Basis of preparation
The 2013 Statutory Financial Statements are the separate financial statements for Fiat S.p.A. They have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and adopted by the European Union, in addition to provisions implementing Article 9 of Legislative Decree 38/2005. The designation IFRS also includes all valid International Accounting Standards (“IAS”), as well as all interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”), formerly the Standing Interpretations Committee (“SIC”).
In compliance with European Regulation 1606 of 19 July 2002, beginning in 2005 the Fiat Group adopted the International Financial Reporting Standards (“IFRS”), issued by the International Accounting Standards Board (“IASB”), for the preparation of its consolidated financial statements. On the basis of national legislation implementing that Regulation, those accounting standards were also used to prepare the separate financial statements of the Parent Company, Fiat S.p.A., for the first time for the year ended 31 December 2006. The information required by IFRS 1 – First-time Adoption of International Financial Reporting Standards relating to the effects of the transition to IFRS was provided in an Appendix to the 2006 separate financial statements.
The financial statements are prepared under the historical cost convention (modified where applicable for the valuation of certain financial instruments), as well as on the going concern assumption. Fiat Group’s assessment is that no material uncertainty exists (as defined in paragraph 25 of IAS 1) as to its ability to continue as a going concern. That assessment takes into consideration the ongoing integration with Chrysler and the Group’s industrial and financial flexibility.
Format of the financial statements
In consideration of the activities carried out by Fiat S.p.A., presentation of the Statutory Income Statement is based on the nature of revenues and expenses. The Consolidated Income Statement for Fiat Group is classified according to function, which is considered more representative of the format used for internal reporting and management purposes and is in line with international practice in the automotive sector. For the Statement of Financial Position, Fiat S.p.A. has elected the “current and non-current” classification for the presentation of assets and liabilities. For the Consolidated Statement of Financial Position, a mixed presentation has been elected (as permitted under IAS 1) with the current/non-current classification applied to assets only. The consolidated financial statements include both industrial companies and financial services companies. The financing portfolios of financial services companies are included under current assets, as those assets will be realized in the course of the normal operating cycle. In addition, the financial services companies only obtain a portion of their funding directly from the market. The remainder of their funding is obtained through Group treasury companies (included under industrial activities), which provide funding to both industrial companies and financial services companies within the Group, on the basis of their individual requirements. The distribution of financial services activities within the Group has no impact on the presentation of financial liabilities for Fiat S.p.A. However, for the Consolidated Statement of Financial Position, the distribution of those activities means that a classification of financial liabilities between current and non-current would not be meaningful.
The Statement of Cash Flows is presented using the indirect method.
With regard to the requirements of Consob Resolution 15519 of 27 July 2006 relating to the format of the financial statements, supplementary Statements of Income, Financial Position and Cash Flows with a breakdown of
related-party transactions have been provided separately so that the overall reading of the principal statements is not compromised.
Goodwill arising from the acquisition of a company or a business unit is recognized at cost at the acquisition date. Goodwill is not amortized, but is tested for impairment annually or more frequently if specific events indicate that an impairment loss has occurred. After initial recognition, goodwill is measured at cost less any impairment losses.
Other intangible assets
Purchased or internally-generated intangible assets are recognized in accordance with IAS 38 – Intangible Assets, where it is probable that the use of the asset will generate future economic benefits and where the cost of the asset can be determined reliably.
Intangible assets are measured at purchase or manufacturing cost and, for those with a finite useful life, amortized over their estimated useful life.
Property, plant and equipment
Property, plant and equipment are stated at acquisition or production cost, net of accumulated depreciation and impairment losses, and are not revalued.
Subsequent expenditures are only capitalized where they increase the future economic benefits of the asset to which they relate. All other expenditures are expensed as incurred.
The method and rates used for depreciating assets are provided below.
Leases where the lessor retains substantially all the risks and rewards of ownership of the assets are classified as operating leases. Costs related to operating leases are recognized on a straight-line basis over the duration of the lease.
Depreciation is calculated on a straight-line basis over the estimated useful life of an asset as follows:
|Annual depreciation rate|
At least annually, the Company evaluates recoverability of the value of intangible assets, tangible assets and investments in subsidiaries and associates, in order to determine whether those assets have suffered a loss in value. If there are indications of impairment, the carrying amount of the asset is reduced to its recoverable amount.
