Insight
ESMA 25th extract of enforcement decisions
The 25th batch deals with decisions in relation to IFRS 7, IFRS 9, IFRS 16, IAS 1 and IAS 7.
ESMA has published further extracts from its confidential database of enforcement decisions taken by European national enforcers. The 25th batch deals with decisions in relation to IFRS 7, IFRS 9, IFRS 16, IAS 1 and IAS 7, including a decision on presentation of the effects of COVID-19 in P&L.
ESMA has published further extracts from its confidential database of enforcement decisions taken by European national enforcers. The 25th batch covers the period from November 2019 to July 2020 and deals with decisions in relation to IFRS 7, IFRS 9, IFRS 16, IAS 1 and IAS 7, including a decision on presentation of the effects of COVID-19 in P&L as per below summary:
| No. | IFRS Standard | Topic |
|---|---|---|
| I | IFRS 9 Financial Instruments | Measurement of expected credit losses – Trade debtor is also a creditor |
| IX | IFRS 9 Financial Instruments | Measurement of purchased credit impaired assets (POCI) – Credit-adjusted effective interest rate determined at initial recognition could not be changed simply because of changes in expected cash flows |
| X | IFRS 9 Financial Instruments | Disclosure of the effects of changes in own credit risk when financial liabilities are measured at fair value through profit or loss |
| IV | IFRS 9 Financial Instruments IFRS 7 Financial Instruments: Disclosure |
Impairment of finance lease receivable – Either the simplified approach or the general approach of measuring expected credit losses should be applied throughout the group |
| II. | IFRS 16 Leases | Recognition of lease on the first application of IFRS 16 – Lease of land for wind turbines was within the scope of IFRS 16 even though lessor could use parts of land for other purposes |
| III. | IFRS 16 Leases | Depreciation of leased assets and dismantling costs – Depreciation period for asset removal obligations should be aligned with the lease term and hence with the depreciation term for the ROU asset |
| V. | IAS 1 Presentation of Financial statements | Presentation of expenses related to COVID-19 – Presentation of COVID-19 related costs as non-recurring items did not provide fair, consistent and relevant presentation. Thus, it was not clear if all impacts in the financial statement was identified and isolated, the issuers explanations were not convincing, and it was not certain whether the effect of the COVID-19 pandemic would be limited to one period. |
| VI. | IAS 1 Presentation of Financial statements IAS 34 Interim Financial Reporting |
Presentation current/ non-current liabilities in the balance sheet – Liability should be presented as current, as there were no formal and legally binding acknowledgement from lender at the balance sheet date that conditions for extension of the debt were met |
| VIII. | IAS 1 Presentation of Financial statements | Disclosures of financial risk – A bank’s treatment of negative interest was not allowed, and the bank provided insufficient disclosures e.g. on forward-looking information, write-off policy, determination of credit impaired financial assets and definition of default |
| VII. | IAS 7 Statement of Cash Flows | Reconciliation of net-debt – Information on net-debt provided did not meet the requirements in IAS 7:44A |
Click for access to the full report (Link to ESMA website). The ESMA also published an updated overview of all enforcement decisions ever published.
