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DYNA-MAC HOLDINGS LTD.
2016 ANNUAL REPORT
110
NOTES TO THE
FINANCIAL STATEMENTS
For the financial year ended 31 December 2016
34.
NEW OR REVISED ACCOUNTING STANDARDS AND INTERPRETATIONS
(CONT’D)
Management is currently assessing the effects of applying the new standard on the Group’s financial
statements and has identified the following areas that are likely to be affected:
(i)
Rights of return – FRS 115 requires separate presentation on the balance sheet of the right to recover
the goods from the customer and the refund obligation; and
(ii) Accounting for certain costs incurred in fulfilling a contract – certain costs which are currently
expensed may need to be recognised as an asset under FRS 115.
At this stage, the Group is not able to estimate the impact of the new rules on the Group’s financial
statements. The Group will make more detailed assessment of the impact over the next twelve months.
●
FRS 109 Financial instruments (effective for annual periods beginning on or after 1 January 2018)
The complete version of FRS 109 replaces most of the guidance in FRS 39. FRS 109 retains the mixed
measurement model and establishes three primary measurement categories for financial assets:
amortised cost, fair value through Other Comprehensive Income (OCI) and fair value through Profit or
Loss. The basis of classification depends on the entity’s business model and the contractual cash flow
characteristics of the financial asset. Investments in equity instruments are required to be measured
at fair value through profit or loss with the irrevocable option at inception to present changes in fair
value in OCI.
While the Group has yet to undertake a detailed assessment of the classification and measurement
of financial assets, debt instruments currently classified as available-for-sale (AFS) financial assets
would appear to satisfy the conditions for classification as at fair value through OCI and hence there
will be no change to the accounting for these assets.
The other financial assets held by the Group include:
●
equity instruments currently classified as AFS for which fair value through OCI election is
available;
●
equity investments currently measured at fair value through profit or loss which would likely
to continue to be measured on the same basis under FRS 109; and
●
debt instruments classified as held-to-maturity or loans and receivables and measured at
amortised cost appear to meet the conditions for classification at amortised cost under FRS 109.
Accordingly, the Group does not expect the new guidance to have a significant impact on the
classification of its financial assets.
For financial liabilities there were no changes to classification and measurement except for the
recognition of changes in own credit risk in OCI, for liabilities designed at fair value through profit or
loss. There will be no impact on the Group’s accounting for financial liabilities as the Group does not
have any such liabilities.
FRS 109 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness
tests. It requires an economic relationship between the hedged item and hedging instrument and for
the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes.
While the Group is yet to undertake a detailed assessment, it would appear that the Group’s current
hedge relationships would qualify as continuing hedges upon the adoption of FRS 109. Accordingly, the
Group does not expect a significant impact on the accounting for its hedging relationships.