For investments in subsidiaries and associates that have distributed a dividend, the following are also considered indicators of impairment:
- if the carrying amount of the investee in the separate financial statements exceeds the book value of equity (including any associated goodwill) as recognized in the consolidated financial statements
- if dividends exceed the comprehensive income of the investee for the period to which the dividend relates
The recoverable amount of an asset is the higher of fair value less disposal costs and its value in use.
When testing for impairment of investments whose market value (fair value less disposal costs) cannot be reliably measured, the recoverable amount is based on value in use, which – in line with the requirements of paragraph 33 of IAS 28 – is determined by estimating the present value of future cash flows and a theoretical terminal value.
Where impairment of an asset subsequently reverses, the carrying amount of that asset is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognized. A reversal of an impairment loss is recognized immediately in the income statement.
Financial instruments held by the Company are classified in the financial statements as follows:
- Non-current assets: investments, other financial assets, other non-current assets
- Current assets: trade receivables, current financial receivables, other current receivables, cash and cash equivalents
- Non-current liabilities: non-current debt, other non-current liabilities
- Current liabilities: trade payables, current debt (including asset-backed financing), other debt
Cash and cash equivalents includes bank deposits, units in liquidity funds and other money market securities that are readily convertible into cash and for which the risk of changes in value is insignificant.
Non-current debt includes liabilities related to financial guarantees. Financial guarantees are contracts where the Company undertakes to make specific payments to a counterparty for losses incurred as a result of the failure of a borrower to meet its payment obligations for a given debt instrument. The present value of any related fees receivable is recognized under other non-current financial assets.
Investments in subsidiaries and associates are recognized at cost and adjusted for any impairment losses.
Any positive difference, arising on acquisition, between the purchase cost and fair value of net assets acquired in an investee company is included in the carrying amount of the investment.
Investments in subsidiaries and associates are tested annually for impairment, or more frequently if evidence of impairment exists. Where an impairment loss exists, it is recognized immediately through the income statement. If the Company’s share of losses of the investee exceeds the carrying amount of the investment and if the Company has an obligation or intention to cover those losses, the investment is written down to zero and a liability is recognized for the Company’s share of any additional losses. If an impairment loss is subsequently reversed, the increase in carrying amount (up to a maximum of purchase cost) is recognized through the income statement.
Investments in other companies, which consists of non-current financial assets that are not held for trading (i.e., available-for-sale financial assets), are initially measured at fair value. Any subsequent gains or losses resulting from changes in fair value determined by the market price are recognized directly in equity until the investment is sold or an impairment loss is recognized. If an investment is sold, cumulative gains or losses previously recognized in equity are recycled through profit and loss. If an impairment loss is recognized on the investment, any accumulated losses recognized in equity are recycled through profit and loss. Investments in companies for which a market price is not available are measured at cost and adjusted for any impairment losses.
Common shares of CNH Industrial (formerly Fiat Industrial) allocated to servicing the stock option and stock grant plans are linked to the liability for share-based compensation (i.e., provisions for stock options and stock grants) and are measured at fair value through profit or loss consistent with the valuation of that liability.
Other financial assets, which the Company intends to hold to maturity, are initially recognized on the settlement date at purchase cost (considered representative of their fair value) which, with the exception of held-for-trading financial assets, is inclusive of transaction costs. Subsequent measurement is at amortized cost using the effective interest method.
Other non-current assets, trade receivables, current financial receivables and other current receivables, excluding those based on a derivative financial instrument, as well as all other unquoted financial assets whose fair value cannot be reliably determined, are measured at amortized cost using the effective interest method, if they have a fixed term, or at cost, if they have no fixed term. Receivables with maturities of over one year which bear no interest or an interest rate significantly lower than market rates are discounted using market rates.
Regular assessments are made to determine whether there is objective evidence that financial assets, separately or within a group of assets, have been impaired. Where such evidence exists, an impairment loss is recognized in the income statement for the period.
Non-current debt, other non-current liabilities, trade payables, current debt and other debt are initially recognized at fair value (normally represented by the cost of the transaction from which the liability arises), in addition to any transaction costs.
