RBS 2010 Annual Report Download - page 288

Accounting developments
International Financial Reporting Standards
The IASB issued ‘Improvements to IFRS’ in May2010 implementing
minor changes to IFRS, making non-urgent but necessary amendments
to standards, primarily to remove inconsistency and to clarify wording.
The revisions are effective for annual periods beginning on or after 1 July
2010 and are not expected to have a material effect on the Group or the
company.
The IASB issued IFRS 9 ‘Financial Instruments’ in November 2009
simplifying the classification and measurement requirements in IAS 39
‘Financial Instruments: Recognition and Measurement’ in respect of
financial assets. The standard reduces the measurement categories for
financial assets to two: fair value and amortised cost. A financial asset is
classified on the basis of the entity's business model for managing the
financial asset and the contractual cash flow characteristics of the
financial asset. Only assets with contractual terms that give rise to cash
flows on specified dates that are solely payments of principal and interest
on the principal amount outstanding and which are held within a business
model whose objective is to hold assets in order to collect contractual
cash flows are classified as amortised cost. All other financial assets are
measured at fair value. Changes in the value of financial assets
measured at fair value are generally taken to profit or loss.
In October 2010, IFRS 9 was updated to include the classification and
measurement of liabilities. It is not markedly different from IAS 39 except
for liabilities measured at fair value where the movement is due to
changes in credit rating of the preparer it is recognised not in profit or loss
but in other comprehensive income.
The standard is effective for annual periods beginning on or after 1
January 2013; early application is permitted.
This standard makes major changes to the framework for the
classification and measurement of financial assets and will have a
significant effect on the Group's financial statements. The changes
relating to the classification and measurement of liabilities carried at fair
value will have a less significant effect on the Group. The Group is
assessing these impacts which are likely to depend on the outcome of
the other phases of IASB's IAS 39 replacement project.
The IASB issued ‘Disclosures - Transfers of Financial Assets
(Amendments to IFRS 7 Financial Instruments: Disclosures)’ in October
2010 to extend the standard’s disclosure requirements about
derecognition to align with US GAAP. The revisions are effective for
annual periods beginning on or after 1 July 2011 and will not affect the
financial position or reported performance of the Group or the company.
The IASB issued an amendment to IAS 12 ‘Income Taxes’ in December
2010 to clarify that recognition of deferred tax should have regard to the
expected manner of recovery or settlement of the asset or liability. The
amendment and consequential withdrawal of SIC 21 ‘Deferred Tax:
Recovery of Underlying Assets’, effective for annual periods beginning on
or after 1 January 2012, is not expected to have a material effect on the
Group or the company.
The International Financial Reporting Interpretations Committee issued
IFRIC 19 ‘Extinguishing Financial Liabilities with Equity Instruments’ in
December 2009. The interpretation clarifies that the profit or loss on
extinguishing liabilities by issuing equity instruments should be measured
by reference to fair value, preferably of the equity instruments. The
interpretation, effective for the Group for annual periods beginning on or
after 1 January 2011, is not expected to have a material effect on the
Group or the company.
RBS Group 2010286
Accounting policies continued