Annual Report 2017
158
159
Notes to the Consolidated Financial Statements (continued) December 31, 2017 (In Thousands Saudi Riyal)
11 Consolidated Financial Statements
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
4.1. New standards, amendments and standards issued and not yet effective (continued)
Notes to the Consolidated Financial Statements (continued) December 31, 2017 (In Thousands Saudi Riyal)
4.1.2. Standards issued but not yet effective (continued)
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
b ) IFRS 15 Revenue from contracts with customers
4.1. New standards, amendments and standards issued and not yet effective (continued)
4.1.2. Standards issued but not yet effective Following are the new standards and amendments to standards the are effective for annual periods beginning after January 1, 2018 and earlier application is permitted; The Group has not early adopted these standards in preparing these consolidated financial statements. a ) IFRS 9 Financial instruments In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early application permitted. Except for hedge accounting, retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions. The Group plans to adopt the new standard on the required effective date and the standard will not be adopted for comparative figures. The Group performed a detailed assessment of IFRS 9, which is subject to changes arising from additional information that will be available to the Group on the date of application. The Group does not expect significant effect on the consolidated financial position nor the consolidated statement of changes in equity from the adoption of the standard. Classification and measurement The Group does not expect a significant impact on its consolidated statement of financial position or consolidated statement of changes in equity on applying the classification and measurement requirements of IFRS 9. It expects to continue measuring all financial assets currently held at fair value. Trade receivables are held to collect contractual cash flows and are expected to give rise to cash flows representing solely payments of principal and interest. Thus, the Group expects that the trade receivables will continue to be measured at amortized cost under IFRS 9 and will be classified as financial assets measured at amortization cost. Impairment The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred credit losses as is the case under “IAS 39.” It applies to financial assets classified at amortized cost, debt instruments measured at fair value through other comprehensive income, contract assets under “IFRS 15 – Revenue from Contracts with Customers”, lease receivables, loan commitments and certain financial guarantee contracts. It is not expected to have an impact on the consolidated statement of financial statement and consolidated statement of changes in equity. Hedge accounting The new hedge accounting rules will align instruments more closely with the Group’s risk management practices. As a general rule, more hedge relations might be eligible for hedge accounting, as the standard introduces a more principles-based approach. The Group will reassess the effect of adopting commissions rate options as per IFRS 9. Disclosure The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the Group’s disclosures about its financial instruments particularly in the year of adoption of the new standard.
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programs. IFRS 15 is effective for annual periods beginning on or after January 1, 2018. The Group will implement the standard using a retrospective approach option. The Group has performed a detailed analysis, subject to changes arising from additional information available to the Group during the year 2018. In general, the Group does not expect a significant impact on the consolidated statement of financial positons nor the consolidated statement of changes in equity from adopting IFRS 15. c ) IFRS 16 Leases IFRS 16 introduces a single, on-statement of financial position lease accounting model for lessees. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are optional exemptions for short-term leases and leases of low value items. Lessor accounting remains similar to the current standard – i.e. lessors continue to classify leases as finance or operating leases. IFRS 16 replaces existing leases guidance including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard is effective for periods beginning on or after 1 January 2019. Early adoption is permitted for entities that apply IFRS 15 Revenue from Contracts with Customers at or before the date of initial application of IFRS 16.
Determining whether an arrangement contains a lease On transition to IFRS 16, the Group can choose whether to: • Apply the IFRS 16 definition of a lease to all its contracts; or • Apply a practical expedient and not reassess whether a contract is, or contains, a lease.
Transition
As a lessee, the Group can either apply the standard using a: • Retrospective approach; or • Modified retrospective approach with optional practical expedients.
The lessee applies the same election to all of its leases contracts. The Group plans to adopt IFRS 16 on January 1,2019. The Group has not yet determined which transition approach to apply. As a lessor, the Group is not required to make any adjustments for leases in which it is a lessor except where it is an intermediate lessor in a sub- lease.
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