With the exception of derivative instruments and liabilities arising from financial guarantees, financial liabilities are subsequently measured at amortized cost using the effective interest method. Measurement of financial liabilities hedged by derivative instruments follows the principles of hedge accounting for fair value hedges. Gains and losses arising from subsequent measurement at fair value, caused by fluctuations in interest rates, are recognized through the income statement and are offset by the effective portion of the gain or loss arising from subsequent measurement at fair value of the hedging instrument.
Liabilities arising from financial guarantees are measured at the higher of the estimate of the contingent liability (determined in accordance with IAS 37 - Provisions, Contingent Liabilities and Contingent Assets) and the amount initially recognized less any amounts already released to profit and loss.
Derivative financial instruments
Derivative financial instruments are used for hedging purposes, in order to reduce currency, interest rate and market price risks.
In accordance with IAS 39, derivative financial instruments qualify for hedge accounting only when at the inception of the hedge there is formal designation and documentation of the hedging relationship, the hedge is expected to be highly effective, its effectiveness can be reliably measured and it is highly effective throughout the financial reporting periods for which the hedge is designated.
All derivative financial instruments are measured at fair value in accordance with IAS 39.
When derivative financial instruments qualify for hedge accounting, the following treatment applies:
- Fair value hedge – Where a derivative financial instrument is designated as a hedge of the exposure to changes in fair value of a recognized asset or liability that is attributable to a particular risk and could affect the income statement, the gain or loss from remeasuring the hedging instrument at fair value is recognized in the income statement. The gain or loss on the hedged item attributable to the hedged risk adjusts the carrying amount of the hedged item and is recognized in the income statement
- Cash flow hedge – Where a derivative financial instrument is designated as a hedge against variability in future cash flows of an existing asset or liability or a transaction considered highly probable that could impact the income statement, the effective portion of the gain or loss on the hedging instrument is recognized directly in equity. Any cumulative gain or loss is reversed from equity and recognized in the income statement in the same period in which the hedged transaction is recognized. The gain or loss associated with a hedge or part of a hedge that has become ineffective is recognized in the income statement immediately. When a hedging instrument or hedge relationship is terminated, but the hedged transaction has not yet occurred, any gain or loss previously recognized in equity is recognized through profit and loss at the time the hedged transaction occurs. If the hedged transaction is no longer probable, the cumulative unrealized gain or loss recognized in equity is immediately transferred to the income statement
If hedge accounting cannot be applied, the gains or losses from the fair value measurement of derivative financial instruments are recognized immediately in the income statement.
Inventory consists of contract work in progress related, in particular, to long-term construction contracts between Fiat S.p.A. and Treno Alta Velocità – T.A.V. S.p.A. (merged into Rete Ferroviaria Italiana S.p.A. from 31 December 2010) under which Fiat S.p.A. as general contractor coordinates, organizes and manages the work.
Work in progress refers to activities carried out directly and is recognized through measurement of the total contract income on a percentage completion basis, with the incremental portion of the work performed to date being recognized in the period. The cost-to-cost method is used to determine the percentage of completion of a contract (by dividing the costs incurred by the total costs forecast for the whole construction).
Any losses expected to be incurred on contracts are fully recognized in the income statement and as a reduction in contract work in progress when they become known.
Any advances received from customers for services performed are presented as a reduction in inventory. If the value of advances received exceeds inventory, any excess is recognized as advances under other debt.
Transfer of receivables
The Company derecognizes receivables when, and only when, it no longer has the contractual right to the cash flows from an asset, or the receivable is transferred. When the Company transfers a receivable:
- if it transfers substantially all the risks and rewards of ownership, it derecognizes the receivable and recognizes any rights and obligations created or retained in the transfer separately as assets or liabilities
- if it retains substantially all the risks and rewards of ownership of the receivable, it continues to recognize the receivable
- if it neither transfers nor retains substantially all the risks and rewards of ownership of the receivable, it determines whether it has retained control of the receivable. In this case:
- if the Company has not maintained control, it derecognizes the receivable and recognizes separately as assets and liabilities any rights and obligations created or retained in the transfer
- if the Company has retained control, it continues to recognize the receivable to the extent of its continuing involvement in the receivable
On derecognition of a receivable, the difference between the carrying amount of the receivable and the consideration received or receivable for the transfer of the receivable is recognized in profit or loss.
