RBS 2013 Annual Report Download - page 392
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Accounting policies
390
Effective after 2014
IAS 19 ‘Defined Benefit Plans: Employee Contributions’ was issued in
November 2013. This amendment distinguishes the accounting for
employee contributions that are related to service from those that are
independent of service. It is effective for annual periods beginning on or
after 1 July 2014.
Annual Improvements to IFRS 2010 - 2012 and 2011 - 2013 cycles were
issued in December 2013. There are a number of minor changes to IFRS
that will not have a material effect on the Group’s financial statements.
All amendments are effective for annual periods beginning on or after 1
July 2014.
In November 2009, the IASB issued IFRS 9 ‘Financial Instruments’
simplifying the classification and measurement requirements in IAS 39 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 principal 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 requirements in respect
of the classification and measurement of liabilities. These do not differ
markedly from those in IAS 39 except for the treatment of changes in the
fair value of financial liabilities that are designated as at fair value through
profit or loss attributable to own credit; these must be presented in other
comprehensive income.
In November 2013, the IASB published IFRS 9 ‘Financial Instruments
(Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39)’.
These amendments introduce a new hedge accounting model. The
classification of hedges into fair value, cash flow and net investment
hedges has been retained. The changes to the current hedge accounting
framework include:
• Hedge effectiveness testing is prospective only based on the
hedging objective.
• A risk component can be designated as the hedged item, for
financial items and non-financial items, provided it is separately
identifiable and reliably measureable.
• The time value of an option, the forward element of a forward
contract and any foreign currency basis spread can be excluded
from the designation of a financial instrument as the hedging
instrument and accounted for as hedging costs.
The amendments also:
• revised IFRS 9 to allow an entity to elect to apply its requirement to
present changes in the fair value of liabilities designated as at fair
value through profit or loss attributable to own credit risk in other
comprehensive income without applying the other requirements of
the standard; otherwise all phases of IFRS 9 must be applied from
the same effective date.
• removed from IFRS 9 the effective date of 1 January 2015.
At its February 2014 meeting the IASB tentatively agreed on 1 January
2018 as the effective date for IFRS 9.
IFRS 9 makes major changes to the framework for financial instrument
accounting. The Group is assessing its effect which will depend on the
results of IASB's reconsideration of classification and measurement and
the final requirements for the impairment of financial assets expected to
be published in 2014.