6. Recently issued accounting standards
Accounting standards and interpretations issued by the IASB/IFRIC and approved by the European Commission, but not yet in force
The main accounting standards and interpretations approved by the European Commission in 2015 but not yet in force are listed and described below.
By means of Commission Regulation (EU) 2015/2173 of 24 November 2015, the regulatory provisions of the document “Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)”, issued by the IASB on 6 May 2014, were approved. The document governs the accounting treatment to be applied to acquisitions of initial or additional interests in joint operations (that do not alter the categorisation of the interest as such), falling within the definition of business pursuant to IFRS 3.
Commission Regulation (EU) 2015/2231 of 2 December 2015 approved the regulatory provisions contained in the document “Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)”, issued by the IASB on 12 May 2014 with the aim of clarifying that an amortisation method based on revenue generated by the asset (the revenue-based method) is not regarded as appropriate as it exclusively reflects the revenue flows generated by this asset, rather than the way in which the economic benefits incorporated in the asset are consumed. In the case of intangible assets, this presumption may be overcome if: (i) the right to use the asset is related to the achievement of a predetermined revenue threshold to be produced; or (ii) it can be shown that the achievement of revenue and use of the economic benefits generated by the assets are closely correlated.
Commission Regulation (EU) 2015/2343 of 15 December 2015 approved the regulatory provisions contained in the “Annual Improvements to International Financial Reporting Standards 2012-2014 Cycle”, issued by the IASB on 25 September 2014. The document: (i) in relation to IFRS 5, clarifies that any change in the classification of an asset (or disposal group) from held for sale to held for distribution to shareholders (or vice-versa) should be considered as a continuation of the original disposal plan rather than as a new plan; (ii) in relation to IFRS 7 – “Financial Instruments: Disclosures”, provides additional guidance on determining whether there is continued involvement in transferred financial assets, in the case where there is a related servicing contract, in order to establish the level of disclosure required. In relation to the same standard, it also clarifies the applicability of disclosure required on the offsetting of financial assets and liabilities in interim financial statements; (iii) in relation to IAS 19, clarifies that the rate used to discount bonds must be determined using the market yields on leading corporate bonds denominated in the same currency used to pay benefits rather than at country level; and (iv) in relation to IAS 34, clarifies the meaning of disclosure “elsewhere in the interim financial report”, specifying that this information must be available in the same timeframes.
By means of Commission Regulation (EU) 2015/2406 of 18 December 2015, the regulatory provisions of the document “Disclosure Initiative (Amendments to IFRS 1)”, issued by the IASB on 18 December 2014, were approved. The document includes a number of clarifications relating to issues of materiality, any disaggregation of items, the structure of the explanatory notes, information on the accounting policies used and the presentation of other components of comprehensive income arising from the valuation of equity investments using the equity method.
On the same date, the European Commission issued Regulation (EU) 2015/2441, approving the regulatory provisions contained in the document “Equity Method in Separate Financial Statements”, issued by the IASB on 12 August 2014, which permits the recognition in the separate financial statements of investments in subsidiaries, joint ventures and associates using the equity method, as well as at cost or pursuant to IAS 39 (the two methods already permitted). The selected accounting option must be applied consistently for each category of equity investment. The same amendment consequently also modified the definition of separate financial statements.
The provisions contained in the aforementioned documents will take effect from financial years starting on or after 1 January 2016.
On 9 January 2015, Commission Regulations (EU) 2015/28 and 2015/29 of 17 December 2014, were published in the Official Journal of the European Union. The Regulations approved, respectively: (i) the regulatory provisions contained in the document “Annual Improvements to International Financial Reporting Standards 2010-2012 Cycle”; and (ii) the amendments to IAS 19 in the provisions in the document “Defined-Benefit Plans: Employee Contributions (Amendments to IAS 19)”.
The provisions contained in the document “Annual Improvements to International Financial Reporting Standards 2010-2012 Cycle” introduced amendments to: (i) IFRS 2, by clarifying the definition of “vesting condition” and adding definitions of service and result conditions; (ii) IFRS 3, by clarifying that obligations to pay contingent considerations, other than those defined as equity instruments, are measured at fair value through profit or loss at each reporting date; (iii) IFRS 8, by requiring disclosure of the judgements made by management in aggregating the operating segments, including a description of the segments that have been aggregated and the economic indicators that have been assessed in determining that the aggregated segments share similar economic characteristics; (iv) IAS 16 and IAS 38, by clarifying the way in which the gross carrying amount is calculated when revaluation takes place; and (v) IAS 24, by establishing the information to be provided when a third party provides key management personnel services to the reporting entity.
