-forsale assets © ‘The required quantitative disclose be bad on he infomation provided internally ‘to key management personnel as détined in JAS No. 24, “Related Party Disclosures.” These dis- Josures include: + Risk exposures for each type of financial instrument + Management's objectives, policies, and processes for managing those risksER ASSETS TeINVESTMENTS AND INTANGIDIS + Changes from the prior period ‘+ Summary quantitative data about exposure to each 1i,k atthe reporting date TERS No. 7 also seeks to ptoxide risk-based disecsu from an enty’s perspetve and require an entity (o communicate the nature and extht gf risks, the significance of financial Fatens and how it manages financial sks to it stakeholders by explaining it isk objee tives, policies, and proceses, These disclosures include «+ Maximum amount of exposure, a description of any collateral, information about the credit quality ofits financial assets that are neither past due nor impaired, and information sbout credit quality of financial assets whose terms have been renegotiated «= Certain analytical disclosures for financial assets that are past due or impaired «+ Information about collateral or other eredit enhancements obtained or called IFRS No.9 On July 24, 2014, the IASB issued FFRS No, 9, “Financial Instruments,” which replac TAS No. 39, “Financial Instruments; Recognition and Measurement.” Critics of IAS No maintained that it contained too many different classification categories and associat impairment models, Many of these application issues were related to the clasifcation measurement of financial assets, After reviewing the criticisms, the IASB decided that most effective way 10 address Such issues and improve the ability of users of financial sta tents to better understand the information about the amounts, timing, and uncertainty = future cash flows was to replace the existing classification and measurement categories financial assets, Work on JFRS No. 9 was accelera(ed in response to the 2008 global fins cial crisis. In particular, interested parties including the G20, the Financial Crisis Advisers Group, and otbets highlighted the timeliness of recognition of expected credit losses. aw complexity of miltiple impairment models, and own credit as areas in need of considerate by the IASB. TERS No. 9 contains requirements for the recognition and measurement, impairment, dere nition of financial instruments, and hedge accounting. The 2014 version of IFRS No, 9 sux sedes all previous versions and is effective for periods beginning on or after January 1,015. = 8g early adoption permitted (subject to Tocal endorsement requirements). The IASB has pres x published versions of JFRS No. 9 that introduced new classification and measurement ro Treats (in 2009 and 2010) and a new hedge accounting model (in 2013), The July 2014 ps ‘cation represents the final version of the Standard, replaces earlier versions of IFRS No. © completes the IASB's project to replace IAS No. 39. Following is a summary of is provi they pertain to financial assets. Initial Measurement of Financial Instruments ‘All financial instruments are fo be initially measured at fair value plus or minus, in the <8 ‘financial asse} not at fair value through profit or loys,transaction costs. The classificaisse financial asset is made at the time itis initially recognized. Two criteria are used to des how financial assets should be classified and measured: + ‘The entity’s business model for managing the Financial assets + "The contractual cash flow characteristics of the financial assetbsequent Measurement of Financial Assets + No, 9 divides all financial assets into two measurement classifications: 1 Those measured at amortized cost 2 Those measured a fair value asseis are measured at fair value, gains and losses are either recognized entirely in profit toss (fair value through profit or loss, FVTPL) or recognized in other comprehensive income ‘value through other comprehensive income, FVTOCN. For debt instruments, the FVTOCT sification is required for certain assets unless the fair value option is elected. For equity vestments, the FVTOCI classification is an optional clection. However, the requirements for assifying gains or losses recognized in other comprehensive income are different for debt Peserurents and equity investments. ‘ business model refers to how an entity mjnages its financial assets to generate eash flows — collecting contractual cash flows, sellin fihuncial assets, or both. Financial assets are mea at amortized cost in a business model whose objective is to hold assets to collect contractual > flows, Financial assets are classified and measured at FVTOCI in a business model whose sctive is achieved by both collecting contractual cash flows and selling financial assets. Any Gosncial assets