Assets held for sale
This item includes non-current assets (or assets included in disposal groups) whose carrying amount will be recovered principally through a sale transaction rather than through continuing use. Assets held for sale (or disposal groups) are measured at the lower of their carrying amount and fair value less disposal costs.
Defined contribution plans
Contributions to defined contribution plans are recognized through profit or loss in the period in which the benefit is earned.
Defined benefit plans
The Company’s obligation is calculated separately for each plan by estimating the present value of future benefits that employees have earned in the current and prior periods applying the projected unit credit method.
The components of defined benefit cost are recognized as follows:
- remeasurement components of the obligation, including actuarial gains and losses, are recognized immediately in other comprehensive income (OCI)
- service costs are recognized in profit or loss
- net interest on the defined benefit liability is recognized under financial expense in profit or loss
Remeasurement components recognized in OCI cannot be reclassified to profit or loss in a subsequent period.
Other long-term employee benefits
The Company’s net obligations are determined by estimating the present value of future benefits that employees have earned in exchange for service in the current and prior periods. Remeasurement components on other long‑term employee benefits are recognized in profit or loss in the period in which they occur.
Termination benefits are expensed at the earlier of: i) when the Company can no longer withdraw the offer of those benefits, and ii) when the Company recognizes costs for a restructuring that includes payment of the termination benefits.
Share-based compensation plans settled by the delivery of Fiat S.p.A. shares are measured at fair value at the grant date. That fair value is expensed over the vesting period of the benefit with a corresponding increase in equity. Periodically, the Company reviews its estimate of the benefits expected to vest through the plan and recognizes any difference in estimate in profit or loss, with a corresponding increase or decrease in equity.
Share-based compensation plans settled through delivery of CNH Industrial N.V. (formerly Fiat Industrial S.p.A.) shares are recognized as a liability and measured at fair value at the end of each reporting period until settled. Any subsequent changes in fair value are recognized in profit or loss.
The compensation component from stock option plans based on Fiat S.p.A. shares relating to employees of other Group companies is recognized as a capital contribution to the subsidiaries which employ the beneficiaries of the stock option plans, in accordance with IFRIC 11 and, as a result, is recorded as an increase in the carrying amount of the investment, with a balancing entry recognized directly in equity.
The Company recognizes provisions when it has a legal or constructive obligation to third parties, when it is probable that an outflow of resources will be required to satisfy that obligation and when a reliable estimate of the amount can be made.
Changes in estimates are reflected in the income statement in the period in which they occur.
Own shares are recognized as a deduction from equity. The original cost of own shares, proceeds of any subsequent sale and other changes are presented as movements in equity.
Dividends from investees are recognized in the income statement when the right to receive the dividend is established.
Revenue is recognized when it is probable that economic benefits associated with a transaction will flow to the Company and the amount can be reliably measured. Revenue is presented net of any adjusting items.
Revenue from services and from construction contracts are recognized using the percentage completion method described under inventory.
Financial income and expense
Financial income and expense are recognized in the income statement in the period in which they are earned or incurred.
Finance costs related to investments in qualifying assets that require a substantial period of time to prepare for their intended future use or sale are capitalized and amortized over the useful life of the asset.
The tax charge for the period is determined on the basis of existing law. Taxes on income are recognized in profit and loss, except where they relate to items charged or credited directly to equity, in which case the tax effect is also recognized directly in equity.
For deferred tax assets and liabilities, determination is based on the temporary differences existing between the carrying amount of an asset or liability in the statement of financial position and its corresponding tax basis. Deferred tax assets resulting from unused tax losses and temporary differences are recognized to the extent that it is probable that future taxable profit will be available against which they can be utilized.
Current and deferred income taxes and liabilities are offset when there is a legal right to do so. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the temporary difference is reversed.
Fiat S.p.A. and almost all its Italian subsidiaries elected to take part in the domestic tax consolidation program pursuant to Articles 117/129 of Presidential Decree 917/1986 for a three-year period beginning in 2004. The election was renewed in 2007 and again in 2010, on both occasions for a minimum three-year period.
