What is meant by IFRS impact assessment?
Effect of an Iinternational Financial Reporting Standards (IFRSs) needs to be assessed to understand the impact on – recognition, measurement and disclosure on revenue, expenses, assets and liabilities to an entity, when a new standard or revision in existing standards taken place.
In order to cope up with the requirement of new challenges in the economy or to rectify the possible errors or for better presentation of the financial statements time to time, the IASB
- Either issues new IFRS
- or reissue the existing standards with suitable modifications.
Such newly issued or reissued IFRS will be always specifying the date from which it will be effective be considered in the financial statements.
IFRS impact assessment is an assessment conducted when new or revised accounting standard is implemented in any business from a specific date. Sometimes the value disclosed in the financial statements needs to be changed while comparing with those normally disclosed under existing practice, because of change in measurement of the item. In some cases, the impact will be only on information disclosed in the financial statement and may not necessarily an impact on the financial figures. In certain situations, items which were not accounted till date or had a different treatment earlier may change by the adoption of new or revised one. In some other cases, the impact could be on both; on the financial figures as well as on the disclosure requirements.
Why it is important to commence IFRS impact assessment?
Anyways, whether the impact is on the amount to be recognized or the amount to be measured or on the disclosure requirements, it is important to do an analysis of impact on introduction of IFRS well before preparing the financial statement to report to the stakeholders and/or to the public. Then the management will have a fair idea on the impact of such new or revised IFRS well before closing the financial year.
What are the information required to conduct IFRS Impact Assessment?
- Audited financials for the immediate two previous financial years.
- Accounting manuals, if any adopted by the management.
- All details of various types of contracts (whether written or verbal) entered with customers of the company.
- Agreements/ Contracts/ relevant Invoices.
- Detailed classification of Financial Assets & Financial Liabilities.
- Details of contract revenue, costs in year previous year anticipated projects for the current year etc.
- Other relevant information, supporting documents as and when required.
Some of the relevant IFRS, recently issued, where we do the impact assessment for the year 2018 are given below.
IFRS 15 Impact assessment
Based on the nature, terms and conditions of contract entered with customers, we will assess how performance obligations are meeting as per requirement of the IFRS 15 on revenue from different sources. The source includes; but not limited to Trading, Construction, Services etc.
The IFRS 15 Impact assessment will cover broadly the following:
- Identifying the contract with customers & identifying performance obligation
- Whether performance obligations are happening at a specific point of time or over a period of time will be primarily evaluated based on the criteria suggested by IFRS 15.
- Recognition of contract costs, allocation of transaction price will also be verified.
- Identify the timing of revenue recognition
- Will check and analyse whether any modification is required in the contract with customers to comply with IFRS 15.
- Comparison with accounting policies and treatment adopted up to end of financial year 2017 will be reviewed with the requirement as per IFRS 15.
- Requirement of updation, if any in system (IT) will be evaluated.
- Need for major revision in estimates will be evaluated.
Disclosure requirement as per new standard will suggested.
IFRS 16 Impact assessment
The IFRS 16 impact assessment of – Leases will broadly cover the following:
- Any property, plant & equipment whether acquired or hired from third party.
- Any asset is given on lease to other party
- Lease accounting review, if required
- Lease amortisation, if any.
- Disclosure requirements as per Standard
IFRS 9 Impact Assessment
As per IFRS 9 – Financial Instruments, the impact assessment will cover broadly the following:
- Classification & measurement of Financial Assets & Financial Liabilities
- Impairment of financial assets & liabilities, if any as per 3 stages impairment model
- Disclosure requirements as per standard.
Need of an impairment allowance is one of the requirements under IFRS 9 – financial instruments. It has to be done on periodic basis and the change in the impairment allowance has to be reported in the profit and loss account.
Emirates Chartered Accountants Group caters highly qualified professional in the related field of work by providing a wide range of Audit and Assurance services all over UAE – Dubai, Abu Dhabi, Ajman, Sharjah, Fujairah & Ras Al Khaimah.
- Internal Audit
- Financial Statement Audit
- Business Valuation
- Due Diligence Audit
- Risk Management
- Investigation Audit
- IFRS Impact Assessment
- Company Liquidation
For IFRS Impact Assessment
Contact Person: Mr. Ajith Kumar
Mobile: +971 – 504820902
Contact Person: Ms. Bindu
Mobile: +971 – 555309597