Standards, interpretation and changes to published standards, application of which was not yet mandatory in 2013 and which were not applied early by the Group
On 12 May 2011 the IASB published three new and two revised standards governing consolidation, the accounting of interests in associated companies and joint ventures, and the related disclosures in the Notes:
International Financial Reporting Standards – IFRS 10 “Consolidated Financial Statements” replaces the regulations previously contained in IAS 27 “Consolidated and Separate Financial Statements” and SIC 12 “Consolidation – Special purpose Entities”. It defines the principle of control as the universal basis for establishing the existence of a parent-subsidiary relationship. The standard also contains additional guidelines demonstrating when control exists. In future the revised IAS 27 will contain only provisions on accounting requirements for interests in subsidiaries, associated companies and joint ventures disclosed in the parent company’s individual financial statements. Aside from several minor changes, the wording of the previous standard was retained. We are currently examining the implications of the new IFRS 10 for the Group. Based on current information, however, we do not expect any significant change in consolidation decisions regarding our participating interests and special purpose entities, nor any significant change in the current recognition of these participating interests and special purpose entities.
IFRS 11 “Joint Arrangements” addresses the accounting requirements in cases where an entity shares management control over a joint venture or joint operation. The new standard replaces the pertinent regulations in IAS 31 “Interests in Joint Ventures” and SIC 13 “Jointly Controlled Entities – Non-Monetary Contributions by Venturers”. According to IFRS 11 it is no longer permitted to consolidate joint ventures, e.g. arrangements where the parties have rights to the net assets, on a proportional basis. The equity method must be applied in future where an entity is classified as a joint venture. The Group does not expect any significant impact from this new rule as the joint ventures in the financial statements are already included at equity. According to the current status of the analysis there are also no joint operations on the basis of which the Group has rights to assets under an arrangement and liabilities for related debts.
The revised IAS 28 “Investments in Associates and Joint Ventures” is being expanded to include rules governing accounting for interests in joint ventures. The equity method must be applied as standard in future. Another amendment affects accounting procedures in accordance with IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” if only part of an interest in an associated company/joint venture is held for sale. IFRS 5 must only be applied for the portion held for sale.
Disclosure requirements relating to the consolidation and accounting treatment of interests in associated companies and joint ventures are brought together in IFRS 12 “Disclosure of Interests in Other Entities”. To some extent, duties of disclosure under the new standard for subsidiaries, associated companies, joint arrangements, unconsolidated structured companies and all other participating interests extend far beyond what was previously the case, the aim being to provide users of financial statements with a clearer picture of the nature of the company’s interests in other entities and the effects on assets, financial position and net income, including risks. We are currently reviewing the implications of these expanded disclosure requirements for the Group.
Application of the provisions of IFRS 10, 11 and 12 and the amended IAS 27 and 28 – ratified by the EU on 11 December 2012 – is mandatory for financial years beginning on or after 1 January 2014.
In June 2012 the IASB published transitional provisions (amendments to IFRS 10, IFRS 11 and IFRS 12). The amendments clarify the transition guidance and also provide additional relief, limiting the requirement to provide comparative information. The effective date of the amendments is aligned with the effective date of IFRS 10, 11 and 12. In October 2012 the IASB announced further amendments to IFRS 10 and 12 and IAS 27, which contain an exception to the full consolidation of controlled subsidiaries. These amendments provide that parent companies meeting the definition of an investment entity must measure their investments in subsidiaries at fair value through profit or loss. As a non-investment entity, Talanx AG will not be affected by this exception, meaning that this amendment has no practical relevance for the consolidated financial statements. The June 2012 amendment was ratified by the EU on 4 April 2013, and the amendment announced in October 2012 was ratified on 20 November 2013.
The IASB adapted the provisions governing the set-off of financial assets and liabilities and published changes on 16 December 2011 in the form of amendments to IAS 32 “Financial Instruments: Presentation” – Offsetting Financial Assets and Financial Liabilities. The offsetting requirements set down in IAS 32 were retained more or less in their entirety and were merely clarified by additional guidelines on application. The amendment is applicable retrospectively to financial years beginning on or after 1 January 2014. We are currently reviewing the implications of these two amendments, ratified by the EU on 13 December 2012, for the consolidated financial statements.
In June 2013 the IASB adopted “Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39 “Financial Instruments: Recognition and Measurement”). According to this amendment, despite novation the derivative remains designated as a hedging instrument in an existing hedging relationship. Application of the amendments ratified by the EU in December 2013 is mandatory for financial years beginning on or after 1 January 2014. The Group does not expect these amendments to have any material impact.
On 20 May 2013 the IASB published IFRIC 21 “Levies”. This clarifies how liabilities should be recognised for levies and in particular when these liabilities which are imposed by a government body and do not fall under the scope of a different standard, should be carried. Application of this interpretation, which has not yet been ratified by the EU, is mandatory for financial years beginning on or after 1 January 2014. We are currently examining the impacts of this amendment.
On 21 November 2013 the IASB published “Defined Benefit Plans: Employee Contributions” (amendments to IAS 19 [revised in 2011]). This amendment clarified how companies should recognise contributions to defined benefit plans from employees or third parties. This amendment – whose application is mandatory for financial years beginning on or after 1 July 2014 – has not yet been ratified by the EU. This amendment has no practical relevance for the Group.
On 12 December 2013 and as part of the IFRS annual improvement process the IASB published the outstanding document from the 2010–2012 Cycle and the collection of amendments for the 2011–2013 Cycle. Application of these amendments, which have not yet been ratified by the EU, is mandatory for financial years beginning on or after 1 July 2014. The Group is currently examining the impacts of these amendments.
In November 2009 the IASB published a new standard on the classification and measurement of financial instruments. IFRS 9 “Financial Instruments” is the first step in a three-phase project intended to replace IAS 39. Amongst other things, IFRS 9 introduces new provisions for classifying and measuring financial assets. In this context, financial assets must be classified into two measurement categories (at fair value or Purchase cost cost). Crucial for this categorisation are the contractually agreed upon cash flows associated with the financial instrument as well as the type of financial-instrument management employed by the Group (business model). This standard was expanded in October 2010 to include rules governing the accounting treatment of financial liabilities and derecognition of financial instruments, the latter having been imported unchanged from IAS 39. Furthermore, the IASB published a draft amendment on IFRS 9 in November 2012, which provides for a third measurement model for financial assets. Under certain conditions, debt instruments can therefore be measured at fair value, recognising any changes in value under “Other comprehensive income”. On 19 November 2013 the IASB finalised phase 3 as part of the revision of IFRS 9 and published the new section on the accounting treatment of hedging relationships (hedge accounting). IFRS 9 no longer includes an initial application date either. Consequently, the mandatory initial application date from 1 January 2015 contained in IFRS 9 will be removed; the initial application date is not expected before 1 January 2017. Neither IFRS 9 nor the consequential amendments mentioned have been ratified yet by the EU. The Group has still to analyse the full implications of IFRS 9, including the two additional phases (rules on recording impairments and on recognising hedging relationships). It is already becoming clear, however, that the revised rules will have an influence, inter alia, on the accounting treatment of financial assets within the Group.