Under the program, Fiat S.p.A. is the consolidating company and calculates a single taxable base for the group of companies taking part, enabling benefits from offsetting taxable income and tax losses in a combined tax return. Each company participating in the consolidation transfers its taxable income or tax loss to the consolidating company. Fiat S.p.A. recognizes a receivable for companies contributing taxable income, corresponding to the amount of IRES (corporate income tax) payable on their behalf. For companies contributing a tax loss, Fiat S.p.A. recognizes a payable for the amount of the loss actually set off at group level.
Dividends payable are recognized as changes in equity in the period in which they are approved by shareholders.
Use of estimates
The statutory financial statements are prepared in accordance with IFRS, which require the use of judgments, estimates and assumptions that affect the carrying amount of assets and liabilities, the disclosure of contingent assets and liabilities and income and expense for the period.
The estimates and underlying assumptions are based on information available at the time the financial statements are prepared, historical experience and other relevant factors.
The continuing difficult economic and financial environment in many Eurozone countries, in addition to a slowdown in growth and other difficulties in several major emerging markets mean that assumptions regarding future performance are subject to significant levels of uncertainty. As a consequence, it cannot be excluded that actual results may differ from those estimates and, therefore, require adjustments to book values in future periods, which may be significant and which at present can neither be estimated nor predicted. The line item most impacted by the use of estimates is “Investments in subsidiaries and associates” (non-current assets), where estimates are used to determine impairment losses and reversals. With regard to recognition of employee benefits, taxes or provisions, no particular reliance was placed on the use of estimates and no significant issues are expected in the future, particularly given the relatively minor book values involved.
The use of estimates had a significant impact on the determination of the carrying amount of Fiat Group Automobiles S.p.A. (FGA), which accounts for a substantial portion of “Investments in subsidiaries and associates”. Measurement was based on FGA’s estimated “value in use” at 31 December 2013, which took into consideration the investee’s expected performance for 2014 together with the auto industry and economic outlook for 2015-2019, based on studies from leading research institutes (e.g., Global Insight), in addition to the announced strategic decision to leverage on the Group’s historic brands (such as Alfa Romeo) and the success of the new 500 family. The assumptions and results are also consistent with information provided in “Subsequent Events and Outlook” (Report on Operations). The earnings projections are based on prudent assumptions that reflect the continued difficult and uncertain trading environment in many key markets. Those projections also take account of the expected impact of the ongoing strategic realignment of Fiat and Chrysler’s manufacturing and commercial activities, including the benefits of the recent acquisition of full control of Chrysler. On the basis of the strategy announced on 30 October 2012 to redeploy industrial assets in EMEA for production of a renewed portfolio of products focused on the premium segment and brands with international potential, it was considered reasonable to use explicit cash flow projections up to 2019. With regard to Chrysler, given loan covenants that restrict dividend distributions, the assumed contribution for the period to 2019 is 50% of projected earnings, with the remainder being added to the terminal value.
The normalized cash flow used in the terminal value (“TV”) calculation was based on a weighted average of the expected contribution from each geographic market, which takes the cyclicality and maturity of the auto business into account. The TV calculation also assumes a long-term growth rate of zero.
As the cash flows are assumed equivalent to expected net profit, the discount rates applied are based on the estimated cost of equity. Different and increasing rates were applied over the cash flow projection period (2014‑2019) to reflect the geographic distribution of earnings and the level of risk associated with achieving targets. The weighted average discount rates ranged from 10.9-16.9% for EMEA, 12.8-16.8% for LATAM, and 11.3-15.3% for Chrysler. For TV, a weighted average discount rate of 16% was used, which includes a 6% premium for EMEA and 4% for LATAM and Chrysler to reflect the execution risks associated with achieving targets.
The resulting estimate of FGA’s value in use was €8.9 billion, representing a more than €0.5 billion premium to the carrying amount of the investment at 31 December 2013. Historic and prospective P/E multiples for a panel of comparable companies used as a control further supported the valuation result.