The amendments to IAS 19 allow contributions paid by employees or third parties that are independent of the number of years of service to be recognised as a reduction in the current service cost for the period, instead of attributing these contributions across the entire time period in which the service is rendered.
The provisions of the latter two regulations apply to years starting on or after 1 February 2015 (the 2016 financial year in the case of the Snam Group).
Accounting standards and interpretations issued by the IASB/IFRIC and not yet approved by the European Commission
The following are newly issued accounting standards and interpretations for which the approval process by the European Commission has not yet been completed.
On 30 January 2014, the IASB issued the document “IFRS 14 Regulatory Deferral Accounts”, the interim standard for the Rate-regulated Activities project. The document’s scope includes First-time Adopters which, according to the provisions of IFRS 14, are allowed to continue recognising amounts related to rate-regulated activities in accordance with the previous standards. The European Commission decided not to begin the approval process for this standard until the definitive version of the standard has been issued.
On 28 May 2014, the IASB issued the document “IFRS 15 – Revenue from Contracts with Customers”, which provides a single model for recognising revenue based on the transfer of control of a good or service to a customer, not necessarily coinciding with the concept of the transferral of risks and benefits currently in force. It provides a more structured approach to the measurement and recognition of revenue, with a detailed implementation guide that includes, for example, recognition of variable fees.
After the changes introduced by the amendment issued on 11 September 2015, the provisions of IFRS 15 will take effect from financial years starting on or after 1 January 2018, notwithstanding any subsequent deferrals established upon approval by the European Commission.
On 24 July 2014, the IASB issued the document “IFRS 9 – Financial Instruments”, together with the relevant Basis for Conclusions and Implementation Guidance, to replace all previously issued versions of the standard. The new provisions: (i) amend the classification categories for financial instruments and provide for this classification to be based on the characteristics of the instrument and the business model of the company in question; (ii) remove the obligation to separate embedded derivatives; (iii) identify a new impairment model that uses forward-looking information to bring forward the recognition of credit losses compared with the incurred-loss model, which delays recognition until a loss event takes place; and (iv) introduce substantial reforms to the qualification of hedge transactions in order to ensure that hedges are aligned with the companies’ risk management strategies and founded on a more principle-based approach.
The provisions of the aforementioned texts, which replace those contained in IAS 39 – “Financial Instruments: Recognition and Measurement”, will take effect from financial years starting on or after 1 January 2018, notwithstanding any subsequent deferrals established upon approval by the European Commission.
On 11 September 2014, the IASB issued the document “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28”. In particular, the aim of the amendments is to provide a more detailed definition of the accounting treatment and the recognition of related effects in the income statement of the loss of control of an investee company due to its transferral to an associate or joint venture. The accounting treatment used in the investor’s financial statements depends on whether the object of the transaction is or is not a business as defined by IFRS 3. On 17 December 2015, the IASB indefinitely deferred the adoption date for the regulatory provisions in this document.
On 18 December 2014, the IASB issued the document “Investment Entities: Applying the Consolidation Exception – Amendments to IFRS 10, IFRS 12 and IAS 28”, which clarifies the issues relating to the application of the consolidation exception for investment entities. The provisions in the document would take effect in years starting on or after 1 January 2016; to date, the document has not been approved by the European Commission.
On 13 January 2016, the IASB issued the document “IFRS 16 – Leases”. In considering that all leases consist of attributing to an entity the right to use an asset for a specified period of time in exchange for a consideration, and the fact that, if the payment of this consideration takes place throughout the contractual period, the entity is implicitly obtaining a loan, IFRS 16 eliminates the distinction between finance leases and operating leases, and introduces, for lessees, a single accounting model for recognising leases. When applying the model, the entity recognises (i) assets and liabilities for all leases longer than 12 months, unless the good in question is of insignificant value, and (ii) separately in the income statement, the amortisation of the asset recognised and the interest on the payable entered. The measures contained in IFRS 16 will take effect from financial years starting on or after 1 January 2019, notwithstanding any subsequent deferrals established upon approval by the European Commission.
On 19 January 2016, the IASB issued the document “Recognition of Deferred Tax Assets for Unrealised Losses – Amendments to IAS 12”, which clarifies that unrealised losses on debt securities recognised at fair value and at cost for tax purposes give rise to deductible temporary differences; it also clarifies that the estimate of future taxable income (i) includes income arising from the realisation of assets for amounts higher than the relative book value; and (ii) excludes the reversal of deductible temporary tax differences. These measures will take effect from financial years starting on or after 1 January 2017, notwithstanding any subsequent deferrals established upon approval by the European Commission.
Snam is analysing the standards in question, where applicable, to assess whether their adoption will have a significant impact on the financial statements.