The International Accounting Standards Board (IASB) has finalized the new IFRS Taxonomy, which was released in December 2018. This taxonomy will replace the existing one in 2021 when it goes into effect in all countries that use IFRS accounting standards. The IASB released this taxonomy in response to feedback from stakeholders, who wanted to see greater consistency across IFRS and US GAAP taxonomies, along with other improvements in the area of accounting standards disclosures. Read on to learn about five significant changes coming with the new taxonomy.
1) Covid-19-Related Rent Concessions
There is a new lease accounting standard that will impact disclosures for tenants that are negotiating rents. Effective January 1, 2020, the new standard requires that lessors recognize right-of-use assets and corresponding liabilities if they grant certain types of rent concessions to tenants. These covid-19 concessions are any nonrecurring allowances or other contractual rights granted to tenants by lessors.
2) Amendments to IFRS 17 Insurance Contracts and Extension of the Temporary Exemption from Applying IFRS 9
The new IFRS update aims at guiding companies with the implementation of IFRS 17 insurance contracts. While accounting for earning from selling items produced while preparing an asset for its proposed use, the companies will have to describe their financial performance and decrease diversity.
3) Interest Rate Benchmark Reform
This change is aimed at companies, enabling them to offer valuable information to investors of the consequences of interest rate benchmark reforms on their financial statements.
4) Primary Financial Statements
This new change requires additional information to be submitted on a company’s financial position, financial performance, changes in equity, cash flows and EPS.
5) Employee Benefits
Defined employee benefit plans are modified according to the new amendments in the presentations and disclosure of these plans.
The new IFRS 2021 taxonomy will affect your business, regardless of what you are doing. We’ve covered five significant changes that should have an impact on how you work with financial statements. Don’t feel overwhelmed though, take it one step at a time. Make sure you understand everything about these five changes before applying them to your business practices and before sending out financial statements to anyone else.
If you need help with this, consider joining an IFRS course with LBTC. It can help you get up to speed with the new reforms and help you adapt to the changes. Visit our website for more information.