Commission Regulation (EC) No 1126/2008Show full title

[F1 Exceptions to the retrospective application of other IFRSs U.K.

This appendix is an integral part of the IFRS.

[F2 B1 An entity shall apply the following exceptions: U.K.

(a)

derecognition of financial assets and financial liabilities (paragraphs B2 and B3);

(b)

hedge accounting (paragraphs B4–B6);

(c)

non-controlling interests (paragraph B7);

(d)

classification and measurement of financial assets (paragraphs B8–B8C);

(e)

impairment of financial assets (paragraphs B8D–B8G);

(f)

embedded derivatives (paragraph B9); and

(g)

government loans (paragraphs B10–B12).

Textual Amendments

F2 Substituted by Commission Regulation (EU) 2016/2067 of 22 November 2016 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard 9 (Text with EEA relevance).

Derecognition of financial assets and financial liabilities U.K.

B2 Except as permitted by paragraph B3, a first-time adopter shall apply the derecognition requirements in IFRS 9 prospectively for transactions occurring on or after the date of transition to IFRSs. For example, if a first-time adopter derecognised non-derivative financial assets or non-derivative financial liabilities in accordance with its previous GAAP as a result of a transaction that occurred before the date of transition to IFRSs, it shall not recognise those assets and liabilities in accordance with IFRSs (unless they qualify for recognition as a result of a later transaction or event). U.K.

B3 Despite paragraph B2, an entity may apply the derecognition requirements in IFRS 9 retrospectively from a date of the entity's choosing, provided that the information needed to apply IFRS 9 to financial assets and financial liabilities derecognised as a result of past transactions was obtained at the time of initially accounting for those transactions. U.K.

Hedge accounting U.K.

B4 As required by IFRS 9, at the date of transition to IFRSs an entity shall: U.K.

(a)

measure all derivatives at fair value; and

(b)

eliminate all deferred losses and gains arising on derivatives that were reported in accordance with previous GAAP as if they were assets or liabilities.

B5 An entity shall not reflect in its opening IFRS statement of financial position a hedging relationship of a type that does not qualify for hedge accounting in accordance with IFRS 9 (for example, many hedging relationships where the hedging instrument is a stand-alone written option or a net written option; or where the hedged item is a net position in a cash flow hedge for another risk than foreign currency risk). However, if an entity designated a net position as a hedged item in accordance with previous GAAP, it may designate as a hedged item in accordance with IFRSs an individual item within that net position, or a net position if that meets the requirements in paragraph 6.6.1 of IFRS 9, provided that it does so no later than the date of transition to IFRSs. U.K.

B6 If, before the date of transition to IFRSs, an entity had designated a transaction as a hedge but the hedge does not meet the conditions for hedge accounting in IFRS 9, the entity shall apply paragraphs 6.5.6 and 6.5.7 of IFRS 9 to discontinue hedge accounting. Transactions entered into before the date of transition to IFRSs shall not be retrospectively designated as hedges.] U.K.

Non-controlling interests U.K.

[F3 B7 A first-time adopter shall apply the following requirements of IFRS 10 prospectively from the date of transition to IFRSs: U.K.

(a)

the requirement in paragraph B94 that total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance;

(b)

the requirements in paragraphs 23 and B93 for accounting for changes in the parent’s ownership interest in a subsidiary that do not result in a loss of control; and

(c)

the requirements in paragraphs B97–B99 for accounting for a loss of control over a subsidiary, and the related requirements of paragraph 8A of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations .

However, if a first-time adopter elects to apply IFRS 3 retrospectively to past business combinations, it shall also IFRS 10 in accordance with paragraph C1 of this IFRS.]

Textual Amendments

F3 Substituted by Commission Regulation (EU) No 1254/2012 of 11 December 2012 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard 10, International Financial Reporting Standard 11, International Financial Reporting Standard 12, International Accounting Standard 27 (2011), and International Accounting Standard 28 (2011) (Text with EEA relevance).

[F4 Classification and measurement of financial instruments U.K.

B8 An entity shall assess whether a financial asset meets the conditions in paragraph 4.1.2 or the conditions in paragraph 4.1.2 A of IFRS 9 on the basis of the facts and circumstances that exist at the date of transition to IFRSs. U.K.

B8A If it is impracticable to assess a modified time value of money element in accordance with paragraphs B4.1.9B–B4.1.9D of IFRS 9 on the basis of the facts and circumstances that exist at the date of transition to IFRSs, an entity shall assess the contractual cash flow characteristics of that financial asset on the basis of the facts and circumstances that existed at the date of transition to IFRSs without taking into account the requirements related to the modification of the time value of money element in paragraphs B4.1.9B–B4.1.9D of IFRS 9. (In this case, the entity shall also apply paragraph 42R of IFRS 7 but references to ‘ paragraph 7.2.4 of IFRS 9 ’ shall be read to mean this paragraph and references to ‘ initial recognition of the financial asset ’ shall be read to mean ‘ at the date of transition to IFRSs ’ .) U.K.