A sensitivity analysis was also conducted with changes to the base case financial assumptions and the market assumptions in EMEA, where the greatest level of uncertainty exists. A 50 basis point change in the discount rate would impact the value in use of the investee by approximately €400 million. If demand levels in the European auto market were assumed to drop by 5% in 2015, 7.5% in 2016 and 10% for the period 2017-2019 (in line with the assumptions used in the impairment test on net assets in EMEA) and all other base case assumptions remained unchanged, the value in use would be €7.7 billion.
Accounting standards and amendments adopted from 1 January 2013
The following standards and amendments were adopted by the Company from 1 January 2013.
- Amendments to IAS 19 – Employee Benefits
- IFRS 13 – Fair Value Measurement
- Amendments to IAS 1 – Presentation of Financial Statements: Presentation of Items of Other Comprehensive Income
- Amendments to IFRS 7 – Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities
- Amendment to IAS 1 – Presentation of Financial Statements (Annual Improvements to IFRSs – 2009-2011 Cycle)
The nature and effects of changes are explained below.
Amendments to IAS 19 – Employee Benefits
The Company adopted IAS 19 as revised for the first time in 2013. The amendments modify the requirements for recognition of defined benefit plans and termination benefits and eliminate the option of deferring actuarial gains and losses under the off balance sheet “corridor method”, requiring instead that they be recognized directly in Other comprehensive income. In addition, the amendments require immediate recognition of past service costs in profit or loss. The result of those amendments is the recognition of the entire plan deficit or surplus on balance sheet.
In application of the transitional provisions, comparative figures for prior periods have been restated on a retrospective basis. The effects of adoption of the amendments on previously reported amounts are as follows:
|1 January 2012||31 December 2012|
|(€ thousand)||As reported||Effect of IAS 19 amendments||Restated||As reported||Effect of IAS 19 amendments||Restated|
|Effect on Statement of Financial Position|
|Other reserves and retained profit||3,171,497||(442)||3,171,055||3,236,989||(1,108)||3,235,881|
|Provisions for employee benefits and other non-current provisions||137,364||442||137,806||140,851||1,060||141,911|
|Total non-current liabilities||2,326,615||442||2,327,057||1,582,247||1,060||1,583,307|
|(€ thousand)||As reported||Effect of IAS 19 amendments||Restated|
|Effect on Income Statement|
|PROFIT/(LOSS) BEFORE TAXES||(183,403)||48||(183,355)|
|PROFIT/(LOSS) FROM CONTINUING OPERATIONS||(152,350)||48||(152,302)|
|(€ thousand)||As reported||Effect of IAS 19 amendments||Restated|
|Effect on Statement of Comprehensive Income|
Items that will not be reclassified to Income Statement:
|Total other comprehensive income/(loss) that will not be reclassified to Income Statement (B1)||-||(666)||(666)|
|TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAX (B1)+(B2)=(B)||26,330||(666)||25,664|
|TOTAL COMPREHENSIVE INCOME/(LOSS)||(126,020)||(618)||(126,638)|
|(€ thousand)||As reported||Effect of IAS 19 amendments||Restated|
|Effect on Statement of Cash Flows|
|B) CASH FROM/(USED IN) OPERATING ACTIVITIES DURING THE YEAR:|
IFRS 13 – Fair Value Measurement
The new standard clarifies rules for determination of fair value for reporting purposes and applies to all IFRSs that require or permit fair value measurements or disclosures about fair value measurements. IFRS 13 also requires additional disclosure for fair value measurements. In accordance with the transitional provisions, the Company adopted the new fair value measurement guidance prospectively from 1 January 2013 without providing the additional disclosures required by the standard for the comparative figures presented. Other than the additional disclosures on fair value measurement provided in Note 28, adoption of the new standard had no material effect on the 2013 financial statements.
Amendments to IAS 1 – Presentation of Financial Statements: Presentation of Items of Other Comprehensive Income
The amendments introduce new terminology whose use is not mandatory and require that items within other comprehensive income (“OCI”) that may be subsequently reclassified to profit and loss are grouped together. Those amendments were adopted and the presentation of items within OCI has been modified. The presentation of comparative information was also modified accordingly.
Amendments to IFRS 7 – Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities
The amendments require disclosures about the effect or potential effect of netting arrangements for financial assets and liabilities on an entity’s financial position. The Company adopted the amendments retrospectively from 1 January 2013 and adoption had no impacts on the disclosures or amounts recognized in the financial statements.
