Mega Bank Annual Report 2017

41 Annual Report 2017 -41- New Standards, Interpretations and Amendments Effective Date by International Accounting Standards Board Amendments to IFRS 2, ‘Classification and measurement of share - based payment transactions’ January 1, 2018 Amendments to IFRS 4, ‘Applying IFRS 9 Financial instruments with IFRS 4 Insurance contracts’ January 1, 2018 IFRS 9, ‘Financial instruments’ January 1, 2018 IFRS 15, ‘Revenue from contracts with customers’ January 1, 2018 Amendments to IFRS 15, ‘Clarifications to IFRS 15 Revenue from contracts with customers’ January 1, 2018 Amendments to IAS 7, ‘Disclosure initiative’ January 1, 2017 Amendments to IAS 12, ‘Recognition of deferred tax assets for unrealised losses’ January 1, 2017 Amendments to IAS 40, ‘Transfers of investment property’ January 1, 2018 IFRIC 22, ‘Foreign currency transactions and advance consideration’ January 1, 2018 Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS 1, ‘First -time adoption of International Financial Reporting Standards’ January 1, 2018 Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS 12, ‘Disclosure of interests in other entities’ January 1, 2017 Annual improvements to IFRSs 2014-2016 cycle- Amendments to IAS 28, ‘Investmen ts in associates and joint ventures’ January 1, 2018 Except for the following, the above standards and interpretations have no significant impact to the Bank and subsidiaries’ fi nancial condition and financial performance: IFRS 9, ‘Financial instruments’ (a) Classification of debt instruments is driven by the entity’s business model and the contractual cash flow characteristics of the financial assets, which would be classified as financial assets at fair value through profit or loss, financial assets measured at fair value through other comprehensive income or financial assets measured at amortised cost. Equity instruments would be classified as financial assets at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present in other comprehensive income subsequent changes in the fair value of an equity instrument that is not held for trading. (b) The impairment losses of debt instruments are assessed using an ‘expected credit loss’ approach. An entity assesses at each balance sheet date whether there has been a significant increase in credit risk on that instrument since initial recognition to recognize 12-month expected credit losses or lifetime expected credit losses (interest revenue would be calculated on the gross carrying amount of the asset before impairment losses occurred); or if the instrument that has objective evidence of impairment, interest revenue after the impairment would be calculated on the book value of net carrying amount (i.e. net of credit allowance). The Company shall always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant financing component. (c) The amended general hedge accounting requirements align hedge accounting more closely with an entity’s risk management strategy. Risk components of non-financial items and a group of items can be designated as hedged items. The standard relaxes the requirements for hedge effectiveness, removing the 80-125% bright line, and introduces the concept of ‘rebalancing’; while its risk management objective remains unchanged, an entity shall rebalance the hedged item or the hedging instrument for the purpose of maintaining the hedge ratio. When adopting the new standards endorsed by the FSC effective from 2018, the Bank and subsidiaries will apply the new rules under IFRS 9 retrospectively from January 1, 2018, with the practical expedients permitted under the statement. The significant effects of applying the standard as of January 1, 2018 are summarised below. Consolidated balance sheet Affected items 2017 version IFRSs amount Effect of adoption of new standards 2018 version IFRSs amount Remark January 1, 2018 Financial assets at fair value through profit or loss $ 41,616,462 $ 11,169,422 $ 52,785,884 2.5 Available-for-sale financial assets 278,090,000 ( 278,090,000 ) - 2.3.4 Financial assets at fair value through other comprehensive income - 242,449,187 242,449,187 1.4 Held-to-maturity financial assets 282,443,736 ( 282,443,736 ) - 3 Other financial assets, net 9,337,686 ( 9,330,292 ) 7,394 1.2 Financial assets at amortised cost - 323,295,318 323,295,318 3 Bills discounted and loans 1,762,160,756 ( 47 ) 1,762,160,709 7 Accounts receivable, net 59,206,809 ( 44,269 ) 59,162,540 5.7 Other assets 735,332,646 ( 2,637 ) 735,330,009 7 Total affected assets $ 3,168,188,095 $ 7,002,946 $ 3,175,191,041 Provisions for liabilities $ 14,820,870 $ 39,719 $ 14,860,589 7 Deferred tax liabilities 2,216,847 ( 13,962 ) 2,202,885 4 Other liabilities 2,887,267,505 ( 64 ) 2,887,267,441 5 Total affected liabilities 2,904,305,222 25,693 2,904,330,915 Share capital 85,362,336 - 85,362,336 Capital surplus 62,219,540 - 62,219,540 Retained earnings 118,719,341 533,042 119,252,383 1.2.3.5.6.7 Other equity interest ( 2,418,344 ) 6,444,211 4,025,867 1.2.3.4.6 Total affected equity 263,882,873 6,977,253 270,860,126 Total affected liabilities and equity $ 3,168,188,095 $ 7,002,946 $ 3,175,191,041