B8B If it is impracticable to assess whether the fair value of a prepayment feature is insignificant in accordance with paragraph B4.1.12(c) of IFRS 9 on the basis of the facts and circumstances that exist at the date of transition to IFRSs, an entity shall assess the contractual cash flow characteristics of that financial asset on the basis of the facts and circumstances that existed at the date of transition to IFRSs without taking into account the exception for prepayment features in paragraph B4.1.12 of IFRS 9. (In this case, the entity shall also apply paragraph 42S of IFRS 7 but references to ‘ paragraph 7.2.5 of IFRS 9 ’ shall be read to mean this paragraph and references to ‘ initial recognition of the financial asset ’ shall be read to mean ‘ at the date of transition to IFRSs ’ .) U.K.

B8C If it is impracticable (as defined in IAS 8) for an entity to apply retrospectively the effective interest method in IFRS 9, the fair value of the financial asset or the financial liability at the date of transition to IFRSs shall be the new gross carrying amount of that financial asset or the new amortised cost of that financial liability at the date of transition to IFRSs. U.K.

Textual Amendments

F4 Inserted by Commission Regulation (EU) 2016/2067 of 22 November 2016 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard 9 (Text with EEA relevance).

Impairment of financial assets U.K.

B8D An entity shall apply the impairment requirements in Section 5.5 of IFRS 9 retrospectively subject to paragraphs 7.2.15 and 7.2.18–7.2.20 of that IFRS. U.K.

B8E At the date of transition to IFRSs, an entity shall use reasonable and supportable information that is available without undue cost or effort to determine the credit risk at the date that financial instruments were initially recognised (or for loan commitments and financial guarantee contracts the date that the entity became a party to the irrevocable commitment in accordance with paragraph 5.5.6 of IFRS 9) and compare that to the credit risk at the date of transition to IFRSs (also see paragraphs B7.2.2–B7.2.3 of IFRS 9). U.K.

B8F When determining whether there has been a significant increase in credit risk since initial recognition, an entity may apply: U.K.

(a)

the requirements in paragraph 5.5.10 and B5.5.27–B5.5.29 of IFRS 9; and

(b)

the rebuttable presumption in paragraph 5.5.11 of IFRS 9 for contractual payments that are more than 30 days past due if an entity will apply the impairment requirements by identifying significant increases in credit risk since initial recognition for those financial instruments on the basis of past due information.

B8G If, at the date of transition to IFRSs, determining whether there has been a significant increase in credit risk since the initial recognition of a financial instrument would require undue cost or effort, an entity shall recognise a loss allowance at an amount equal to lifetime expected credit losses at each reporting date until that financial instrument is derecognised (unless that financial instrument is low credit risk at a reporting date, in which case paragraph B8E(a) applies). U.K.

Embedded derivatives U.K.

B9 A first-time adopter shall assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative on the basis of the conditions that existed at the later of the date it first became a party to the contract and the date a reassessment is required by paragraph B4.3.11 of IFRS 9.] U.K.

[F5 Government loans U.K.

B10 A first-time adopter shall classify all government loans received as a financial liability or an equity instrument in accordance with IAS 32 Financial Instruments: Presentation . Except as permitted by paragraph B11, a first-time adopter shall apply the requirements in IFRS 9 Financial Instruments and IAS 20 Accounting for Government Grants and Disclosure of Government Assistance prospectively to government loans existing at the date of transition to IFRSs and shall not recognise the corresponding benefit of the government loan at a below-market rate of interest as a government grant. Consequently, if a first-time adopter did not, under its previous GAAP, recognise and measure a government loan at a below-market rate of interest on a basis consistent with IFRS requirements, it shall use its previous GAAP carrying amount of the loan at the date of transition to IFRSs as the carrying amount of the loan in the opening IFRS statement of financial position. An entity shall apply IFRS 9 to the measurement of such loans after the date of transition to IFRSs. U.K.

B11 Despite paragraph B10, an entity may apply the requirements in IFRS 9 and IAS 20 retrospectively to any government loan originated before the date of transition to IFRSs, provided that the information needed to do so had been obtained at the time of initially accounting for that loan. U.K.

B12 The requirements and guidance in paragraphs B10 and B11 do not preclude an entity from being able to use the exemptions described in paragraphs D19–D19D relating to the designation of previously recognised financial instruments at fair value through profit or loss.] ] U.K.

Textual Amendments

F5 Inserted by Commission Regulation (EU) No 183/2013 of 4 March 2013 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard 1 (Text with EEA relevance).

Textual Amendments

F1 Substituted by Commission Regulation (EC) No 1136/2009 of 25 November 2009 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard (IFRS) 1 (Text with EEA relevance).