Amendment to IAS 1 – Presentation of Financial Statements (Annual Improvements to IFRSs – 2009-2011 Cycle)
On 17 May 2012, the IASB issued a number of amendments to IFRSs (“Annual Improvements to IFRSs – 2009-2011 Cycle”). The amendment to IAS 1 – Presentation of Financial Statements is applicable to the Company from 2013. The amendment clarifies how comparative information is to be presented when an entity changes accounting policies or retrospectively restates or reclassifies items in its financial statements and when an entity provides comparative information that is additional to the information required by the standard. The amendments were applied for the restatement of amounts presented in the statement of financial position following application of the amendments to IAS 19 with the addition of a third statement of financial position at 1 January 2012.
New standards and interpretations not yet effective
In May 2011, the IASB issued three new standards: IFRS 10 – Consolidated Financial Statements, IFRS 11 – Joint Arrangements, and IFRS 12 – Disclosure of Interests in Other Entities. As a consequence, the IASB also amended IAS 27 – Consolidated and Separate Financial Statements, which was renamed IAS 27 – Separate Financial Statements. The new IAS 27 addresses accounting for subsidiaries, jointly controlled entities and associates in the separate financial statements, including the additional disclosures required. The standard confirms that investments in subsidiaries, joint ventures and associates are accounted for at either cost or fair value in accordance with IFRS 9. The same accounting treatment is to be applied for each category of investment. If an entity elects to measure investments at fair value in its consolidated financial statements, it is required to use the same method of measurement in the separate financial statements. The new standard is applicable retrospectively for annual periods beginning on or after 1 January 2013. The European Union has completed the process for endorsement of the standard and postponed the effective date to 1 January 2014 although early adoption is permitted from 1 January 2013. The Company will apply the new standard from 1 January 2014 and application is not expected to have any material effect.
On 16 December 2011, the IASB issued amendments to IAS 32 – Financial Instruments: Presentation which clarify application of certain criteria for offsetting financial assets and liabilities. The amendments apply retrospectively for annual periods beginning on or after 1 January 2014. No material effect is expected from first time adoption of the standard.
On 29 May 2013, the IASB issued an amendment to IAS 36 – Recoverable Amount Disclosures for Non-Financial Assets, which addresses disclosures about the recoverable amount of impaired assets, if that amount is based on fair value less costs of disposal. The amendments are applicable retrospectively for annual periods beginning on or after 1 January 2014. Early adoption is permitted for periods where the entity has already applied IFRS 13. Application of the new standard is not expected to have any material effect.
On 27 June 2013, the IASB issued narrow-scope amendments to IAS 39 – Financial Instruments: Recognition and Measurement entitled “Novation of Derivatives and Continuation of Hedge Accounting”. The amendments allow hedge accounting to continue in a situation where a derivative, which has been designated as a hedging instrument, is novated to effect clearing with a central counterparty as a result of laws or regulation, if specific conditions are met. Similar relief will be included in IFRS 9 – Financial Instruments. The amendments are effective retrospectively for annual periods beginning on or after 1 January 2014. No material effect is expected from first time adoption of the standard.
In addition, at the reporting date, the European Union had not yet completed the process for endorsement of the following standards and amendments:
- On 12 November 2009, the IASB issued IFRS 9 – Financial Instruments. The standard was reissued in October 2010 and amended in November 2013. The standard addresses classification, measurement, recognition and derecognition and hedge accounting for financial assets and liabilities and replaces parts of IAS 39. The amendments issued in November 2013 removed the mandatory effective date of 1 January 2015. The IASB announced that an effective date will be decided upon when the entire IFRS 9 project is completed.
- On 20 May 2013, the IASB issued IFRIC 21 – Levies, an interpretation of IAS 37 – Provisions, Contingent Liabilities and Contingent Assets. The interpretation provides guidance on recognition of liabilities to pay levies that are not income taxes. IFRIC 21 is applicable for annual periods beginning on or after 1 January 2014. Early adoption is permitted.
- On 12 December 2013, the IASB issued the Annual Improvements to IFRSs 2010–2012 Cycle and Annual Improvements to IFRSs 2011–2013 Cycle.