that are not held in one of these two business models are measured at FVTPL. ‘Pecancial assets that ae held for trading and those managed on a fair value basis are also included sn this category. Equity investments included under the seope of JFRS No. 9 are to be measured at fair value “ge the statement of financial position, with value changes recognized in profit or loss, except for howe equity investments for which the entity has clected to present value changes in other com- iprebensive income. Tra financial asset is a debt instrament and the objective of the entity’s business model is to collect its contractual cash flows, the financial asset is measured at amortized cost. All other debt Snstruments are measured at fair value through profit or loss (FVTPL). Pair Value Option RS No. 9 contains an option to designate, at initial recognition, a financial asset as measured at EVTPL, even if an instrument meets the two ‘equirements t0 be measured at amortized cost or EN-TOCI, if doing so eliminates or significantly reduces a measurement or recognition inconsis~ tency (defined as an accounting mismatch) that would otherwise arise from measuring assets or sahilities or recognizing the gains and losses on them on different bases Other Comprehensive Income Option «yan equity investment is not held for trading, an entity can make an inevocable election at intial ‘cognition to measure it at FVTOCT with only dividend income recognized in profit or loss. Derecognition of Financial Assets ‘The derecognition criteria in IFRS No. 9 require an entity to determine whether the asset under consideration for derecognition is * + an asset in its entirety or ~ «specifically identified cash flows froma asset (ora group of sina Financial assets) or + a fully proportionate (pro rata) share of the cash flows from an asset (or a group of similar financial assets) oroN ERO ASSETS TIN VESTIIENTS AND INTANGTELES «fully proportogate (pro rata) share of specifically identified cash flows from a financial asset (ora group of similar financial assets). ‘Once the asset under consideration for derecognition hagepeen identified, an assessment is made of whether the asset has been transfered and, if $0, ¥) ther the transfer of that asset is subsequently eligihle for derecognition, * sot i considered wansfered if either the entity as transferred the contractual rights 0 rect cash dows or the entity has retained the contractual rights to receive the cash flows Thom the asset, but bas assumed a contractual obligation t0 Pass those cash flows on under an tnrangement that meets the following three conditions: The entity has no obligation to pay amounts t9 the eventdl recipient unless it collects ‘equivalent amounts on the oigisal asset j «The entity is prohibited from selling or pledging the Crginal asset (other than as security 10 the eventual recipient) «The enity as an obligation to remit those cash lows without ‘material delay ‘Once an entity has determined that the asset has bes transferred, it then must determine ites or ot it has tansferred substanially all ofthe sks an rewards of ownership of the eset. substantia all the risks and rewards have Deen ‘transferred, the asset is derecognized. I ae antilly ll hprisks and rewards have been etaied, deresg 0) ‘of the asset isnot allowed See ay hag nether ruined nor wansfrred substantially 8) of the risks and rewards of the asst, hen the entity must assess whether it has ‘relinquished control of the asset or not TF ie the onuty doce nox control the asset, dhen dereeosnition is mPOA however if the entity has I tae eo of easel, then the enity continues to eragnize the asset to the extent to Whi thas a continuing involvement in the asset Reclassification Reclssiteain of rancial assets between FVTPL, EYTOCY: a amortized cost is requires # Rear plese model objective fr is fnanelal asses chars £2 previous moss if the ent thao longer apply. rciasicaion i aPproprsss Out done prospe= aa ey te raasication dts, wich defined she fist day of fist reporting pero J Mae the change in business model. An entity 04s nok resis previously recounicet | rare een or imerest, IFRS No, 9 doesnot sessifentn Fy HN investments m= Bais were the fair vale opin has Fee etercsod in any Csunsanes © ‘ financial asset Impairment — earache delayed recogni of ee losis meso Dring 2 eee ewes in apg te provision of AS NOS cally, the ineusred loss’ mode] delayed the recognition ‘of credit Losses until there was evideno= cn sed He a SE re tongs ding bd ines Hower: ate 2008 Fase’ ta col be et thee inured lose sel aoe a ies St anole PO rl conpenis pope ose Bren tous AS NaS ana ete mpc ecopipd in rae ts wa oe ig a ts Ne 9 asd the pei of OVA OT ac sit ose ene that measures of xpeted cei HE lst, The ry eied amt ha determined bY eaH Oe wb yl nara te inva of ies AO HE ew =