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FINANCIAL STATEMENTS
Axiata Group Berhad | Annual Report 2016
131
2.
BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED)
(b) Standards and amendments to published standards that are applicable to the Group and the Company but not yet effective
(continued)
The Group and the Company will apply the new standards and amendments to standards in the following periods: (continued)
(ii) Financial year beginning on/after 1 January 2018
•
MFRS 9 “Financial Instruments” will replace MFRS 139 “Financial Instruments: Recognition and Measurement”.
MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories
for financial assets: amortised cost, fair value through profit or loss and fair value through OCI. The basis of classification depends
on the entity's business model and the cash flow characteristics of the financial asset. Investments in equity instruments are
always measured at fair value through profit or loss with an irrevocable option at inception to present changes in fair value in OCI
(provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it
to collect contractual cash flows and the cash flows represent principal and interest.
For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial
liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for
financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in OCI rather than to profit or loss,
unless this creates an accounting mismatch.
MFRS 9 introduces an expected credit loss model on impairment for all financial assets that replaces the incurred loss impairment
model used in MFRS 139. The expected credit loss model is forward-looking and eliminates the need for a trigger event to have
occurred before credit losses are recognised.
•
MFRS 15 “Revenue from Contracts with Customers” will replace MFRS 118 “Revenue” and MFRS 111 “Construction Contracts” and
related interpretations. The standard deals with revenue recognition and establishes principles for reporting useful information to
users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s
contracts with customers.
Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain
the benefits from the good or service. The core principle in MFRS 15 is that an entity recognises revenue to depict the transfer
of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services.
A new five-step process is applied before revenue can be recognised:
0 Identify contracts with customers;
0 Identify the separate performance obligations;
0 Determine the transaction price of the contract;
0 Allocate the transaction price to each of the separate performance obligations; and
0 Recognise the revenue as each performance obligation is satisfied.
Key provisions of the new standard are as follows:
0 Any bundled goods or services that are distinct must be separately recognised, and any discounts or rebates on the
contract price must generally be allocated to the separate elements.
0 If the consideration varies (such as for incentives, rebates, performance fees, royalties, success of an outcome etc), minimum
amounts of revenue must be recognised if they are not at significant risk of reversal.
0 The point at which revenue is able to be recognised may shift: some revenue which is currently recognised at a point in time
at the end of a contract may have to be recognised over the contract term and vice versa.
0 There are new specific rules on licenses, warranties, non-refundable upfront fees, and consignment arrangements, to name
a few.
0 As with any new standard, there are also increased disclosures.